Workplace Wellbeing Guide 4: Employment Agreements

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Our sector consists of mainly small andmedium sized organisations. Governance members in these organisations often play a role in recruitment, selection and ongoing management of staff. In larger organisations, there are usually sufficient resources to allow employment and staffing matters to be handled by skilled and experienced personnel managers. Regardless of size, as the legal employers, governance members need to be aware of the range of employment agreements which exist and the rules and conditions that relate to each kind of agreement.

Under the Employment Relations Act 2000, itis illegal to employ a person without an employment agreement in place. These must be in writing and include:

• The names of the employer and the employee
• A description of the work
• An indication of where the employee is to work
• An indication of hours to be workedWages/ rates of salary
• Minimum requirements for work on a public holiday and annual leave
• A plain language explanation of the process for resolving employment relationship problems
• A provision confirming the right to at least time and a half on a public holiday
• For most employees, an employment protection provision that will apply even if the employer’s business is sold or transferred, or if the employee’s work is contracted out.

There is no legal requirement foremployment agreements to include allowances and overtime, but it may help youretain valued staff members if you do.

Other things not covered by law that should be considered as part of good employment practice include travel, mobile phone use, clothing, on-call and higher duties allowances, overtime rates, andparticularly important for our sector, time off in lieu arrangements.

Fair Bargaining when Negotiating Employment Agreements

Under the Employment Relations Act 2000, parties must negotiate employment agreements in good faith, dealing with each other openly and honestly.

If and when an agreement is reached theemployer has to be confident that the employee is able to understand theprovisions of the agreement.

Particular care must be taken if the employee is young, sick, or emotionally distressed, or if the employee has a mental, educational or communication disability.

Employers must ensure the person has the opportunity to seek independent advice and does not rely on the employer’s advice, or on the advice of someone acting on the employer’s behalf.

An employment agreement may be cancelled bythe Employment Relations Authority if:

• Either party was unable to understand what they were agreeing to by reason of diminished capacity relating to age, sickness, mental or educational disability, or a disability relating to communication or emotional distress
• One of the parties relied on another’s knowledge or skill
• One party unfairly pressured the other
• The employer did not allow the employee the opportunity to seek independent advice.

Collective Agreements

Collective agreements involve one or more employers, two or more employees, and one or more unions. Under the Employment Relations Act, all of these parties need to be involved.

If there is a relevant collective agreementat your workplace, negotiated between the employer and a union and coveringwork to be performed by the new employee, the employer must:

• Inform the new employee there is a collective agreement, and give the employee a copy
• Inform the employee of their right to join the union and provide contact details
• If the employee agrees, promptly inform the union that a new employee has begun work
• Inform the employee that if they join the union they will be bound by the terms of the collective agreement
• Inform the employee that if they are not a union member and do not join, the terms and conditions of work will be the same as those of the collective agreement for the first 30 days. After that the employee’s terms and conditions of employment can be varied by agreement.

If a new employee is a member of the relevant union, and the agreement covers work to be performed by them, the collective agreement automatically covers that employee. Additional terms may be negotiated so long as those other terms can comfortably sit alongside those inthe collective agreement. The Department of Labour provides an example of what an employer’s offer to an employee in this situation might look like.

Individual Agreements

Where there is no collective agreement, the employer and employee must negotiate an individual employment agreement settingout the employee’s terms and conditions of employment.

Individual agreements are binding for eachparty and must contain the legal minima.

An employer must provide a written copy ofthe intended individual agreement and advise the person they are entitled toseek independent advice about the agreement and give the person enough time toseek that advice.

Fixed Term Agreements

There is considerable confusion in oursector about the use of fixed term agreements.

It is important to be aware that fixed termor temporary employment is work that will clearly end:

• At the close of a specified date or period (e.g. at the end of the fruit picking season); or
• On the occurrence of a specified event (e.g. when a permanent employee who has been away on maternity leave returns to work); or
• At the conclusion of a specified project (e.g. when installation of a new computer system is completed).

It is not acceptable to continually roll over a fixed term agreement year after year. In the event that this occurs theposition in question becomes in the nature of a permanent position.

There has to be a genuine reason for thefixed term. The employer should include the reason in an individual employment agreement with the employee, and ensure that the employee is well aware of thereason.

It is not also acceptable to use a fixed term of employment to establish the suitability of an employee for permanentemployment.

Employers also must not use fixed-termagreements to get around normal disciplinary or dismissal processes.

Examples of wording to be included infixed-term agreements

Example 1

“The position is for a fixed term. Thereason for this is that you will be covering for an existing employee who hastaken four months’ leave. That employee will return to work on 26 April 2008,and will need to be brought up-to-date by you in the week ending 7 May 2008. Asa consequence, your employment will cease on 7 May 2008.”

