Working to rules: Perils of the protection law

By PAULA OLIVER

Government proposals intended to protect vulnerable workers will create uncertainty, force companies to give away sensitive information and make it difficult to tender for contracts, says a company which will be affected by the change.

Spotless Services employs 8500 staff, almost all in areas the Government has deemed vulnerable.

The Government expected its move to protect vulnerable workers when a business is sold or their work is passed to a new contractor to be contentious.

A similar move was planned in the original Employment Relations Act in 2000 but was removed after an outcry from business groups.

Now it is back. But this time it has a two-tier form, giving a limited amount of protection to all workers and a stronger level of protection for those deemed vulnerable.

Labour Minister Margaret Wilson said the legislation struck a balance between employers and employees.

It was needed because people in jobs such as cleaning had suffered falling wages, loss of quality of life and sometimes loss of their jobs through their work being repeatedly taken over by new companies.

She said the protection was the most significant part of the Employment Relations Law Reform Bill.

But Spotless Services' general manager of support services, Yvonne Treen, said the proposals would be hard to put into practice.

"The amount of person hours required to tackle this, get it under our belts and cope with it is significant. That loss of productivity isn't really taken into account."

Treen said one of the big effects would be that it would become hard to price tenders for contracts.

Spotless, which covers cleaning, catering, laundry and maintenance in many sectors, frequently bids for contracts for its mostly part-time employees.

Because the new law would require an incoming contractor to take over the previous contractor's workers, it created uncertainty over what those employees would do and what it might cost to take them on or make them redundant.

When working out what price to bid for a contract, it would be necessary to find out the workers' terms and conditions, Treen said.

"You don't know the liability that is there. You don't know how many will choose to transfer.

"The client would have to get the current contractor to disclose terms and conditions, otherwise you'd be pricing blind and would have to put a set of assumptions in there."

That then created a problem over disclosing commercially sensitive information, she said.

The industries were so competitive that elements such as the configuration of a workforce or how much labour was used at different times of the day could be a crucial point of difference.

Treen said Spotless differed from other businesses in that it did not oppose some form of protection for workers.

"It's not in anyone's interest to continue to undermine competition in the market by doing it off the backs of employees, by cutting their pay and conditions."

But Spotless felt that if the new employer could offer comparable terms and conditions, the employee should not have a choice on whether to transfer.

"There's no disadvantage being incurred. The fact that the employee can choose is a big thing for us. It's uncertainty."

Cabinet papers show that the Government wrestled with the protection clauses for months.

Margaret Wilson was asked several times to give the Cabinet more information about parts of her plan.

After originally pushing the idea of substantial protection for all workers, Wilson agreed that targeting was needed.

Options considered included limiting the protection to the public service, collective agreements or certain services. Exempting small business was also considered.

In the end the Government adopted the Council of Trade Unions' suggestion that protection be given to specific services.

It also decided to include succession of contract and sale of the business, despite Wilson's office saying in May last year that:

"This has an unintended effect - to effectively create a perpetual right of transfer for employees of a contractor where the work and the contract is lost to another provider.

"I therefore propose that these situations no longer attract the right to transfer due to the complexity, cost to business and anomalous situations that may result."

The Ministry of Economic Development was also against including protection where a contract was taken over.

Treen said the law changes would mean Spotless would have to update its manuals, give new training about how to price a tender and develop new procedures in case the company lost a contract.

She was concerned that the list of workers deemed to be vulnerable would be extended, and said the law was confusing for workers involved in more than one contract job.

And it meant companies would be spending time on compliance and governance, rather than expanding their business.

But CTU president Ross Wilson cannot understand why employers are concerned.

He said that the laws were modest, and he would like to see the protection for vulnerable workers applied to all employees.

"All workers are vulnerable in a situation where a business is being sold or the work contracted out."

Wilson said the laws could work, and people should try to make them work, particularly for the people in the target group.

"There might be a few practical difficulties in making this work, but they're really nothing compared to the negative impacts that these workers have experienced without protection."

Wilson said the CTU would seek to have more workers added to the "vulnerable" list.

And the Engineering, Printing and Manufacturing Union said it would try to have some of its tradespeople added to the schedule.

Business New Zealand executive director Anne Knowles said any sale or contracting out problems could be handled with other mechanisms.

The strongest submissions she had heard against the laws came from people who saw their small businesses as a retirement nest egg.

They were worried that they might have to pay redundancy costs if they sold the business, or that they might have trouble selling because of the added cost for buyers.

Knowles' other concerns centre on the possibility that companies would have to take on staff even if they were substandard.

"That might be the reason a contract was lost. You've got the caterers, but everybody is avoiding the cafeteria because of the food."

Cabinet papers show that the legislation could:

* Reduce the purchase price of businesses to factor in the costs of protections

* Change the nature of business re-organisation

* Inhibit growth for some businesses in the contracting area if the costs of redundancy are seen as too high to make tendering worthwhile

* Make it more attractive to close, rather than reorganise, a business

* Negatively affect employer attitudes toward hiring decisions.

The changes

* "Vulnerable workers" are given the right to transfer on the same wages and conditions to a new employer who buys, takes over or contracts for a business or part of a business

* "Vulnerable workers" are listed on a schedule, which can be added to if Labour Minister Margaret Wilson advises so

* If the redundancy entitlement is unclear and cannot be agreed upon, it can be set by the Employment Relations Authority

* The new employer must be fair when choosing who to make redundant, and strike a balance between its existing staff and the ones who are transferring.

Unpopular bill

* For the country's thousands of medium-sized businesses, the proposed new rules on the transfer of undertakings is the worst aspect of the Employment Relations Law Reform Bill.

* The Business Herald surveyed 609 small and medium-sized members of the Auckland Chamber of Commerce and 50 of the country's top business leaders to test reaction to the bill.

* On a scale of 0 to 10, where 5 is neutral, medium-sized businesses gave that part of the legislation 1.4.

* The proposed rules were also a concern to small businesses, which rated them at 1.8, and large businesses (2), but less so than the bill's provisions on multi-employer collectives and individual contracts.