Editorial: Employment law change not fair

16:00, Nov 01 2012

There are many problems with part 6A of the Employment Relations Act, which allows vulnerable workers to stay in their jobs when contracts change hands.

However, simply excluding thousands of people from the provision, as Labour Minister Kate Wilkinson will by exempting companies with fewer than 20 employees, is not a solution.

Part 6A was passed by Labour in 2006 after concerns about the plight of workers in the cleaning, laundry, caretaking, catering and orderly industries when contracts changed hands, as they frequently do. Many were forced to take reduced pay and conditions to remain with the new contractor, replaced with lower-paid workers or simply left out of a job.

Under part 6A, companies taking over contracts must employ existing workers who wish to stay on their existing terms and conditions. According to a review by the former Labour Department, it has taken pay and conditions of some of New Zealand's most vulnerable workers out of the equation when tenders are up for grabs.

However, the provision has many fish-hooks. Employers complain that it forces incoming contractors to take on workers they do not wish to employ. The review heard from employers that poor workers were often the reason incumbent companies lost contracts in the first place (though worker groups said underinvestment and a lack of management were usually to blame).

The review also heard of many problems when it came to transferring entitlements – such as outstanding holiday pay – of workers. Employers have also complained of losing tenderers trying to sabotage winners by boosting workers' wages and conditions before they transfer.


Ms Wilkinson plans to address some of those issues by requiring employers to agree on how to apportion entitlements when contracts change hands. Workers who wish to transfer to an incoming contractor will also have to make their intentions known within five days. That will help resolve ambiguities that have led to Employment Court cases when workers wishing to transfer have been told they have left it too late.

However, Ms Wilkinson's decision to exempt companies with fewer than 20 workers from part 6A altogether is likely to make up for any drop in the court's workload. There are bound to be disputes about whether a company with a franchise from a big operator should be classed as a small employer.

Ms Wilkinson has justified the exemption for small companies as a necessary protection for mum-and-dad-type operations, which might win tenders only to find they have to employ existing workers – an obvious concern if it were occurring regularly, but there is no evidence that is the case.

On the other hand, the exemption will certainly create inequalities in a workforce that is already extremely vulnerable. It will mean workers in a company that loses a tender to a contractor with 19 staff will have no right to keep their job, while those in a company that loses a tender to a contractor employing 21 people will. That is not fair, and cannot be justified.

The Dominion Post