Benefit for bosses buying smaller businesses

19:40, Feb 11 2013

Toward the end of last year, the National Government foreshadowed some changes it intended to make to the Employment Relations Act 2000, writes Brian Richardson in Work to Rule.

These changes are aimed at making the act and its workings more usable to both employers and employees, and creating more flexibility. Some view these changes as positive and some view them as an attack on the protective provisions brought to us by the Labour Party.

What has been a bugbear for a lot of small employers is the protection provided to "vulnerable" workers, which guaranteed protections for workers in certain industries when businesses were sold.

These industries were defined in part 6 of the act and generally related to cleaning services, food catering services, laundry services, orderly services in the health sector; some of those services in the education services or public sector; and cleaning or food catering services in airports or other places of work (as defined by the Health & Safety in Employment Act 1992).

Those protections covered every worker affected but now the proposal is to allow those protections only for workers who will be employed by businesses employing 20 or more staff, when the sale and purchase has taken place.

This will definitely help SMEs (small and medium-sized enterprises) by removing the requirement to offer the same terms and conditions to transferring staff.


New employers will be better allowed to align their operating goals with their cost structures so they are not locked into old wage rates or terms and conditions that do not reflect how they want to operate their business.

What has often been seen as a bug in the system - where the outgoing employer (in a sale and purchase situation) has not provided appropriate records for the incoming employer - is to be fixed by making it a requirement that the outgoing employer forward the information relating to the transferring staff to the new employer.

This would cover information such as employment agreements, PAYE records, and wage, time and leave records.

It is proposed there be a system that will enable the two employers to apportion liability for service-related benefits such as sick leave.

This should mean staff do not miss out altogether and have to restart acquiring service with the new employer before becoming entitled to a benefit.

One thing that quite a few employers have had difficulties with is where they have made an offer to take on the transferring employee and the employee has delayed making up their mind.

The proposal is to fix this by making transferring staff decide whether they will take up the offer of the transfer within five working days of the offer being made.

Another proposed change is for additional penalties for non-compliance with part 6a.

Currently under the act, there is a provision that requires the parties to collective bargaining to continue negotiating until they conclude a new agreement.

The proposal is that this requirement be removed.

In conjunction with that change, the Employment Relations Authority will be given the power to declare that bargaining has ended, and the employer and the employees (and their representatives) can then negotiate on an individual basis.

What has been seen as a major advantage to unions and employees has been the ability of unions to require employers to be part of multi-employer bargaining - that ability will be removed from the act.

Employers have often been stuck with wondering what to do when employees go on a part strike - do they lock them out or do they let them carry on unpenalised for striking. The changes proposed will allow for a reduction in pay in part-strike situations such as a "work to rule" where people are still working but not as productively as they were beforehand or where they will just not do all of the work they normally would.

A current requirement that has often frustrated employers who have both collective agreements and individual agreements on site covering workers doing the same or similar work is the "30-day rule".

This is where new staff who will work in positions covered by a collective, but who are not members of the appropriate union, have to be covered by the collective, even though they and the employer may not want them to be. The "30-day rule" will be abolished.

Finally, there is to be a change to the rules around what personal information has to be disclosed in restructuring situations.

Currently there is a difference between what can be accessed under the Privacy Act and the Official Information Act and under case-law precedent. This situation arose out of the Employment Court's decision in Massey University v Wrigley.

The aim is to bring all of the requirements more in line with each other.

These changes are due to be implemented in the second half of 2013.

» Brian Richardson is an employment and human resources adviser at Preston Russell Law. E-mail questions to:

The Southland Times