HOLIDAYS ACT CHANGES EFFECTIVE 1 APRIL 2004

Transcription

1 MARCH SEMINARS/WORKSHOPS BOOK NOW Employment Team Members This year s programme includes sessions on the main areas of change under the Employment Relations Law Reform Bill HOLIDAYS ACT CHANGES EFFECTIVE 1 APRIL 2004 It s no April Fool s joke. The new provisions of the Holidays Act 2003 come into effect on 1 April Michael Quigg Partner DDI: michaelquigg@quiggpartners.com employees. Changes to the current Holidays legislation are considered by many to be long over due. It is said that the new legislation clarifies holiday entitlements, reflects judicial decisions made since the original Act came into force and achieves a healthier work life balance for New Zealand The key changes that employers will need to address include: Public Holidays: Under the new law, an employee working on a public holiday that would otherwise be an ordinary working day, will be entitled to receive payment at one and a half times their ordinary rate of pay for the hours worked plus a day in lieu. Jol Bates DDI: Regardless of the amount of time the employee works on the public holiday eg half hour, there is an entitlement to be paid for that time at time and a half and an entitlement to receive a whole day off in lieu. The Act requires that existing employment agreements must be amended to reflect this provision, either at the time that the agreement is next amended, or by 1 April 2005, whichever is the earlier. Sean Heywood DDI: Bereavement Leave: In addition to the 3 days bereavement leave to be provided to an employee on the death of a member of their immediate family (as listed in the Act), the Act includes a new bereavement leave provision. Tangi Leave: Under this new provision, employers must provide one day of bereavement leave on the death of a person outside the employee s immediate family where the employer accepts that the employee has suffered a bereavement as a result of that death. To determine eligibility the employer must consider relevant factors such as the closeness of the relationship between the employee and the deceased Deirdre Marshall DDI: Quigg Partners Level 7, The Todd Bldg 28 Brandon Street P O Box 3035, Wellington Phone: Fax:

2 2 and any cultural or other significant responsibilities the employee has regarding to the funeral ceremonies. This provision has been mistakenly construed as creating an open-ended requirement to provide leave for tangi and other cultural funeral arrangements. The Act however only provides for one day of leave for each such occasion. Sick Leave: Under the Act each employee, after 6 months continuous employment, will be entitled to 5 days sick and domestic leave per year. The leave can be accumulated to a maximum of 20 days. Sick leave entitlement is now separate from the bereavement leave entitlement. Employment agreements that allow for more than 5 days sick leave will need to be amended to address how much contractual sick leave can be accumulated. Medical Certificates: Employers will be able to require an employee to provide a medical certificate in respect of sick leave taken if the sickness or injury that gave rise to the leave is for a period of 3 or more days. This applies regardless of whether the days would otherwise be working days or not. Casual Employees: Pay as you Go holiday pay for casual employees is permitted where the employee s employment agreement is for less than 12 months, or where the intermittent or irregular nature of the employment makes it impractical for the employer to provide the usual 3 weeks annual leave required by the Act. The employee must agree to be paid in this way, the holiday pay must be not less than 6% of the employee s gross earnings and must be paid as an identifiable component of the employee s pay. Payment of Annual Leave: The employer must pay annual holiday pay before the holiday is taken unless the employee agrees otherwise or the employment ends. NB: This can be addressed by amending the relevant clause in the employment agreement or via an election in the leave application form. Four Weeks Annual Leave: Under the Act, employees will be entitled to four weeks annual leave with effect from 1 April Good Faith Dealings: When dealing with each other under the Act, employers and employees must act in good faith. Penalties: The new legislation imposes substantially increased fines for failure to comply with the provisions relating to the provision of and payment for leave. Fines will increase from $500 to $5000 for an individual and $10,000 for a company or corporation. Customary Closedown Periods: Under the Bill, only one customary close down period will be permitted each year.

