• Max Bradford

Labour Minister Max Bradford today announced a number of industrial relations reforms, following reviews of the Employment Contracts Act and Holidays Act.

The Minister said the Coalition Government had consulted widely and carefully considered at length a very broad range of views. The changes are in line with the commitments given in the Coalition Agreement.

"The Government has thoroughly reviewed the Employment Contracts and Holidays Acts, and listened to both employees and employers. The Government did not have a preconceived, inflexible objective - despite the mischievous and misleading claims by the Labour and Alliance Opposition," Mr Bradford said.

"The result of the reviews is a package of reforms that clarifies the law, provides greater certainty and better balances the rights and responsibilities of employers and employees. It is good for people and good for business."

Mr Bradford said that while about a third of individually written submissions wanted some ability to trade holidays for cash, the majority indicated they wanted no change (i.e. days off or time in lieu).

"The Coalition Government therefore proposes to keep the status quo in regard to holidays," he said. "But we do plan to do some significant tidying of the Act to bring it into the 1990s (details attached)."

Mr Bradford said the review of the Employment Contracts Act confirmed the Act was working well, and little change was needed. The statistics on work stoppages, which show strikes and lockouts have plummeted since the Employment Contracts Act came into effect, demonstrate this point.

"Seven years after the Employment Contracts Act was enacted, some fine-tuning with an eye to the future is appropriate. This will include changes to personal grievance provisions, based on a thorough review of court decisions in this area, and on probationary periods.

"Contrary to the far-fetched claims by the Opposition, all employees will retain the ability to access personal grievance procedures, including those on probation."

Specifically, the proposed changes during the probationary period will clarify that the performance of an employee on probation is monitored closely from day one. Probationary periods will continue to be optional, will be limited to no more than six months and must be agreed to by employers and employees in writing before employment commences.

"These changes are designed to encourage employers to take a chance on new staff. They will also protect employees by ensuring they are aware of their employer's concerns about their performance and are also given an opportunity to improve. This will bring a better balance between the rights and obligations of employers and employees," he said.

Other changes to personal grievance provisions in the Act are designed to bring about a fairer balance between the substance of an employee's conduct resulting in dismissal and the process the employer has followed. It will be clearly stated in the Employment Contracts Act that the Employment Tribunal will have to take all relevant conduct into account when setting remedies for a personal grievance.

The changes also include providing clarification in the Employment Contracts Act on the standard of conduct required of an employer in dismissing staff - this will benefit both parties to an employment contract, as well as the Employment Tribunal and courts.

Mr Bradford said the administration of the Employment Court will be looked at in the context of a fuller review by the Minister of Justice of court structures. The review is expected to be completed later this year.

"The Government is committed to the continuation of a specialist Employment Court," he said.

The proposed changes to the Employment Contracts Act and Holidays Act are those promised under the Coalition Agreement - that is, to encourage an industrial relations environment based on the principles of flexibility, neutrality, and fairness, he said.

"The public will have another opportunity to make submissions on the proposed changes when the Holidays Bill and Employment Contracts Amendment Bill will be considered by a Select Committee in coming months."

He said Cabinet papers relating to these changes are being collated and will be made public tomorrow.

Meanwhile, Mr Bradford said work was also well underway on other industrial relations related Coalition Agreement initiatives.

He said that funding for the Employment Tribunal and the Labour Inspectorate have been progressively increased since 1994. Increased funding for these bodies will be considered in the course of the 1999/2000 budget round.

Mr Bradford also said the Department of Labour would be actively investigating issues related to employment casualisation later this year.

"The Government has also carefully considered the Coalition Agreement key initiative with respect to introducing the concept of "fair" bargaining into the Employment Contracts Act. After carefully examining the case law, the Coalition Government concluded the current law supports fairness in bargaining, given the interests of both parties to an employment contract."




The Government is proposing to keep the status quo in regard to holidays and tradeability: three weeks' annual holidays which must be taken as time off work; eleven public holidays (where these fall on days employees would otherwise work) and which may be exchanged for days in lieu; five days' special leave (for sickness, domestic and bereavement purposes).

Anzac Day and Waitangi Day

Under the current Act, Anzac Day and Waitangi Day are observed on the days they fall - i.e. not transferred to a Monday if they fall on a Saturday or Sunday. This will continue. However, employees who wish to observe these holidays on different days may agree with their employer to do so.

Under the current Act employees who work on Anzac Day or Waitangi Day, are entitled to a day in lieu if they were paid their normal day's pay.

However, if they are paid more than a normal day's pay (even if it is just one cent) they are not entitled to a day in lieu.

Under the proposals, the payment for Anzac and Waitangi Days will be brought into line with other public holidays, therefore, employees who work on those days will be entitled to a day in lieu regardless of how much they are paid for those days.

Christmas and New Year

Under the current Act, if December 25 and/or December 26 and January 1 and/or January 2 fall on a Saturday or Sunday, they are automatically transferred to the Monday and Tuesday.

The Government proposes that in the future, if Christmas Day, Boxing Day, New Year's Day and 2 January fall on Saturday or Sunday, they will be observed for employment purposes on either the days they fall, or the next Monday and/or Tuesday, depending on when the employee would otherwise have worked. Employees and employers may also agree to observe these holidays on alternative days.

This remedies the problem faced by people who work on weekends and do not receive a day off for Christmas and other such days in years they are "Mondayised" (sometimes "Tuesdayised") because they don't usually work on Monday (or Tuesday).

