Dyson Ruth: Employment Relations Amendment Bill — First Reading 
Dyson Ruth: Employment Relations Amendment Bill — First Reading 
[Volume:629;Page:1473] 
Hon RUTH DYSON (Minister of Labour) 
: 
 I move  
That the Employment Relations Amendment Bill be now read a first time. 
 At the appropriate time I intend to move that this bill be referred to the Transport and Industrial Relations Committee. 
The Employment Relations Amendment Bill gives effect to the Government’s intent of ensuring that the terms and conditions of employment for New Zealand’s most vulnerable employees are protected when their work is restructured. The bill also encourages businesses to utilise existing talent and facilitates productive employment relationships that are built on good faith. The bill balances the need to allow businesses to grow and contribute to New Zealand’s economic transformation with the need to provide protection to specified employees who are particularly disadvantaged when businesses restructure. 
In 2004 the Employment Relations Act was amended to introduce a two-tiered system of protection for employees affected by restructurings. Specific groups of employees such as cleaners and food service workers were provided with the right to choose to transfer to a new employer on their existing terms and conditions of employment. These groups of employees had been particularly susceptible to and disadvantaged by successive changes in contracts. Other employees were given protection through a requirement that their employment agreements contain a provision describing what steps their employer will take to protect employees affected by sale transfer or initial contracting-out situations. The intent of those amendments was that the right to choose to transfer should include all situations where a new contractor replaces an existing one and the specified employee’s work is affected. 
In July 2005 the Employment Court’s decision in  
Gibbs 
and others  
v  
Crest Commercial Cleaning Ltd 
 established that the amended Act does not provide the protection the Government intended in these subsequent contracting situations. That decision highlighted a gap in the protection that the Employment Relations Act was intended to provide. This must be rectified. Specified employees must be ensured of a right to transfer to the new employer on their current terms and conditions of employment in subsequent contracting situations. 
This bill ensures that specified groups of employees have the right to choose to transfer when contracting in or contracting out on the sale or transfer of the employer’s business and in subsequent contracting situations. This right applies regardless of whether a new contractor intends employees to perform the work. This right to choose to transfer applies regardless of whether the work was at some stage performed in-house. The right also applies whether or not the contract for service was terminated by one of the parties or just expired. The right does not disappear just because the new contract does not start immediately. There has been no change from the Government’s policy in this area since 2004; the bill implements the Government’s original policy intent. 
This bill not only addresses the issues raised by the Employment Court in the  
Gibbs 
and others  
v  
Crest Commercial Cleaning 
Ltd 
 case concerning subsequent contracting but also clarifies the practical application of the Act in restructuring situations. By outlining specific scenarios providing examples of how the bill applies in practice and introducing specific penalties and remedies for non-compliance the Government can be certain that the protection it intended to provide is implemented. The court’s decision highlighted certain areas in which the Act is unclear. Additional loopholes have been identified following the court’s decision that have the potential to frustrate the original policy intent. The bill closes those loopholes and prevents the use of contracting mechanisms that have the effect of avoiding the Government’s original policy intent. 
The use of fixed-term employment agreements linked to the end of a contract for services is one such mechanism. To prevent specified employees from being stripped of the right to choose to transfer when their fixed-term agreement ends at the same time as a restructuring the bill provides that specified employees whose employment agreements are linked to a contract for service or to an intended restructuring may elect to transfer even if the fixed term has expired. This means that the obligation to provide specified employees with the right to elect to transfer cannot be avoided through the use of fixed-term employment agreements. 
The bill also clarifies how the protection applies when the work is subcontracted. At the moment the application of Part 6A of the Act to subcontracting situations is not clear. To provide certainty and to ensure that some specified employees are not excluded from protection simply because work is subcontracted or they work for a subcontractor the application of protection in subcontracting situations is spelt out in the bill. This again is not a policy shift from what was intended in 2004; the bill clarifies the Government’s original intent. These amendments will not prevent businesses from having the freedom to choose how to do their business and whether to contract out work. The amendments will ensure that specified employees are not treated as disposable commodities to be cast off when a business contracting arrangement comes to an end. To clarify the practical application of the Act the bill provides that the terms and conditions that transfer to the new employer include all statutory leave entitlements accrued. This ensures that employees can access these rights on transfer. 
The bill does not mean that specified employees are assured of jobs for life. This bill affects specified employees at the time of a restructuring. It does not change the usual employment rights of specified employees after they have elected to transfer. Following the transfer an employee’s terms and conditions can be renegotiated in accordance with the provisions of the Employment Relations Act. Employers and employees can agree in good faith to changes that are satisfactory to both parties. If performance or employment relationship problems arise following transfer then the mechanisms for employment relationship problem resolution already in place under the Employment Relations Act will apply as usual. 
The bill also clarifies that if an employer has surplus staff due to a transfer employees may be made redundant. In such a case the employee will get the redundancy entitlements provided for in the employment agreement. If the agreement is silent then the employee can bargain for redundancy entitlements from the new employer. If the employer and employee cannot agree they can apply to the Employment Relations Authority for a determination on redundancy entitlements. 
The bill delivers on the Government’s original policy intent. It is about providing clarity and certainty to employers and employees and stability to specified groups of vulnerable employees. It ensures that businesses maintain the freedom to grow but confirms that employees who are particularly disadvantaged when businesses restructure are protected. I commend this bill to the House.