3 3 CHANGES TO THE HOLIDAYS LEGISLATION - HOW TO ENSURE COMPLIANCE AND AVOID PITFALLS If you have any concerns you should seek advice and a review of your current employment agreements to ensure ongoing compliance with the new Holidays Act. HAVE YOU TAKEN ALL PRACTICABLE STEPS? UNWISE TO RELY ON EXPERT ADVICE District Court Recently in the case of Department of Labour v Solid Timber Building Systems (NZ) Limited, the High Court looked at how to determine whether or not all practicable steps were taken to ensure the safety of one of the respondent s employees, a Mr Willis who suffered harm as a result of operating a timber machine. The District Court Judge found the respondent had taken all practicable steps as although it was clear after the accident that there was a hazard and that it could adequately and properly be dealt with, that was not clear to the company at the time of the accident. Accordingly it was found that there was nothing more that the company could have done, as there had been no identification of the particular hazard. Much weight was given to the fact that the respondent had sought expert advice on the machine and had acted upon that advice. That advice being (from an experienced supervisor and an employment consultant) that the machine was safe prior to the accident. High Court On appeal, the High Court commented that the question to be asked in determining whether or not the respondent had taken all practicable steps were: 1 What was the nature of the severity of any harm that might be suffered by Mr Willis if the machine were not adequately guarded? 2 What should a reasonably informed employer and the respondent s position to have known about the likelihood that harm of that nature and severity would be suffered if the machine were not guarded? 3 What should a reasonably informed employer in the position of the respondent have known of harm of that nature? 4 What should a reasonably informed employer in the position of the respondent have known about the availability of an appropriate guard?

4 4 5 How available was such guard and at what cost? It construed the definition of all practicable steps as essentially one of objective fact, viewing the matter at a stage shortly before the injury through the eye of an employer conducting the respondent s operation and with the knowledge that such employer could reasonably have been expected to possess as to the nature of prospective harm from the machine. The Court said that the current state of knowledge about the likelihood and severity of such harm needs no elaboration. It said that the Section 2 objective standard all steps to achieve the best result that it is reasonably practicable to take in the circumstances refers to the current state of knowledge about relevant factors not what the particular employer happened to know, (as the District Judge seems to have considered), with or without recourse to experts, but the current state of knowledge whether it and its experts were aware of that or not. It said in the case of injuries caused by woodworking machinery the current state of knowledge about the risk and its remedy is self-evident. The Court said while the 1992 Health and Safety in Employment Act under which this case was brought does not impose any absolute duty of protection, the risk of injury by unfenced machinery is notorious, as section 17(1) and its legislative predecessors make plain. The High Court commented that accordingly the District Court Judge had misdirected himself when he said he was quite satisfied that by applying that test there was nothing more that the company could have done, having sought apparently appropriate advice and acted upon it. The Test The High Court found that the test is not whether an employer acts reasonably, although acting reasonably will bear very heavily on penalty. It is whether it was reasonably practicable for the operator of such an operation in New Zealand to take steps to protect the operator of such a machine. The Court said that that is a very different test. Decision Victory for Common sense The High Court overturned the District Court decision and in doing so commented that experts are entitled to respect for their views but not to the point where those views must be accepted over common sense.

5 5 EMPLOYEE OR CONTRACTOR IN THE FILM INDUSTRY? Discerning the difference between an employee and an independent contractor has traditionally proven very difficult. The Employment Court has tackled this question most recently in Bryson v Three Foot Six Limited. The Facts This matter was commenced in the ERA by Mr Bryson who alleged that he had been made redundant by the defendant and brought a personal grievance. The defendant opposed the matter on a number of grounds. The first of these was that Mr Bryson was engaged as an independent contactor when he worked for the company between August 2000 and September Mr Bryson says he was employed as an employee. The ERA s Determination Contract for Services The Authority said that it had considered all the relevant matters to distinguish the real nature of the relationship between the parties. Its determination concluded that on balance there are features associated with employment arrangements but overall I am satisfied the evidence supports a contract for services between the parties. The Law The relevant principles established since section 6 of the ERA changed the tests for determining what constitutes a contract of service are as follows: The Court must determine the real nature of the relationship. The intention of the parties is still relevant but no longer decisive. Statements by the parties, including contractual statements, are not decisive of the nature of the relationship. The real nature of the relationship can be ascertaining the tests that have been historically applied such as control, integration, and the fundamental test. Employment Court Decision - Contractor Contract Terms: From October 2000 Mr Bryson s contract conditions, known in the industry as the crew deal memo, were printed on the back of a CREW TIME CARD/TAX INVOICE which had to be completed each week to secure payment. The crew deal memo is based generally on the guidelines for the employment of crew produced by the New Zealand Film & Video Technicians Guild. These guidelines include standard contract terms to be used in all

