Individual Employment Agreements in New Zealand
WHAT FRANCHISEES NEED TO KNOW
The Employment Relations Act 2000 (NZ) was amended to make it mandatory for all New Zealand employers including, quite obviously, New Zealand franchisees who employ staff, to provide individual employment agreements in writing.
This article looks at the requirements for employees whose work is not covered by a collective agreement. A collective agreement is where employees, through a union, create a collective set of terms and conditions for all employees that are governed by the agreement.
As of 1 April 2011, a failure to comply with the requirements of the Employment Relations Act 2000 (NZ) (‘the Act’), as they relate to the provision of employment agreements, could subject a franchisee to a penalty imposed by the Employment Relations Authority (a New Zealand statutory authority that enforces employment relations obligations between employees and employers).
What must be in an employment agreement?
Employment agreements, in New Zealand, are subject to a number of different pieces of legislation, most notably:
• The Act;
• Holidays Act 2003 (NZ); and
• Minimum Wage Act 1983 (NZ).
An employment agreement must be in writing, must include the names of the employee and employer/franchisee and, as a
minimum, contain the following clauses:
1. A description of the work to be performed by the employee;
2. An indication of where the employee is to perform the work;
3. An indication of the arrangements relating to the times the employee is to work;
4. The wages or salary payable to the employee;
5. A plain language explanation of the services available for the resolution of employment relationship problems, including a reference to the period of 90 days within which a personal grievance must be raised;
6. Payment for public holidays;
7. Franchisee obligations when transferring their business;
8. In the event of a transfer of business, franchisee obligations when negotiating on behalf of employees, with the new franchise owner; and
9. What happens when an employee is not hired by the new franchisee.
An employment agreement must not contain anything contrary to law or inconsistent with the Act and the franchisee must retain a copy of the employment agreement.
1. Description of work to be performed
Franchisees can include a simple list of the main functions of the position to be performed by the employee, or a more detailed job description can be provided in an attached schedule.
2. Where the employee is to perform work
This can be either a specified location, or if a franchisee has multiple locations
and they require the employee to move between various work places, then this will need to be addressed.
3. Hours of Work
An employment agreement must fix, at no more than 40, the maximum number of hours (exclusive of overtime) to be worked
in any week by the employee. Parties are free, however, to agree that the working week will be longer. If a franchisee and
employee agree upon weekly hours of 40 or less, the Act requires them to endeavour to fit the working hours into five or fewer
days of the working week.
If the parties do not include an overtime clause, it becomes negotiable on an occasion-by-occasion basis, in relation to the hours and rate of pay for such work.
4. Wages or salary
There is no obligation to provide for extra rates for weekend work, shifts or long hours. Other types of payments may be appropriate, such as qualification or service payments. However, this is discretionary and should be negotiated on a case by case basis.
5. Resolution of employment relationship problems
The clause should detail the method of dispute resolution and must include a reference to the period of 90 days in which
an employee is able to file a personal grievance. It is important that both the franchisee and the employee recognise that
they must follow the processes detailed within the clause.
6. Payment for working on a public holiday
An employment agreement must not state that an employee’s pay compensates an employee for any extra payment that they are entitled to for working on a public holiday. Existing employment agreements should be checked and amended to ensure a separate public holiday payment is payable, in addition to the employee’s usual daily pay, for work performed on a
7. Franchisee obligations when transferring their business
The Act protects employees in the event of a restructure by mandating that an employee protection provision be included
in an employment agreement. Existing employment agreements must be amended to include a provision that provides that a franchisee must meet with their employee, provide them with information about the proposed arrangement and an opportunity for the employee to comment on the proposal. The franchisee must also consider and respond to the employee’s comments.
8. Negotiations with a new franchisee
Where a business is in the process of being purchased, the Act provides that a franchisee must negotiate with the new franchisee as to whether affected employees will transfer to the new franchisee on the same terms and conditions. An employment agreement should include a provision that the franchisee, in the case of a business transfer, will seek to negotiate with the new franchisee. This negotiation is to seek employment for the new employee with the new franchisee on the same or similar terms of employment.
9. No transfer or employment
Where the employee chooses not to transfer to a new franchisee, or is not offered employment by a new franchisee, their employment agreement must provide them with protection. To that end, a provision must be included that the employee’s current employer will activate the redundancy provisions of the employment agreement, including redundancy compensation (if any). That said, redundancy compensation is not a statutory entitlement under New Zealand law.
The Act provides that a franchisee must advise an employee that they are entitled to seek independent advice about an intended agreement, must provide the employee with a reasonable opportunity to seek that advice and respond to any issue that an employee may raise.
In order to avoid doubt, a franchisee should include in their employment agreement a clause that addresses these concerns.
However, it is not enough to simply include such a clause in an employment agreement. The opportunity to seek advice must be a real opportunity, as opposed to a minimal or nominal opportunity for the employee to seek advice.
Copies of the employment agreement
The Act imposes strict obligations upon franchisees to retain copies of:
• Finalised individual agreements; and
• Intended agreements supplied during negotiation process.
These obligations are enforceable by penalty, following an action brought by a New Zealand Labour Inspector.
If the franchisee has provided an employee with an intended agreement, the employer must retain a copy of that regardless of
whether it has been signed, or agreed to, by the employee.
Whilst the Act requires employment agreements, as a whole, to be in writing, the terms of an employment agreement that
are verbal may, nonetheless be enforceable. Franchisees should be careful as to how they word their employment agreements and any representations they may make to an employee.
What can franchisees do?
Franchisees must ensure that all of their employees are covered by an employment agreement that, at the very least, includes the above terms and conditions. Failure to have a validly written employment agreement may prove quite costly.
If you are unsure as to whether your employment agreements currently meet the necessary legislative requirements, you
should seek legal advice.
Chad is a Lawyer at Mason Sier Turnbull, a law firm renowned for its franchising expertise.
Located in Melbourne’s industry heartland, Mason Sier Turnbull has strong commercial law skills and provides clients with sensible solutions.
For more information contact Chad at:
Phone: 03 8540 0200