Almost everyone works as an employee at some point in their lives. In an ideal world, every employee would receive a contract from their employer and have it reviewed by their lawyer before signing the agreement and commencing employment.
In reality, most employees don’t have the time or resources to seek legal advice every time they begin a new role. Often, they don’t even have an employment contract in place or they may have been led to believe that they’re a contractor rather than an employee.
Whatever the case, it’s important to know your rights as an employee and have a basic understanding of New Zealand employment law and contracts.
Are you an employee or a contractor?
The Employment Relations Act 2000 (‘the ERA’) contains a number of provisions that protect employees. However, to benefit from the provisions in the ERA, you must be an employee and not a contractor. A contractor is engaged under what is commonly referred to as a contract for service, whereas an employee will enter into an employment contract, commonly referred to as a contract of service.
Some key pointers:
- You don’t need to have signed an employment agreement to be deemed an employee and therefore fall under the ERA. Nor does a contracting agreement mean you are not an employee
- Whether someone is an employee or a contractor depends on the nature of the relationship between the worker and the business that is in charge. In some cases, the Employment Relations Authority and the Employment Court have found that an individual is an employee, despite the fact they had signed an agreement saying they were a contractor
So, what it says in your contract is not necessarily determinative. The Employment Relations Authority and/or Employment Court consider a number of factors in determining what the real nature of the relationship is.
If the relationship has many of the typical features of an employer/employee relationship, there is a strong likelihood it will be found to be a contract of service and therefore an employer/employee relationship. This will mean that the employee is entitled to the significant protections provided under the ERA and as established in employment law in New Zealand. They will also be entitled to the various benefits provided under the Holidays Act 2003.
This can have serious implications for the employer, particularly if they have treated the worker as a contractor for some time.
Do you need an employment contract? And if so, when?
Under the ERA, an employer is required to provide each of their employees with a written employment contract. Before an employee signs that contract, they must first be given a reasonable amount of time to consider it and, if necessary, seek legal advice.
If the contract includes a 90-day trial period, the employee must have signed the employment contract before they commence work in order for it to be enforceable.
What should be included in an employment contract?
Employers have a significant amount of freedom when it comes to the form and content of employment agreements, although terms of employment are always negotiable – an employee should not feel pressured to just accept what is put in front of them.
However, under the ERA, there are certain fundamental terms that must be included in all employment agreements. These mandatory terms include:
- The names of the employee and employer
- A description of the work to be performed
- An indication of where the employee will perform the work
- The agreed hours of work (or an indication of the arrangements relating to the hours of work)
- The wages or salary payable
- An explanation, in plain language, of the services available for the resolution of any problems that arise out of the employment relationship, including reference to the fact that personal grievances must be brought to the Employment Relations Authority within 90 days
What doesn’t need to be included in an employment agreement?
Employers don’t have to include information about leave entitlements or rest and meal breaks. However, all employees are eligible for these entitlements (under the Holidays Act 2003), whether they are set out in the agreement or not. Those rights are:
- 4 weeks of paid annual holidays (annual leave) after 12 months of continuous employment for their employer – click here for more information about annual leave entitlements
- Up to 11 public holidays each year (if they are days you would otherwise work). If an employee works on a public holiday, they must be paid for the hours worked at the rate of at least time and a half. If the day is an otherwise working day for them, they will also be entitled to a paid alternative holiday (sometimes called a day in lieu)
- Access to sick leave and bereavement leave after:
- Six months of current continuous employment with the same employer, or
- Working for the same employer for six months for an average of 10 hours per week and at least one hour in every week, or 40 hours in every month
- A rest and meal break. It often surprises people to find out that there are no statutory rules around the frequency and duration of breaks. However, employers must give their employees a reasonable opportunity to negotiate the timing and length of their breaks in good faith. The rest and meal break(s) must:
- Give the employee a reasonable chance to rest, refresh and take care of personal matters during work periods, and
- Be appropriate for the length of the employee’s working day
How does a 90-day trial period affect employment law and contracts?
If you are within your first 90 days of employment and you have agreed to take part in a 90-day trial period, then the protections afforded to you under the ERA relating to termination of your employment relationship (i.e. being fired) do not apply.
If you have agreed to a 90-day trial period, your employer can dismiss you without justification before the trial period has lapsed. You cannot bring a claim in relation to that dismissal.
NOTE: Some contracts provide for trial or probationary periods that fall outside the 90-day trial period that is specifically allowed to be imposed on new employees under the ERA. If the provision in your contract is one of these, then the ordinary rules apply so that your employment cannot be terminated for no reason. If you are in any doubt about what the provision is in your employment contract, we can clarify this for you.
What is a secondary employment provision?
Another thing to look out for in your employment agreement are constraints on your ability to work for someone else while you are working for your employer. These are called ‘secondary employment provisions’.
There must be genuine reasons, based on reasonable grounds, for incorporating a secondary employment provision in an agreement. The reason must be expressly stated in the agreement. Further, the secondary employment provision must not restrict the employee from performing work for another person to a greater extent than is necessary.
Even if there are no such provisions, employees owe obligations of loyalty and fidelity to their employer, which would restrict them from working for a competitor or acting in a way that conflicts with their duties to that employer.
Regardless of whether it is specifically stated in the employment contract, employees have no right to use their employer’s confidential information, except in connection with work undertaken for that employer.
What other provisions should you look out for?
In addition to secondary employment provisions, it is common to see restraint provisions, which limit the employee’s ability to work for a competitor after they have left the employer.
These sorts of provisions must be reasonable, in that they need to recognise the employee’s right to earn a living in their chosen field. To be enforceable by the employer, such provisions ordinarily have to be restricted in how long they apply for and, often, over the geographical area they apply.
Restraint provisions are often accompanied by other provisions which restrain the former employee from soliciting clients, customers and/or employees of the employer.
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John is the firm’s specialist Litigator. He has more than 30 years of experience in this field and practices in the areas of Civil and Commercial Litigation, Property Litigation, Estate and Trust Litigation, Employment Law (including Personal Grievances) and Debt Collection.
John’s clients appreciate his problem-solving skills and ability to explore resolutions from every possible angle to achieve the most beneficial, cost-effective outcome.
This article is brief and general in nature. You should not treat this article as legal advice and should seek professional advice before taking any action in relation to the matters dealt with in this article. Armstrong Murray accepts no liability for losses suffered by any person or organisation who may rely directly or indirectly on this article.