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8 March 2000

The Labour force - where's it heading?

Employment law reform

The newly elected coalition government has made it clear that repeal of the Employment Contracts Act is high on its agenda. Although we have yet to see draft legislation it is likely that any such legislation will be closely based on the Workplace Relations Bill (WRB) that was drafted by the CTU some years ago. This bill is likely to have a name change and be called the Employment Relations Bill (ERB) and its exact content will depend on the outcome of discussions between the Labour and Alliance parties.
Therefore, in spite of some uncertainty as to exactly what the new legislation will look like, it is possible to make some general comments on anticipated changes.

Contractualist model continued
It appears certain that the contractualist model adopted by the Employment Contracts Act (ECA) will be continued. This means that employment relationships will be governed by a contract bargained for 
by the parties or their agents. This is in distinction to the old system of awards imposed by third 
parties that characterised the regime which existed prior to the ECA. Despite the comments of some politicians to the contrary, it is unlikely that there will be any return to the days of compulsory 
union membership and blanket coverage of documents.

Unions' positions enhanced
Unions are likely to be a considerable beneficiary of the proposed legislation. The WRB stipulates that only unions can negotiate collective employment contracts. Therefore, all employees who wish 
to be covered by a collective employment contract will have to join a union. However, it is important to note that there is no system of registration of unions as there was prior to the ECA. It appears 
that the only requirements for unions will be that they comply with the Incorporated Societies Act (basically a 15-member minimum) and that they are not controlled by employers. It would therefore be an option for 15 or more employees in a workplace to form their own union and negotiate their own collective contract with their employer.

The WRB also gives unions a greatly enhanced right of access to the workplace. This includes a right of access to discuss union matters with members and also to recruit for new members. This is a 
significant change from the provisions in the ECA.

Good faith bargaining
One of the centrepiece elements of the proposed legislation is an obligation to bargain in good faith. While this does not require parties to actually conclude a document, or even to make specific concessions, the requirements will be: to meet and consider proposals; to provide information necessary for the purpose of collective bargaining; not to undermine the authority of bargaining 
agents; and to make every effort to conclude an agreement in a reasonable time. Again, this is a significant change from obligations on employers under the ECA and employers who have adopted a "take it or leave it" attitude when presenting a collective employment contract will no longer be able to do this.

There are some significant changes in relation to strikes. One of the most important is that it will now be lawful for employees to engage in a strike to obtain a multi-employer document. Another significant change is that it will be a breach of the good faith bargaining provisions for employers to employ replacements during a lawful strike. There are many industries in which this will have significant implications.

Personal grievances
The personal grievance provisions appear to remain largely unchanged although it is likely that the provisions of the new legislation will be extended to cover "dependent contractors". This may give a number of people who are presently regarded by the law as independent contractors and not employees, access to the personal grievance provisions.

Transitional provisions
Contracts entered-into prior to the implementation of the new legislation will remain in force for a maximum of three years with an option of expiry in July 2001. Therefore, employers are not going to be able to defeat the provisions of the new legislation by negotiating contracts for lengthy terms prior to its implementation.

Although the basic system of industrial relations is not being changed, the new act will present a number of challenges to employers and employees. Some of the concepts (such as good faith bargaining) are borrowed from North America and it is likely that North America case law will influence how the courts interpret the proposed legislation. All those involved in negotiating employment contracts should be considering now exactly what implications the new proposals have for 

For further information contact:
Frazer Barton, Partner, Dunedin

Workplace Deaths Top 50
The death by drowning of a 66 year-old farmer in Waikaruka after his tractor rolled into a stream and pinned him underneath on 28 December brought the 1999 workplace death total to 55. New Zealand is reputed to have the second-highest accident rate amongst western nations, with deaths occurring across the widest possible spectrum of industry and workplaces, including construction, industrial/commercial, farming and forestry. Workplace deaths cost employers dearly as well, if prosecutions ensue. We can help you with risk management, advice on hazard elimination and representation if the worst happens.

For further information contact:
Frazer Barton, Partner, Dunedin

Property law watchdog
For clients currently looking at property transactions involving a cross-lease or composite freehold/leasehold title, we strongly recommend you speak with a lawyer in our Property Law Division before proceeding. The Law Commission has put forward a number of proposals for reform 
in this area, which may have significant consequences for property owners.

For up-to-date information contact:
Clare Malthus, Partner, Dunedin
Warwick Deuchrass, Partner, Dunedin
Roger Sandford, Partner, Christchurch
Peter Richardson, Partner, Christchurch

GST and retirement village development
The Court of Appeal recently clarified the GST treatment of 'supplies' made in the development and operation of a retirement village. In Norfolk Apartments Limited v CIR, the court held that common areas and facilities developed for the use of occupiers of a retirement village, fell within the definition of a 'dwelling' under the GST Act. As the supply of residential accommodation by way of license-to-occupy is an exempt supply under the GST Act, a consequence of the decision is that input tax credits or refunds are not available for the costs in developing such facilities, where the 
license-to-occupy structure is adopted. In Wairakei Court Limited v CIR, the court held that GST input tax credits were available for the costs in developing studio units where the occupiers of those units were obliged to receive and pay for either full care (to the level of a rest home) or partial care. The 
court held that the developers 'principal purpose' in incurring the costs for the development of the studio units was to generate fee income by providing care to the occupiers (a taxable supply) rather than in supplying accommodation (an exempt supply). However, in respect of villas which had also been developed, GST input tax credits were not available, as the principal purpose involved was the supply of residential accommodation on a license to occupy basis.

IRD has released a draft (IS3571) of its interpretation of various GST issues affecting retirement village developments and operations. The GST treatment of development costs well may be an important 
factor in determining the subsequent structuring of the legal arrangement for ownership or occupancy of units. The IRD draft is currently available for comment by interested parties. In future issues we will look at the recent Law Commission Report on Retirement Villages and the draft Retirement Villages Act.

For further information contact:
Peter Richardson, Partner, Christchurch
Warwick Deuchrass, Partner, Dunedin

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