Jennifer Mills: Big worries over redundancy with employment reform bill

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When is someone else's employee your responsibility? When you buy or take over someone else's business.

This is just one of the many sweeping changes set to be introduced by the Employment Relations Law Reform Bill, at present before a select committee.

As well as providing special protections to specified categories of employees, the bill also requires that every employer in New Zealand sets in concrete a process that will deal with their employees on the off-chance they might sell their business.

The bill affords certain categories of "vulnerable" employees substantial protection in the event that their employer's business is restructured.

Employees providing laundry or caretaking services in the education sector, laundry and orderly services in the health and residential care sector, or food and cleaning services nationwide will have several options when faced with losing their jobs.

Where an employer's business is restructured, or the employer no longer needs its employees and the new employer intends to employ other people to perform essentially the same tasks, the new employer may well find its hands are tied.

The bill will not only apply when an employer sells or transfers its business, but even when it loses a contract to provide services that its employees perform.

But the most chilling proposal is the right of employees to transfer to the employ of the new boss - who will not only have to deal with its own employees, but also those of the business it has taken over.

This proposal will worry those who run contracting companies in the cleaning and food industries, as they could find themselves forced to take on employees they cannot afford.

Two aspects of this new right for vulnerable employees are of concern. First, if the employee was a party to a collective employment agreement at his or her old place of work, the new employer will become a party to that agreement, and forced to negotiate in good faith with the employee's union, even if that union has had no previous dealings with the new workplace.

But of greater concern are the provisions for redundancy. Although an employee can negotiate an exit package with his or her present employer, the new employer is not so lucky if the employee elects to transfer to their employ.

If the new employer has no need for the employee, and seeks to make him or her redundant, the employer is required to negotiate a payout. If no agreement can be reached, the Employment Relations Authority can force the new employer to pay compensation. This will greatly complicate negotiations for the sale of a business, and may reduce its value to a prospective purchaser.

The bill also allows the Governor-General, on the advice of the Minister of Labour, to amend the categories of protected employees without following parliamentary processes. Not only is the constitutionality of such a provision in question, but one cannot help but feel this power could be exploited for political gain should a slightly less left-leaning party come to power.

The bill also covers workers outside the vulnerable category. Every employer in New Zealand will be required to plan for the eventual sale or transfer of their business.

The bill requires all employment agreements to include employment protection provisions, which are activated in similar circumstances to those outlined above.

Employers will have to plan months, perhaps years, in advance, how at present mythical negotiations for the sale of their business are to proceed, and what the parties will negotiate about.

Even more frustrating is the fact that such negotiations could be in vain. While an employer can be forced to negotiate the transfer of his or her employees to a new owner, the employee does not have to accept any arrangement, rendering the previous negotiations pointless.

Labour Minister Paul Swain has expressed concern about these aspects of the bill. It will be interesting to see if it changes form before it leaves the desk of Mark Gosche, whose transport and industrial relations select committee is scheduled to release its verdict on June 10. Until then, employers will be holding their breath.

* Jennifer Mills is a senior associate with Bell Gully, specialising in employment law.