Zero-hours contracts are employment agreements where an employer can require its employees to attend work for the hours it sets, but with no guarantee of the number of hours to be provided each week/shift.
These agreements were used widely in the fast food industry (amongst others) and resulted in a situation where employees did not know whether they would receive enough hours from week-to-week to cover their financial obligations. A number of unions ran a concerted campaign against these agreements which resulted in the “ban on zero-hours contracts” set out in sections 67C and 67D of the Employment Relations Act. It is important to note that this change does not affect genuinely casual employees who have the ability to turn down shifts when they are offered.
Employment agreements must now specify any agreed hours between an employer and employee. This means setting out the days and start and finish times when work will be carried out (and any flexibility e.g. rostering). The agreement will also need to specify a number of guaranteed hours if an employer wants to be able to require their employee to work at the times in the agreement (as opposed to a casual employee). This applies to salaried employees as well as those on wages.
Further, if an employer wants to be able to require their employees to work above their guaranteed hours (i.e. overtime), they need to have a specific clause in the agreement called an “availability provision”. The provision in the contract must set out an additional period of time where the employer may require the employee to be available to work. Importantly, employers can only use an availability provision where there are genuine reasons based on reasonable grounds to have one. What will be genuine/reasonable remains to be tested, but it will be considered based on the employer’s business needs and the ratio of guaranteed hours to “availability” hours. Employers will also need to pay compensation for those availability hours. Again, what will be sufficient compensation has not yet been tested, but will depend on the number of availability hours, how restrictive they are, and how much the employee gets paid (amongst other things). Staff on salaries can have the compensation incorporated into their overall salary package.
While these new provisions will provide certainty for some employees, certain industries will struggle with the requirements. In particular, some businesses cannot predict how many hours they will be able to offer employees at any one time. To avoid being stuck with lots of employees with guaranteed hours and no work to do, some employers are considering casualising portions of their workforce to retain some flexibility for the “quiet periods” without the cost of an availability provision. That potentially leads to even less certainty for employees and employers, as the employees do not know when/if they will receive work, and the employers may find themselves without a willing workforce when required.
Another issue which can have a serious impact on workers was the practice of cancellation of shifts when an employee was already on their way to work, or halfway through a shift, with no compensation. This was particularly hard on workers if they had invested time and money into transport to work, childcare or otherwise arranged their life to attend work, only to have their shift cancelled, often at short or no notice.
Now employment agreements must contain a provision setting out reasonable notice for shift cancellation. If there is no such provision, or if the shift is cancelled after it begins regardless of the provision, the employer must pay for the full value of the shift if they decide to cancel.
If there is a cancellation provision, the notice provided must be reasonable to avoid any payment for the cancellation. There are set considerations in the Act for determining the notice period, but it will remain to be seen how the Authority and Court interpret those criteria. Further, if an employer cancels a shift after the notice period, but before the shift begins, they will have to pay the employee an agreed amount of compensation. As with the period of notice, the compensation amount must be determined with regard to set considerations which will become clearer once the employment institutions have provided some guidance.
The Act also extends the requirements to keep wage and time records under section 130. The new sections make it clear that staff on salaries are not immune from the requirement, particularly if they work more hours than their “usual hours” as set out in their employment agreement.
This is potentially a major change, as traditionally a salaried employee simply did the hours required to get the job done. However an employee on a low salary working long hours may cause the employer to be in breach of the Minimum Wage Act. The new requirements are designed to enable Labour Inspectors to quickly and easily confirm that no employee is getting less than their minimum entitlements. Employers with salaried staff may need to dust off the old fashioned punch-clocks, or look to new technology to record the hours of their staff to avoid a potential penalty.
How we can help
Jackson Russell is experienced in dealing with all aspects of employment law. We regularly assist employers make sure their employment agreements and record keeping comply with the latest requirements. If you would like further information about an employer/employee relationship or require advice on anything related to employment matters, please contact your usual Jackson Russell advisor or our Employment Law specialists
The information contained in this publication is of a general nature and is not intended as legal advice. It is important that you seek legal advice that is specific to your circumstances.
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