New Year Changes to Employment Law

There were two new pieces of legislation passed by Parliament in November this year but which come into force on the 1st of April 2011. I've set out the key changes for small businesses below so that you are up to date with the latest play.

More flexibility over dismissals

Under the current law, if you are before the Employment Relations Authority having to defend an unjustified dismissal you have to persuade the Authority that the decision which you took as what a fair and reasonable employer would have done. In other words, that there was only one possible right decision to make and that you have to persuade the Authority that you made it.

That gives employers very little discretion and if the Authority disagrees with your decision then you lose and pay damages. Under the new law, you can argue that your decision was one of several courses of action that a fair and reasonable employer could have taken. This gives employers a lot more discretion at dismissal time since it means your decision need not be the best response providing it was a fair and reasonable response.
This may seem like a subtle difference but it could offer a lifeline to many employers.

More guidance on fair process

The new legislation also gives more guidance as to what is expected of employers in the dismissal process. Matters which the Authority should take into account are:

1. The resources of the employer and whether they had the ability to carry out a full and proper investigation into the allegation. The places a greater burden on larger employers compared to smaller businesses who may have limited resources;

2. Whether the employer's concerns were raised with the employee before they took action;

3. Whether the employee been given a reasonable opportunity to respond; and

4. Whether the employer genuinely considered the employee's explanation before making its decision.

Obviously, there is nothing new in the above, but what is more interesting is what is not included and the statement that the Authority should disregard minor defects in process that do not result in any unfairness. That again allows employees a little bit of flexibility if the process is not absolutely perfect.

90 day trial period extended

The 90 day trial period will now apply to all new employees who sign an employee agreement containing a trial period clause. No longer is this legislation restricted to businesses with 19 or fewer employees.
Remember however that to take advantage of this trial period legislation the employee must sign their employment agreement before they start work otherwise they will not be classified as a new employee. This piece of legislation has proved very popular with small businesses and is likely to prove even more popular with large businesses.


When the 2000 Act was introduced , reinstatement to employment was seen as the primary remedy for a claim for unjustified dismissal. However, everyone that deals regularly in personal grievances knows that requests for reinstatement are few and far between. The new law recognises that reinstatement is no longer the primary remedy and will only be ordered where "practical and reasonable to do so".


For those small businesses that have unions in their workplace, under the new law unions have to ask your permission before they enter the workplace (although that permission must not be unreasonably withheld). A further significant change is that employers can communicate with employees during collective bargaining about offers made during bargaining providing that they do so in good faith.

Increase in penalties

The Authority has always had the power to impose penalties for such things like:

1. Breach of a duty of good faith;

2. Breach of the employment agreement;

3. Not having a compliant written employment agreement.

Under the new law, penalties have doubled to $10,000 for an individual and $20,000 for a company. This may signal that the Authority is going to be a little bit more strict in the future about compliance with the Act.

Holidays Act

A number of changes have been made to the Holidays Act. First of all, employees can now cash up their 4th week of holidays. At the moment, the only time annual leave can be taken in cash is at termination of employment. Next, employers and employees have far greater flexibility to transfer public holidays to other days. There are also other more technical changes to the definition of "average" and "daily" pay which may have some impact on payroll but you are likely to receive advice from this from your payroll provider who will provide the necessary updates to your software.

In terms of sick leave, employers will be permitted to seek a medical certificate after only 1 day of sick leave. The employer no longer needs a reasonable suspicion that the sickness may not be genuine. All that you are requires to do is inform the employee as early as possible that proof is required and agrees to meet any costs obtaining that medical certificate. This means you could potentially have a policy that required all employees to provide a sick certificate on a Friday and Monday (providing of course you pay for it).

No material shift

Whilst the changes may not be particularly ground breaking they do present a marginal shift in employment legislation in favour of businesses. Perhaps the most significant will be the extension of the 90 day trial period and with more employees now being subject to this 90 day trial it may well be that there will be more law on this subject as more employees seek to challenge dismissals under this part of the Act.
2011 should be an interesting year so make sure you stay subscribed to this website.
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