Employment Relations Act: if it ain't broke, don't fix it?

Christine Meechan | Tuesday 14 September 2004

Earlier this year employers - and their legal advisors - got more than a little exercised about the Government's proposed reform of the Employment Relations Act.

Introduced by the then Minister of Labour, Margaret Wilson, the Employment Relations Law Reform Bill prompted an angry response from employers and opposition parties alike.

The bill was sent off to the Transport and Industrial Relations Select Committee, chaired by Mark Gosche. The Committee apparently received 354 "substantive submissions" and heard 62 hours of evidence up and down the country. The Committee reported back this week.

Have any of these submissions and the evidence and the hours of work put in by the Committee made any difference to what the critics labelled as "a recipe for ruin".

The answer is "well no, not really". The revised bill, if passed in its current form, will still see some significant changes in the areas of collective bargaining, disclosure of information, redundancy and dismissal procedures which will not be well received by employers, particularly smaller employers who will have yet another set of rules to grapple with.

The reforms will not make an employment lawyer's job any easier in terms of advising clients exactly what their obligations are in certain circumstances. These are some of the key areas of uncertainty:

• Changes to the definition of the concept of good faith: good faith is the quintessential "motherhood and apple pie" concept. The problem has been that no one is really sure what it means. The bill purports to clarify what is meant by good faith and the circumstances in which the obligation of good faith will apply. The revised good faith obligations will require parties to be "responsive" and "communicative" but will not require them to be "supportive". Whether conduct breaches this new, broader obligation of good faith will remain the $64,000 question.
  
  
• Disclosure of information: if passed, the bill will require employers to disclose information to employees in circumstances where they are proposing to make a decision that is likely to have an adverse effect on worker's employment - unless there is a "good reason to maintain confidentiality" of the information. The employer will have a "good reason" if disclosure would contravene the Securities Market Act 1988 or unreasonably prejudice the commercial position of an employer.
  
  The key to the proposed amendment is that this disclosure and the opportunity to comment must be given before a decision is made. The "good reason" clause will do little to address employer's concerns that at critical points in a deal, and before decisions are even made, they will have to advise employees what they are contemplating.
  
  
• Multiparty bargaining: the prospect of being shoe horned into a "MECA" (multi employer collective agreement) raises the blood pressure of most employers. The Committee recognised this and the bill has dropped the requirement for an employer to attend the first meeting of a multiparty bargaining round.
  
  The push for collective bargaining remains. The new requirement that parties bargaining for a collective must conclude an agreement unless there is a "genuine reason" not to do so will leave most employers asking "is the fact that I don't want to pay
  them what they are asking a genuine reason not to agree?"
  
  
• Passing on collectively bargained terms and conditions to individual employment agreements: with the objective of preventing undermining of collective bargaining, the proposed bill makes it a breach of good faith for an employer to pass on terms and conditions agreed in collectively bargaining with unions to their individual employees if (and this is a big 'if') the employer's objectives in doing so is to intentionally undermine the collective and the effect of doing so is to undermine the collective.
  
  The Committee was at pains to point out that it would not be a breach of the duty of good faith in itself for an employer to agree terms with individuals that are substantially the same as the collective terms provided it gets to that point as a result of bargaining in good faith with the individual. Employers who simply want to pay the same wage for the same work will need to set up a 'good faith trail' and negotiate their terms with individuals before they get into a collective bargaining round.
  
  
• Continuity of employment in restructuring: the bill continues to promote the idea that "at risk" groups of "vulnerable employees" deserve job protection. Those who work in cleaning services, catering services, caretaking or laundry services are on the list of "vulnerable employees" and in the event of a restructuring, sale or contracting out, those employees are given certain rights, including a right to a job with the new company or contractor.
  
  If a company decides to dispense with contractors and "contract in" ie. bring the work in house, it will be bound to offer jobs to the existing contractor's employees. This would mean that the company could well be saddled with employees whose poor performance has driven a decision to restructure in the first place.
  
  There is some good news: the continuity of employment provisions will not affect technical redundancy clauses that cover the situation where the employee is offered a comparable position by the incoming company. If the employee is offered a comparable position but turns down the job, they cannot be forced to transfer over to the new employer - but they do not get to pick up their redundancy cheque as they leave.
  
  
• A new test for justification for dismissal: an employer firing someone will have to justify that dismissal by establishing that it was "fair and reasonable to both parties in all the circumstances at the time the dismissal occurs". This is said to be a "more balanced" approach than that promoted by the Court of Appeal in Wilson & Horton Newspapers v Oram which focused on the reasonableness of the decision actually made by the employer.
  
  Satisfying the new test will make it harder for employers to justify dismissal - as if it is not hard enough now. Employers will need to prove that they have taken into account factors such as the worker's employment history and their personal circumstances before making a decision to dismiss.

The amendments to the Employment Relations Act will come into effect on 4 December this year. Their immediate impact will probably be lost in the usual pre-Christmas rush - unless of course you try to fire someone just before Christmas.