Protection for the vulnerable

By Mark Story

You never saw it coming because the bosses kept it quiet, but their decision to sell the business has left you high and dry. Not only are you unexpectedly without a job, but there are no provisions within your employment contract for redundancy pay, either.

Until recently, this all-too-predictable picture has been deemed "part and parcel" of the unskilled worker's lot.

At face value, employers are supposed to have consulted with employees over the sale of a business since 2000. But a realisation that "fessing-up" to staff on possible sale plans could damage the business has made many employers wary of showing their hand until necessary.

Recognising some employers pay only lip-service to this requirement, new provisions contained within last December's Employment Amendment Act require them to give staff greater clarity into their plans to sell (or restructure).

As a result, employers must detail the steps they plan to take within the consultation process to protect employees in restructuring situations (following business sell-down).

Employment agreements entered into after December 1 last year must contain an employee protection provision (EPP). And employment agreements in existence before December 2004 will have to be altered to include this provision by this December.

What the EPP is designed to do is to prescribe the process employers will follow when negotiating with the new employer on any restructuring that affects employees.

While they technically apply to all employees, recently enacted provisions are specifically designed to safeguard the "vulnerable" workers - in service industries, such as cleaning, catering and laundry - that unions have sought to defend for some time.

The net effect of these provisions, says employment lawyer Andrew Scott-Howman, is employment protection in "restructuring" situations where an employee's work is to be undertaken by a new employer. So, if the boss sells the business, your right to transfer (your employment) to the new owner - on existing (or better) terms and conditions - is now a done deal.

Workers clearly aren't duty bound to transfer to their new employer. But should they decline, the law prescribes processes to determine what entitlements are available. Those who do transfer, explains Scott-Howman, have the right to negotiate entitlements if they're made redundant by the new employer for reasons related to the "restructuring" of the previous employer's business.

In restructuring situations, specified employees also have a right to transfer (to the new employer) if they'll no longer be required to do all or part of their work for their existing employer because of the restructuring. That applies when the new employer will perform the same type of work, or work that is similar.

So if your employer's business is being restructured, what must they do for you?

Assuming your work will be affected, the employer - says Scott-Howman - must provide adequate notification along with relevant information. The onus is then on your employer to let you know the date by which you must decide to transfer to the new employer or not. Assuming you agree, you'll effectively become an employee of the new employer as if nothing has changed.

So if you decide to transfer - and are then made redundant as a result - what entitlements to redundancy do you have?

Any redundancy entitlements in a restructuring situation within your employment agreement continue to apply.

But even if your employment agreement is silent on this matter Scott-Howman says you may still be eligible for redundancy entitlements from your new employer.

If you and your new employer can't agree on redundancy entitlements, the Employment Relations Authority (ERA) can "wade-in" with a judgment. Key considerations the ERA will adjudicate on include length of service with both new and previous employer, how much redundancy notice you received, and the likelihood of you getting another job.

Scott-Howman says: "It's going to take some "case law" to determine how these new provisions should in practice be interpreted.

"But vulnerable workers will fare better with the weight of their union (through collective representation) than if they try to negotiate their own redundancy provisions."

For more information visit the Department of Labour's Employment Relations page here.

- NZ Herald

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