Legal Update – March 2023

Welcome to our latest update.  As an election year it is likely a range of employment policies will be promoted by political parties in their efforts to control the Treasury benches.

It is also a busy time for the incumbents.  So far this year the income insurance bill has been deferred, work to define who are ‘employees’ and ‘contractors’ has been postponed pending the outcome of the “Uber” appeal, the minimum wage increases to $22.70 (gross) per hour from 1 April 2023, potential changes to the Holidays Act are afoot, and we may see the first applications for Fair Pay Agreements approved by MBIE and commencing negotiation.

Disaster Management

The recent natural weather events in Auckland and the effects of Cyclone Gabrielle in the East Coast and Hawke’s Bay are a timely reminder to ensure that your business preparedness plans are refreshed and reviewed, including the often difficult question of payment when work is unavailable in the event of a disaster.  Ensuring that your employees are aware of what to do in the event of a disaster also helps you to ensure compliance with health and safety and employment obligations.

Income Insurance Scheme

The Government has confirmed that the Income Insurance Scheme has been “kicked down the road” to address at a future date.

We have previously written about this scheme which proposes to levy a small tax on employers and employees for the purpose of providing income protection to employees who are unable to work due to illness, or who have been made redundant.

Holidays Act

We anticipate a Parliamentary Bill will be introduced this year to address issues in the long-derided Holidays Act[1].

The following changes are likely to be made to the Holidays Act (and associated legislation), assuming the Holidays Act Taskforce recommendations are implemented:

  • Annual leave entitlements to be available for use as they accrue (currently already customary practice in many workplaces).
  • Changes to the method of calculation for leave payments.
  • Employees returning from parental leave entitled to annual leave at their normal rate, despite parental leave absence.
  • Sick leave entitlements to apply from the first day of employment.
  • Bereavement leave entitlements for a wider group of relationships; and
  • A requirement to provide payslips to employees showing their used and remaining leave entitlements and how these are calculated.

We will send a further update once the bill is introduced.  We anticipate a brief period for submissions, before being enacted prior to Parliament being dissolved on August 31st (barring any further unforeseen events).

Fair Pay Agreements

There are currently three FPA applications being assessed by the Ministry of Business, Innovation and Employment[2].  These relate to:

  • Bus drivers, coach drivers and cleaners on interurban, rural and urban bus transport;
  • Hospitality (as including receptionists); and
  • Supermarket and grocery stores.

Once approved, negotiation between the bargaining parties will (all things being equal) commence.  It is unlikely that any FPA will be finalised by the end of this year.  The National Party has committed to reversing FPA legislation should they become the government after October.

Case law  – Controlling third parties (triangular employment) relationships.

A triangular employment relationship is where a worker is employed by one entity, but works under the control or direction of another.   In this regard, a controlling third party (CTP) can be joined to a personal grievance where that CTP has a contract or other arrangement with the employer of the employee, and the CTP receives a benefit of the employee’s work.  The CTP must also exercise, or be entitled to exercise, control or direction over the employee that an employer otherwise would.

When employees apply to join a claimed CTP to a personal grievance, they must satisfy, in addition to the above, notification of the personal grievance to both the employer and the claimed CTP (subject to timeframes, generally 90 days), and that the claimed CTP’s actions caused or contributed to the grievance.

In Welten v McKay and Oji Fibre Solutions (NZ) Ltd[3], Welten was an employee of McKay.  McKay placed employees on site at Oji’s Kinleith Mill premises.  McKay and Oji had a services agreement in place regarding the process of poorly performing McKay workers. Oji raised with McKay their dissatisfaction with Welten’s performance.  Welten was removed from Oji’s Kinleith site by McKay.  No discussion had been had with Welten, either by McKay or Oji, about his claimed poor performance.  Welten raised a personal grievance with McKay, and raised notice with Oji that he considered them a CTP.

The Authority found that Welten met the standard to prove Oji was a CTP.  There was an agreement in place between McKay and Oji, Oji benefited from the work of McKay’s employees, and Oji exercised day-to-day control in the manner of an employer, over McKay’s employees. Finally, it was Oji’s dissatisfaction with Welten that directly contributed to McKay acting in removing Welten from site.

It appears from this determination that it may be difficult to avoid being joined to a grievance as a CTP, particularly where (a common enough occurrence), a contract or arrangement between business entities exists which provides for the placement of employees at another’s business and there is control and direction of those workers on site.

For any advice from our employment law specialists, please contact us via email or by mobile:

Paul McBride (Partner) – or 021 614 215
Guido Ballara (Partner) – or 021 782 891
Frances Lear (Partner) – or 021 237 7811
Saadi Radcliffe (Senior Solicitor) – or 021 557 236
Alec Nash (Solicitor) – or 021 352 288

Disclaimer – this newsletter is necessarily brief and general in nature.  You should therefore seek professional legal advice before taking any action in relation to any matter addressed above.  © McBride Davenport James


[2]             MBIE has a FPA dashboard to track progress:

[3]              Welten v McKay Limited and Oji Fibre Solutions (NZ) Ltd [2023] NZERA 60.

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