Posted by De Novo Legal - 19 August 2022
Budgie smugglers and togs. Doonas and duvets. Eskies and chilly bins.
Things are a bit different across the ditch.
While Australian and NZ employment law share many common principles, three key features of NZ employment law are often overlooked by legal and HR practitioners in Australia when it comes to managing NZ-based employees. More than simply technical differences, they have real implications that can trip up Australian businesses.
Factoring in these key differences will help reduce unnecessary risk and cost.
1. There’s no high income threshold in NZ for dismissal related claims
While Australia’s statutory income threshold prevents certain high earners from bringing claims for unfair dismissal, there’s no income threshold for dismissal related claims in NZ. Even the most senior employee in NZ can raise a grievance for unjustified dismissal, and pursue legal proceedings where, for example, their employer has failed to follow a fair process in terminating their employment.
This has unique implications that Australian-based legal and HR practitioners should be aware of when it comes to managing NZ-based staff. Whether you're addressing poor performance, incompatibility, misconduct or otherwise considering termination, all employees in NZ - including the most senior employees - are entitled to the benefit of a fair process.
While in practice, it’s not unusual for employers to negotiate agreed exit arrangements with senior employees, employers will reduce their risk and better position themselves to enter those negotiations having first taken steps to commence a fair process.
2. NZ law requires employers to consult more before making significant decisions
This is a wide-reaching point of difference between Australian and NZ employment law.
Before making any decision that might result in a significant change or termination of employment, NZ law requires an employer to meaningfully consult with affected employees.
The key source of this obligation is NZ’s statutory duty of good faith. Among other things, the duty of good faith requires NZ employees and employers to be“active and constructive in establishing and maintaining a productive employment relationship in which the parties are, among other things, responsive and communicative”. While consultation obligations can be found in many Australian Modern Awards and Enterprise Agreements, few go as far as the proactive requirements of NZ's statutory good faith duty.
One implication of being “active and constructive” is that NZ employers must meaningfully consult with employees any time they are proposing to make a decision that might result in the loss of employment. In this situation, the duty of good faith requires an employer to provide impacted employees with access to information about the proposed decision, and an opportunity to comment on that information, before the decision is made.
This obligation to consult can often be underestimated by Australian practitioners in the context of organisational restructuring and redundancy, performance management, and the management of medical incapacity. It’s safe to assume that in most cases, additional time will be required when running these processes in NZ, when compared to how these matters are often addressed in Australia.
3. There’s no minimum employment period in NZ for unjustified dismissal claims
Unlike in Australia, where a statutory minimum employment period must be served by an employee before they're eligible to bring an unfair dismissal claim, NZ employees can raise a personal grievance for unjustified dismissal regardless of their length of service. An employee includes any individual “intending to work”, so an employee yet to commence in their role can even bring a claim (unusual, but not impossible).
There is an exception: trial periods of up to 90 days are available to small-to-medium-sized employers (generally speaking, employers who employ fewer than 20 employees), with specific requirements applying as to how they are drafted and the timing as to when they are signed. When drafted and signed properly, a valid trial period provision will permit the employer to give notice of termination during the trial period, in which case the employee is prevented from bringing an unjustified dismissal grievance in respect of the termination.
Employers of any size can also make use of contractual probation periods, although these don’t automatically preclude employee claims, and employers must still follow a fair process before terminating employment during the probation period.
In the absence of a valid trial period provision, employers in NZ should therefore manage any termination, performance or misconduct issue in respect of newer employees with no less vigilance as they should with longstanding employees. While length of service may impact the extent of remedies available to an aggrieved employee, it shouldn’t be assumed that the obligations to consult and follow a fair process are any less applicable in respect of newer staff.
For legal and HR practitioners in Australia managing staff across the ditch, it pays to know your jandals from your thongs - by understanding these key differences you can reduce the chances of getting inadvertently tripped up.
De Novo Legal works with Trans-Tasman businesses, providing NZ legal advice on a range of commercial and employment matters. Contact us for a fuller understanding of your obligations in NZ and practical steps to de-risk your approach to employment relations across the ditch.