Alternative day off

At present, employees who work on any part of a public holiday are entitled to an alternative day off. However, this is not explicitly stated in the Holidays Act - but will be so under the Government proposals.

Rates of pay for public holidays

Under the current Act, the minimum payment for a public holiday is not specifically stated. This makes it confusing for employers to work out what to pay their employees for these days.

The Government proposes that employees who work on a public holiday will have a minimum entitlement to their rate of pay for an ordinary working day, excluding extra payments, such as piece rates, overtime payments, "rain money" etc.

Calculation of annual holiday pay

Under the current Act there are a number of different ways employers can calculate holiday pay.

The Government proposes that in future employees on annual holidays will be paid the greater of: their ordinary pay, or their average earnings over the 12 months prior to taking the holiday.

Inclusion of holiday pay in hourly/weekly pay rate

The Government proposes that employees must be entitled to paid time off work after one year's employment - only people employed for less than one year may agree to have their holiday pay incorporated into their hourly/weekly pay rate. This is not specifically stated in the current Act.


The Government proposes to make the Act more consistent by removing outdated clauses, such as the "one-tenths rule" (how holiday pay is calculated) for people in "factories and undertakings" to ensure all employees have the same minimum holiday entitlements regardless of where they work.

Direction to take annual holidays

Under the current Act employers must give employees at least seven days' notice when requiring them to take annual holidays.

The Government proposes this be extended to at least 14 days' notice, unless the employee agrees otherwise.

Accumulation of annual holidays

The Government proposes that employers and employees may agree to carry over unused annual holidays from one year to the other. Currently, an employer who allows an employee to carry over their annual holidays beyond a year is in breach of the Holidays Act.

Special leave

Under the current Act employees may take special leave when they, their spouse (including de facto relationships but not including same-sex partners), dependent child or dependent parent (including their partner's parents) are sick. Employees may also take special leave on the death of their spouse (including de facto relationships, but not including same-sex partners), parent, child, brother or sister, grand-parent, mother-in-law or father-in-law, or any other person where the employer accepts the employee has suffered a bereavement.

The Government proposes to extend these provisions to allow employees to take time off to look after anyone dependent on their care, including a same-sex partner.

Medical Certificates

The Government proposes to clarify the fact that employers cannot require their employees to provide a medical certificate if they take special leave.


The Government proposes to increase the speed and efficiency of the Labour Inspectorate in recovering employees' entitlements. Labour Inspectors will be given the power to serve a demand notice in circumstances where they are satisfied a holiday pay, minimum wage, or wages protection liability clearly exists. Employers have the right to dispute this in the Employment Tribunal.


Probationary periods

Under the current Act probationary periods are optional, and there is no limit on the length of time.

The Government proposes to retain probationary periods as optional, but to limit the length of time to a maximum of six months, and to clarify that the performance of an employee on probation and their suitability for the position is being monitored closely from day one. If employers and employees agree to a probation period, the agreement will have to be in writing.

The proposed changes mean that the employee will know right from the time they start work that their performance and suitability for the job must meet the employer's expectations for them to continue in their job. The employer will also know that they must keep the employee informed about how they are performing and their suitability, and what the employee needs to do to meet the required standard.

Employees on probation will continue to be covered by the personal grievance provisions - this means any employee who feels that they were unfairly dismissed while on probation will still have the option of taking a personal grievance case. The following changes will also apply to people on probation.

Personal grievances - contributory fault

Under the current Act, an employer who dismisses an employee may face penalties if they have not followed the correct procedures - even if there was a good reason for the dismissal. This means, for example, that an employer who dismisses an employee who had lied about their skills (such as that they claimed could type 100 words a minute), but did not follow an appropriate dismissal procedure, may face overly tough penalties which do not recognise the fault of the employee. This is clearly wrong on balance.

The Government proposes to change the personal grievance provisions in order to bring about a fairer balance between the substance of an employee's conduct and the process the employer has followed. This would be clearly stated in the Employment Contracts Act to ensure the Employment Tribunal takes all relevant conduct into account when setting remedies for a personal grievance. This would mean that substantive failings on behalf of employees - such as being caught with their hand in the till - are given full weight when remedies for procedural errors by employers are being adjudged by the Tribunal and courts.

Personal grievances - guidance on the standard required of employers The Government proposes changes to the ECA to provide guidance on the standard of conduct required of an employer in dismissing staff. These changes recognise that, while all employees have the right to be treated in a fair manner, the way in which an employer does this will be influenced by individual circumstances.

For example, if an employer dismissed an employee in a manner which was not "ideal", but was fair and reasonable given, for example, the resources of the employer and the circumstances surrounding the dismissal, the Employment Tribunal would have to take this into account.

Wrongful dismissal

Under current legislation, employees who believe they were unfairly dismissed have the right to take a personal grievance claim under the ECA to the Employment Tribunal or a breach of contract claim for "wrongful dismissal" directly to the Employment Court. Only 35 cases of "wrongful dismissal" have been heard directly by the Employment Court since 1991 - just 0.02 percent of total disputes resolved by the Employment Tribunal in the same period.

Therefore, the Government proposes to remove the common law "wrongful dismissal" option to ensure that all personal grievances are handled in the same manner and disputes are resolved as quickly and close to the workplace as possible. This will remove confusion about the remedies available in dismissals.