Simpson ScottEMPLOYMENT RELATIONS (ALLOWING HIGHER EARNERS TO CONTRACT OUT OF PERSONAL GRIEVANCE PROVISIONS) AMENDMENT BILLFirst ReadingSCOTT SIMPSON (National—Coromandel): I move That the Employment Relations (Allowing Higher Earners to Contract Out of Personal Grievance Provisions) Amendment Bill be now read a first time. I nominate the Transport and Industrial Relations Committee to consider the bill. The title of this bill is long and a bit cumbersome but it neatly and appropriately sums up the intention and the purpose of the bill. This is a bill that will seek to allow high-income earners an opportunity to contract out of the existing provisions of Part 9 of the Employment Relations Act. So for employees who are earning more than $150000 a year this will be of great interest. This bill would insert a new section 102A into the principal Act allowing that non-compulsorily and by mutual agreement and following the receipt of independent written legal advice a contracting out of the provisions of the principal Act could occur.A casual observer might ask well why an employee would want to do that and what might be gained. The benefits to an employer are pretty obvious but why would a high-income earning employee want to enter into such an arrangement? Well the answer to that is simply that being able to terminate an individual employment agreement with certainty on mutually agreed terms is of business and commercial value to that employer. That certainty of the ability to end an employment agreement without the threat of a personal grievance sword of Damocles hanging over the head of the employer has value and that value is something that the employee can turn to their own advantage.What we are actually talking about here is severance—severance payments. There is nothing new or unusual about severance payments being negotiated. In fact many senior executives negotiate them already. They are quite commonplace. Usually they reflect the nature of the role and the likelihood of it having a finite term. We are not talking here about people who generally are entering into career employment designed for a working lifetime. Senior executives are often employed on the basis of a certain job being done and completed and then once that job has been done and completed knowing full well that the terms of their employment will come to an end. Equally businesses sometimes want to restructure. They want to rearrange their business affairs and senior executives will negotiate a severance package that takes that into account—that applies that kind of expectation and eventuality. Employers accept that and that they will then include as part of the employment package a pre-negotiated pre-agreed exiting arrangement on terms that are mutually agreed and often very generous.The problem then is that having negotiated a severance package the prospect and the potential of a personal grievance action still hangs over the head of the employer because of the provisions of Part 9 of the principal Act. My bill seeks to give employees the ability to agree to contract out of Part 9 should they wish and the price they extract from an employer for doing so will obviously be a more generous severance package than would otherwise have been negotiated. If the employee decides not to contract out then the provisions of the principal Act remain in place. But for the employer the incentive is then to be generous with the severance arrangements or run the risk that the employee will not opt out in which case the employer is still likely to be suffering the threat and risk of a personal grievance.That certainty has real value to both the employer and the employee. It is a negotiated arrangement—non-compulsory not mandatory but a negotiated agreed arrangement between two consenting parties. If someone is sufficiently skilled to command a salary of $150000 or more he or she is not so vulnerable that they need to be protected from even their own employment agreement. Well-paid chief executive officers (CEOs) and senior executives are very capable of agreeing and bargaining for themselves.Under current law they have the automatic right to challenge a severance payment the same as everyone else. Currently a senior employee whose contract was terminated would be paid out the remainder of the contract and often that is generous and large. But the employee is then also free to take out a personal grievance which could be seen to be excessive. Often in the real world an employer will provide a golden handshake to avoid the mere threat of a personal grievance. I do not think that is fair and I do not think that this bill provides any kind of encumbrance that would be negatively impacting on employees should they choose to take it up. But that certainty in advance of a finite severance package has value both to an employee and an employer.So this bill will protect businesses from being taken advantage of by costly personal grievance claims that negate the previously agreed severance arrangements. There is another obvious benefit to taxpayers in this bill. If high earners are able to sort things out for themselves—and in my view they should—then there are obvious benefits in not clogging up our employment courts or mediators.There are a couple of things that I want to make clear at the first reading. First there is no compulsion here. Just because an employee has a gross income of more than $150000 a year it does not mean that there is an automatic opt-out provision. Contracting out could occur only if the parties agree and if it relates to an individual agreement. The negotiated agreement must be in writing and signed by both parties. Further it must be witnessed by a lawyer and the employee must have the independent legal advice provided to them prior to that signing and witnessing by the lawyer. So this bill does not go as far as the situation in Australia where under their Fair Work Act their unfair dismissal rules simply do not apply to people who earn above their high-income threshold which is currently about A$140000.It is worth noting that for the purposes and objectives of this bill nominating a salary or income threshold is more effective than nominating an employee title such as chief executive or chief financial officer or CEO or something like that. That would create legal uncertainty and of course it would be very easy to avoid and get around.I hope that this bill will be sent to the select committee. That being the case there is an area that does need the attention of the select committee and it relates to adding in protection for employees no matter how high their gross earnings are from situations that might simply be regarded as those of a bad employer such as discrimination sexual or racial harassment or where the employer fails to comply with their legal obligations. I believe those protections can and should be inserted at the select committee.I would like to acknowledge the Hon Paul Goldsmith who was the original author of this bill and had it placed in the ballot. He was motivated to do so following conversations with employers with business organisations and with high-income earners. At the time when the bill went into the ballot it was met with wide and popular acclaim. The then chief executive of Business New Zealand Phil O'Reilly was quoted as saying: Excluding higher-paid employees from personal grievances would help focus employment law provisions on those who had most need of employment protection". He went on to say: "and [that] would help reduce the number of personal grievance cases clogging up the legal system." Kim Campbell chief executive of the Employers and Manufacturers Association was reported as saying: "This bill will give employers and the staff earning over $150000 a year the ability to make their own arrangements should they fall out. High earners should be allowed to sort things out amongst themselves and at their own expense."Most informative was the then Labour Party spokesperson one Andrew Little MP and he said that it was the sort of thing that a Labour-led Government would be keen to look at especially for chief executives and subject to a discussion about threshold he went on to say that he agreed with the bill in principle and "thought it was something that Labour would support to the select committee".This is a good bill. It is a bill that I think is deserving of time and consideration by a select committee. I know that if it goes to a select committee it will get some tweaking and some improvement and I thoroughly and heartily commend it to the House."