Personal grievance change will help move on 'C-graders': NZ Initiative

The legislation is backed by the NZ Initiative think-tank. Photo / Derek Flynn

A law change that would stop many high earners from taking a personal grievance has the strong backing of a think-tank that says currently "ruses" are used to jettison "C-graders".

The NZ Initiative, whose members are mainly chief executives of large companies, says higher earners can sometimes be moved on through the "ruse" of a restructure, but most employers just wait for them to leave or retire on their own accord.

This is a major drain on productivity, the group's chairman Roger Partridge told a Parliamentary committee considering National MP Scott Simpson's member's bill.

"It is a serious issue. Employers the length and breadth of the country are grappling everyday with dealing with under-performing senior employees. Sometimes it's possible to restructure...and go through a bit of a ruse, and make the employee redundant," Partridge said.

"It's the C-grader. You might be able to go through performance management but the performance may not be so bad that it's possible justifiably to dismiss them."

The legislation passed its first reading in March. It will amend the Employment Relations Act to make clear the right to pursue a personal grievance isn't available to a person whose individual employment agreement excludes the right.

That exclusion will be negotiated by mutual agreement and only be included in individual employment agreements with a salary over $150,000.

Labour MP Iain Lees-Galloway questioned the need for the change, noting Business New Zealand had submitted that personal grievances were rare, and settlements were normally reached.

However, National and Wairarapa MP Alastair Scott asked why the threshold shouldn't be lowered to about $70,000.

Kathryn Beck, president of the NZ Law Society, told MPs the legislation had serious flaws, and as currently drafted would remove the right to enforce grievances for basic human rights, including those relating to discrimination, harassment and duress.

"Even if one was only to narrow it to unjustified dismissals, there may be well still be unintended consequences, and that would be that the claims would shift elsewhere - you would have adverse action claims...arguably, there would also be a return to common law claims."

The committee was also told there could be issues with the "blunt" salary threshold, including the exclusion of allowances, bonuses, share options and company cars. Beck, an employment lawyer, said the threat of a personal grievance stopping employment issues being addressed was "not an issue".

"The current mechanisms are used to start conversations that by and large are resolved by agreement."

The legislation was originally put forward by National MP Paul Goldsmith, and passed its first reading in March.

At that time, Simpson said employers would be incentivised to offer generous severance pay provisions in contracts, or risk employees not agreeing to rule out a personal grievance.

He said the select committee process could outline changes to ensure employees are still protected from "bad employers", including discrimination and sexual or racial harassment.

The legislation was opposed by Labour, the Green Party and New Zealand First.

Lees-Galloway said the bill was "a solution looking for a problem", while Green MP Denise Roche said it would become part of the general provisions of agreements, given the power rests with the employer.

New Zealand First MP Clayton Mitchell said the legislation was "crap...out of the multinational conglomerates' handbook", and "facism at its absolute best, and I think it is a disgrace".