EMPLOYMENT LAW INSTITUTE

Introduction
Ladies and gentlemen, thank you for inviting me to speak here this morning.

It's a pleasure to talk to practioners like yourselves, the people who operate at the "coal face". You're involved in the detail of employment relations - the negotiations of contracts, the personal grievances and disputes, and the hopes and fears of individual employers. It is you who put the policy we write into practice.

That is why I'm delighted to have the opportunity to speak to you today about the Government's proposed changes to the Employment Contracts and Holidays Acts. These proposals are very much "hot off the press" and I value the chance to discuss them with you.

As you will be aware, the ECA has helped set the foundations of New Zealand's strong economic performance since 1991. It has been good for employers, good for employees and good for growth. Our unemployment rate is now below the OECD average. It has dropped from 9.9% in March 1991 to 7.5% in March this year. Meanwhile, over the same period, 200,000 new jobs have been created. That is a 15.5% increase. Work relations are also more harmonious, as evinced by work stoppages which have fallen to a post World War II low.

In fact, ladies and gentlemen, all the indications are that, in passing the ECA, the then National Government got things just about right. This is why seven years later when this Government came to review the ECA, we did not feel the need for a radical rethink. Rather what was needed was some fine-tuning to maximise the ability to the legislation to continue to create jobs and growth for New Zealanders.

We undertook a thorough review of the ECA, including a comprehensive review of personal grievance court decisions. The results of that our review, announced just last week, confirm the Act is working well and needs little change.

The proposed changes mostly relate to personal grievance provisions as this can be an area that has the ability to hinder enmployment and hence, economic growth.

Probationary Periods
Taking on staff can be a big gamble for employers. I get several phone calls a week from employers concerned at employees taking frivilous personal grievances for what they claim is unjustifiable dismissal. These employers are busy people who do not have the time, money or expertise to devote to vexatious or unwarranted personal grievance cases. They are often Joe Bloggs trying to make a small business work. Some of them have been so scarred by their experiences they are afraid to take on new staff, lest they have to carry employees who are unsuitable for the job, or face unjust personal grievances claims.

This is not the sort of environment the Coalition Government wants to see. We want to encourage employers to take on new staff, to provide new job opportunities and give people a chance.

That is why we plan to try and stop such problems before they begin by codifying and tightening the law on probationary periods.

Currently probationary periods are optional, and there is no limit on the length of time. They exist both to allow the employer to assess the suitability of new employees for permanent employment and to provide an employee with a chance to prove themselves.

But many employers and employees do not understand what is presently required. For example, in Wholesale Plant Nursery Ltd v Johnston (1995) a worker was on a week's trial. The employee had been rude to customers and was an unwilling worker. But, because the employer did not explain what was required of the employee before dismissing them, the dismissal was unjustifiable.

To overcome such problems, we plan to change the law to clarify that the performance of an employee on probation and their suitability for the position is being monitored closely from day one. Probationary periods will continue to be optional, but must be agreed, be in writing and limited to a maximum of six months. There will be no surprises.

The changes mean that the employee, such as the unwilling worker in the Nursery case, will know right from the time they start that their performance and suitability for the job must meet their employer's expectations for them to continue in the job. The employer on the other hand will know that they must keep the employee informed about how they are performing, their suitability, and what the employee needs to do to meet the required standard. The law will be clear that probationers' performance and suitability are issues for their employer to judge.

Let me stress here that, contrary to scurrilous rumours propogated by Opposition parties, employees on probation will continue to be covered by the personal grievance provisions. Indeed, the Government never contemplated removing this.

Contributory Fault
The Government also plans to change the "contributory fault" provisions to bring about a fairer balance between the substance of an employee's conduct and the process the employer has followed in a dismissal situation.

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.

For instance, in Wilson v Wrightson Farmers Finance Limited (1992) the worker could not do the job because of poor English skills. She was warned that she could lose the job and was given assistance. However, because this did not happen quickly enough the worker was held to have had an expectation that the job would continue and the dismissal was considered unjustifiable.

Of course, in other cases contribution has been appropriately recognised. The problem is that the current process is haphazard - sometimes contributory fault is taken into account, sometimes it isn't. This leads to conflicting court decisions. This is confusing for practitioners and confusing for the public.

The Government thus proposes to clarify and reinforce for the Employment Tribunal and Courts that all relevant conduct by an employee must be taken into account when setting remedies for a personal grievance.

