“Zero hour” approaches on new employment standards
The 2016 Employment Relations Amendment Act was a Government response to growing public concern regarding “zero hour contracts”.
These employment agreements did not have to guarantee any hours of work, yet could require employees to be available. The amendments currently apply to all employment agreements signed after 1 April 2016. Agreements signed prior to this date must comply with the amendments by 1 April this year, leaving employers with little time to review their employment agreements and practices. Employers who do not do so risk finding that their employment agreements are unenforceable, potentially resulting in personal grievance claims and heavy fines.
Where an employee and an employer agree to a set number of hours, this must be specified in the employee’s employment agreement. An availability provision allows for an employee to work additional hours at the employer’s request, and must set out how many hours or for what period the employee is required to be available. In order for an availability clause to be enforceable, two requirements must be satisfied:
- Genuine reasons on reasonable grounds - The employer must have genuine reasons based on genuine grounds for including the availability provision, and the number of hours provided for. These genuine reasons may include situations where business demands cannot be performed by the employee without the availability provision. Employers must also have regard to the number of hours an employee must be available and the ratio of guaranteed hours to available hours.
- Reasonable compensation - Availability provisions must also provide for the payment of reasonable compensation to the employee for making themselves available to perform work under the provision. This compensation must be paid whether or not the employer makes work available to the employee. When determining what level of compensation should be offered, employers must have regard to the number of hours an employee is required to be available, the nature of any restrictions on employees that result from ensuring their availability, their salary, and the rate of payment for any additional hours worked.
Where an employer does not provide reasonable compensation in exchange for availability, an employee may refuse any work additional to their guaranteed hours. Employers cannot discriminate against employees who turn down available work. This may place employers who wish to offer promotions, training, or other benefits to employees who commit to additional hours in a difficult legal position.
Secondary employment and shift cancellation
Clauses which prevent employees from taking up secondary employment are now only valid where their employer has a genuine reason based on reasonable grounds to include the clause. These reasons may relate to the protection of sensitive information, intellectual property rights, commercial reputation, or managing a conflict of interest. They must be set out in the employment agreement. This will require many employers to amend their standard clauses.
Shift workers will also be entitled to new protections from April. Employers must not cancel the shift of an employee unless their employment agreement sets out a reasonable period of notice that must be given. Reasonable compensation must be paid where that reasonable period of notice is not provided.
Complying with the new standards
The meanings of “reasonable grounds”, “genuine reasons” and “reasonable compensation” are uncertain. A test case between Unite Union and McDonalds is due to be heard by the Employment Court shortly. This relates to whether a clause requiring employees to advise of their availability to be rostered qualifies as an availability provision.
Employers should be advised to review their employment agreements to ensure that any clauses regarding additional hours, secondary employment and shift work are based on genuine reasons, reasonable grounds, and provide for compensation where necessary. As terms of employment cannot be varied unilaterally, employees should be consulted with and approve any alterations.