6 6 contracts between producers and crew whether employed as employees or independent contractors. The tax invoice, which had to be submitted each week by Mr Bryson, stated that it was for Services rendered as an independent contractor on the theatrical motion picture the Lord of the Rings. The invoice requires the contractor to fill in his/her address, IRD number, and hourly rate. There is provision for the deduction of withholding tax. Clause 28 of the conditions set out on the reverse of the crew deal memo states: INDEPENDENT CONTRACTOR: The Contractor is engaged as an independent Contractor and not as an employee of the Company. Nothing in this agreement shall be deemed to create a joint venture or partnership. The further conditions specify how the contractor is to be employed. These requirements included: The contractor is not to accept any other engagements during the anticipated schedule without the written approval of the company; The fee is stated to be a gross rate but the same clause states that withholding and other applicable taxes will be deducted; The hours of the working week are stipulated including overtime and grace periods; Payment for statutory holidays is at double time or a day in lieu; Payment for accommodation outside of Wellington is provided for; Private vehicles may only be used after consultation with production; The company provides any special protective equipment or clothing other than personal wet or cold weather gear; Although the contract states that the production company is not liable to pay sick leave, the producer will make a decision regarding payment to the contractor where the absence for sickness is notified in advance; All copyright attaching to the contractor s services is owned by the company and the contractor agrees to assign any copyright that may be vested in him or her to the company; All items created by the contractor while rendering services to Three Foot Six are the sole and exclusive property of Three Foot Six; and All purchases by the contractor must be authorised in advance by the production manager.

7 7 Employment Court Reasoning The Employment Court found that it was questionable whether the crew deal memo reliably indicated the real nature of the contract. It was submitted however that those clauses in the crew deal memo, which appeared to be more consistent with employment terms, were simply based on industry practice. The Employment Court determined that while that may be the case, it did not mean that those clauses could be overlooked when determining the real nature of the relationship. Intention of the Parties: It was found that it was not possible to establish if the parties had any common intention as to their working relationship. The Court concluded that Mr Bryson did not turn his mind to the nature of employment when he began working with Three Foot Six. He simply accepted the employment that was offered because he saw the opportunity to gain new skills. Similarly it was clear from the evidence of the defendant that it did not contemplate at any stage that Mr Bryson s employment relationship was anything other than as an independent contractor because that was invariable practice at Three Foot Six or across the film industry. Control: The Court commented that she was satisfied that although, following training, Mr Bryson was able to independently prepare models for filming, the work that he was required to do was very much under the control of the directors of photography through Mr Bryson s immediate manager. Mr Bryson was required to be at work between specified hours each day of the week and perform the duties as directed on a day-to-day basis. Judge Shaw concluded that there was significant control imposed by the crew deal memo. Three Foot Six exercised this control over Mr Bryson s work, namely how and when he did it. The Court found it was the sort of control, which characterizes a contract of service. Integration Test: The Court commented that the evidence strongly pointed to Mr Bryson being an integral part of Three Foot Six business. Fundamental Test: Mr Bryson stated that when he began with Three Foot Six he simply filled out his IR3 forms, which were sent to him but it was not accepted that he acquiesced to independent contractor status. The Court determined that a finding that he was an employee could have tax implications for him but that would be a matter between him and the IRD. The Court commented that apart from these matters there was no evidence at all of Mr Bryson s operating a business on his own account. He had no separate legal identity as a trust, a company, a partnership, or even as a sole trader. His income from Three Foot Six was not linked in any way to the profits or losses made by that company. He was paid a regular wage based on hourly rates. The invoices that he was paid on were generated by Three Foot Six and not by Mr Bryson himself and appeared to be a device to record the hours worked. The Court concluded that Mr Bryson acted solely as an individual who took work as it became available regardless of how it was characterized by the person engaging him.