Example 2

“The position is for a fixed term. The reason for this is that you will be working on a project to develop a web strategy and build a new website. The project plan for developing this strategy and the site build is attached. Note that the project will end on 28 November 2008. At that time, your employment will cease.”

Probationary Periods

While it is not ideal practice, employersand employees may sometimes agree to an initial probationary or trial period.

This is different to a fixed term contract where there is no expectation of permanent employment. Both the employer and the employee need to make efforts to make the probation period successful so that the employment becomes permanent.

• The probationary period and its duration must be recorded in writing in the employment agreement
• The same processes of offer and consideration of employment agreements apply
• Employees have the same employment rights as full-time employees
• Realistic expectations for the probation or trial period should be clearly specified in writing either in the letter offering the position or in the employment agreement
• The probation period should only be long enough for the employee to demonstrate their suitability for the position.

If the employer thinks there are problems,they still need to follow a fair disciplinary or dismissal procedure. The employer cannot merely tell the employee to go at the end of the trial period. The use of a trial period does not affect the right of employees to be treated fairly and reasonably in compliance with the Employment Relations Act before any decision is made to dismiss them.

Employers should use the same processes and take the same care in managing the probation period that they would take ifthey were performance-managing a permanent employee with a performance issue.

Sometimes an employer may ask job applicants to demonstrate their skills prior to making a decision on whether to employ them. However employers cannot use such an arrangement to get work done without having to pay for it.

Example probation period clause

“A probation period will apply for the first [insert time period] of your employment to assess and confirm your suitability for the position. This probation period does not limit the legal rights and obligations of the employer or the employee, and both parties must deal with each other in good faith.

The employer will provide you with guidance, feedback and any necessary support. Both parties will promptly discuss any difficulties that arise, and the employer will appropriately raise any issues or concerns with you and also warn you if s/he is contemplating ending your employment. Any termination must comply with the termination clause in this agreement and the requirements of the Employment Relations Act 2000.”

“Your Employment is Dependent uponContinued Funding…”

The use of “dependent upon funding” clauses in employment agreements is widespread. Indeed, the vulnerability of funding isoften cited as the reason for making positions fixed term. However, it is not good practice and depending on the wording of any clause could be illegal. If a position is ongoing and there is a good chance that fundingis likely to be rolled over, it is better practice to make the position permanent and instead include a redundancy clause.

Redundancy is a situation where an employer may have positions surplus to requirements through an event such as loss of funding or reduced forecast funding. There should be a process of consultation set out in a redundancy clause and a commitment to redeploy staff members affected if this is possible or practicable. In most redundancy clauses thereis often a scale of redundancy compensation, which is paid in addition to notice of termination of employment if an employee is unable to be redeployed. One common option is the payment of 4 weeks pay for the first year of service and two weeks extra pay for each year of employment after this.

Who is the Employer?

Quite simply, the employer is the legal entity which has appointed the employee. In sector organisations, this means the trust, committee, or board.

A manager or coordinator may have delegated authority to employ and manage staff, but both the manager and any other employee/s are employed by the legal entity.

Employee or Contractor?

Under the Employment Relations Act 2000, an employee is anyone who has agreed to be employed to work for some form of payment. This can include wages, salary, and commission. Unlike the Human Rights Act (see the Guide), volunteers, self-employed people and contractors are not classed as employees.

Sometimes it is not clear whether someone is an employee or a self-employed contractor.

If all or most of the following featuresare present in a work relationship, it is likely to be an employmentrelationship rather than a contract for services:

• The intention of the employer and employee is to form an employment relationship, and this is shown in any written agreement or correspondence and/or by the behaviour of the parties
• The employer or their agent controls the hours worked
• The employer or their agent has the power to hire and fire
• The employer makes a surplus or loss, not the employee
• The employer deducts ACC premiums and PAYE tax on behalf of the employee
• The employer supplies materials for the work
• The employer owns or leases the equipment needed
• The employee is bound to one employer at a time and is expected not to compete or offer his or her skills to competitors of the employer.

Where there is uncertainty, mediation assistance can help settle the real nature of the relationship. Alternatively the Employment Relations Authority or Employment Court can be asked to determine the matter.

Resources

• Guide 16 – Unions and Collective Bargaining
• Resource 2: Sample Agreements – includes sample individual employment agreements, a sample contract and a sample letter of offer of employment

Information

• www.ema.co.nz – The Employers’ and Manufacturers’ Association – provides advice to employers on employment agreements
• www.ers.dol.govt.nz – Department of Labour fact sheets, “Terms & Conditions of Employment” and “Forming an Employment Relationship.” An employment agreement builder is also available, as well as information on probationary periods and various other forms of employment
• www.nscss.org.nz – North Shore Community and Social Services has a range of employment resources for community organisations available for purchase (including sample employment agreements).
• www.psa.org.nz – The Public Service Association – advice for employees
• www.sfwu.org.nz – The Service and Food Workers Union – advice for employees