The amendment will ensure that, where an employee contributes to their own dismissal, the employer will not have to bear the cost of the employee's fault.

Minimum Standard of Procedure
We also plan to change to the ECA to provide guidance on the standard of conduct required of an employer in dismissing staff.

The Employment Tribunal and Courts currently consider whether the employer's conduct is "reasonable" in personal grievance cases. Exactly what is "reasonable" is unclear, and it is a source of uncertainty for employers.

The Government is thus seeking to provide guidance in the ECA in this area to ensure that the Tribunal and Courts take into account the variety of situations applying to employers. This will help focus on what it was reasonable for the employer to have done in the circumstances.

The 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 dismisses an employee in a manner which was not "ideal", but was fair and reasonable - given the resources of the employer, the length of service or the circumstances surrounding the dismissal - the Employment Tribunal will have to take this into account.

At present such differences are only sometimes taken into account. For example, in the recent case of Routhan and Murphy v Van Beek (1998) the Court referred to the need to remain aware of the circumstances of small employers. The legislative amendment will ensure that this happens as a matter of course.

Wrongful Dismissal
"Wrongful dismissal" is another aspect of the law we plan to change. 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 0.2 percent of total disputes resolved by the Employment Tribunal in the same period.

Therefore, the Government plans 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 as close to the workplace as possible. This will remove confusion about the remedies available in dismissals.

Employment Court
In regard to the Employment Court, the Government has made it very clear that it is committed to the continuation of a specialist court. The administration of the 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.

Holidays - Tradeability
As you're no doubt aware, that as well as reviewing the ECA, the Government has also been reviewing the Holidays Act. And we have been through an extensive consultation period including seeking public submissions.

The Holidays Act is very much an out-dated piece of legislation, still designed more for the days when a five-day, Monday-Friday, 40-hour week was the norm. Our world has changed a great deal since then, and both employers and employees assume a great deal more flexibility.

Last year we put up four options for the future shape of our holidays legislation in relation to the concept of giving employees the option of exchanging some of their time off for cash.

We received nearly 14,000 submissions - including many tick-the-box "union postcards" - during that public consultation phase. While the majority were against all tradeability options, of the individually written submissions about a third want some ability to exchange holidays for cash.

The view of Cabinet and the National Caucus is that there is considerable benefit for employees to have the right to exchange their 11 public holidays for cash if they wish to.

However, a majority of the New Zealand First Caucus could not agree to the proposal, and therefore the status quo remains.

This difference of views between the Coalition partners has been portrayed in the media as far more significant than it really is. Decisions and compromises like this are a reality - and the challenge - of Coalition Government.

Holidays - Technical Changes
The Government does plan to do some significant tidying of the Act to bring it into the1990s.

We will get rid of outdated clauses such as the "one tenths rule" for factories and undertakings.

We are going to bring the observance and payment for ANZAC and Waitangi Days into line with other holidays.

We are also going to clarify entitlements to Christmas and New Year public holidays. In years where Christmas and New Year fall on a weekend, we will allow people to either "Mondayise" the holidays or take them on the days that they fall depending on when the employees otherwise would have worked.

Payment for the holidays will be tidied up to ensure that there are clear definitions of what people should be paid for public and annual holidays. In addition, annual holidays will be able to be incorporated into an employees' pay where people work for less than a year. This codifies the Court of Appeal's decision in the Drake Personnel case.

We are also clarifying the requirements for special leave.

Finally, we're tightening up on enforcement. 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.

Conclusion
The changes I've outlined here this morning to the ECA 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.

We expect the Holidays Bill and the Employment Contracts Amendment Bill will be introduced in the House in early September, then sent to Select Committee for consideration.

This process provides a further opportunity for interest groups and individual members of the public to make submissions and make their views very clearly known. As specialists in this area, this an ideal opportunity for you to contribute to the legislation. With all the skills and expertise among those present here today I'm sure I can look forward to some substantive and thoughtful submissions.

To help you in this process, the Cabinet papers relating to all these changes have been made public. If you would like to see all the very substantial amount of work that went into the reviews, I encourage you to request a copy of thes papers from my office in Wellington. Indeed, for those insomniacs among you, they make ideal bed-time reading - being about 3 inches thick, and described by one journalist as "the brick"!

Thank you for coming to hear me speak this morning - I hope my comments have helped you understand the Government's recently announced changes to industrial relations legislation and the thinking behind them.