'This change will allow a lot of flexibility, but the risk for it being used in the wrong way is also there, too'
Amendments are expected for the Employment Relations Act to change the transition period for its proposed income threshold for unjustified dismissal claims to anyone earning over $180,000.
The government say the change is being done to offer more flexibility and choice for high-income employees — but it could create difficult conversations between employers and employees, according to Zachary Pentecost, Senior Associate at Edwards Sluiters lawyers.
“There’s obviously going to be situations where it could be misused a little bit by employers,” he said.
“A role such as your CEO or CFO needs to be in line with company values – if they aren’t, they can be quite a difficult person to deal with. It can stop a business from progressing or moving forward. This change will allow a lot of flexibility, but the risk for it being used in the wrong way is also there, too.”
The 12-month transition period is for business across New Zealand to prepare for the change in legislation to the new 90-day unjust dismissal application time.
What this means is employees will still be able to raise an unjustified dismissal grievance within a 90-day period – but not those who are moving to a new employer, or who shift to a new role under the same employer.
Workplace Relations and Safety Minister, Brooke Van Velden, said the change “will apply to new employment agreements once the Bill is passed and will apply to existing employment agreements 12 months after the Bill is passed.”
The income threshold delivers on the ACT-National coalition agreement commitment to set an income threshold above which personal grievances cannot be pursued, according to the government’s website.
The change is set to give employees greater power to ensure their rights are upheld if they were to be dismissed.
“I don’t think it [dismissal clauses] was at the forefront of conversations, because even if it was an agreement, it may not have been enforceable. Let’s say you agreed that you get three months’ pay if you’re let go at any stage – you can still raise an unjustified dismissal agreement if that went wrong. This just allows those clauses to be enforceable and allows that conversation to be had,” Pentecost said.
“That being said, I guess the biggest concern would be people who haven't negotiated a change in their terms or don't understand what’s in place when they're starting a job on $180,000 and they can be dismissed and basically not have a job in a week or so. There will be some people caught in that net.”
Ideally, employers don’t want to dismiss people, he said.
“It’s an incredibly difficult process and recruiting and replacing them in the role can also be difficult. So, whilst there is some chance this new change will be misused, I doubt it’s going to be – there’s flexibility and time to make sure changes can be implemented.”
The New Zealand government say the Employment Relations Act will be amended to clarify contracting arrangements, simplify personal grievances, and reintroduce the ability to make pay deductions in response to partial strikes.