8 8 Industry Practice: The Court commented that it is clear from the evidence that the defendant and the film and television industry in general has a real and genuine concern that any changes to the present employment arrangements which have been in place for many years will cause significant disruptions in the film industry with potentially adverse outcomes both in economic terms and in terms of attracting overseas film companies to bring the productions to New Zealand. The Court found that whilst these concerns were acknowledged, she was of the view, that in the context of this case they were overstated. Decision Real nature of relationship - Contractor The Employment Court commented in light of the facts measured against the established principles, it was of the view that whatever was written in the crew deal memo, and in spite of Mr Bryson being paid on invoice, the real nature of his employment was that of a contract of service. PAID PARENTAL LEAVE EXTENDED The eligibility for and the duration of paid parental leave is to be extended. The leave period is to be extended from 12 to 14 weeks, phased in over two years. Parents will also be able to take paid parental leave if they have been in the same job for at least six months, rather than a year as currently applies. EMPLOYMENT RELATIONS LAW REFORM BILL Proposed commencement date 4 October 2004 Amendments likely if it follows the pattern set by the Employment Relations Bill Sponsoring new Minister - the Hon. Paul Swain Reporting back expected in July 4 Key Areas of Change: 1 Duty of Good Faith 2 Collective Bargaining 3 Resolving employment relationship problems 4 Protecting employees on sale of business

9 9 Good Faith Good faith is wider than implied mutual obligations of trust and confidence Requires disclosure of information to employees that may specifically affect them Requires bargaining over all issues Applies to IEAs, employers are required to consider and respond to employees proposals NB Employer cannot adopt take it or leave it approach Increased penalties includes ERA fixing terms and conditions of CEA Collective Bargaining The promotion and encouragement of collective bargaining Collective bargaining should result in agreement unless genuine reason not to Bargaining to continue although deadlocked over a particular matter ERA may be used to break the deadlock Allowing freeloading of collectively negotiated terms into IEA may constitute actionable breach of good faith Union membership to be more efficient eg fee deductions, ratification process 30 day rule strengthened Resolving Employment Relationship Problems New objective test for the justifiability of employer s disciplinary decisions that requires balancing employer and employee interests Mediation available to resolve between principals and contractors Provides for fast track mediation process Settlement payments must be made to the parties directly Prohibits mediated settlements being cancelled Protecting Employees on Sale of Business 2 tier approach covering: o most employees and employers

10 10 o particularly vulnerable employees Covers sale, transfer or contracting out Protection provisions to be subject to negotiation but must include: o the process the vendor will follow in negotiating with the new employer o matters affecting employee s entitlements including whether they will transfer on existing terms and conditions o if the employee is not to be transferred the process to determine what if any entitlements the employee may have The above provisions must be included in all employment agreements within 12 months of the Bill coming to effect: Higher levels of protection are available to vulnerable employees Vulnerable employees are those employed in cleaning, food, caretaking, orderly or laundry services Vulnerable employees will be able to transfer to the new employee on their same terms and conditions where they can undertake substantially the same work Any redundancy provisions will be transferred but if none exist, there is the opportunity to negotiate them. FURTHER INFORMATION Employment Michael Quigg michaelquigg@quiggpartners.com Sean Heywood seanheywood@quiggpartners.com Jol Bates Deirdre Marshall jbates@quiggpartners.com deirdremarshall@quiggpartners.com M&A Corporate David Quigg davidquigg@quiggpartners.com John Horner johnhorner@quiggpartners.com Amy Geddes amygeddes@quiggpartners.com Matt Yates mattyates@quiggpartners.com Barbara Pearse barbarapearse@quiggpartners.com