Source: New Zealand Government
Removing rewards for poor employee behaviour
Good afternoon everyone, and thank you Malcolm for that lovely introduction.
It’s wonderful to be here today at MJH Engineering.
Thank you to the Hutt Valley Chamber of Commerce and MJH Engineering for inviting me to speak and share some exciting announcements with you all.
Before I begin, I want to congratulate MJH Engineering for their recent win at this year’s Wellington Regional Business Excellence Awards in the Health, Safety and Wellbeing Innovation category. This award recognises organisations who have implemented innovative health, safety, and wellbeing initiatives in the workplace to keep people safe.
It has been just over a year since this Coalition Government was formed, and I am pleased that we have hit the ground running. We are delivering what we said we would, and I am proud that many of the changes New Zealanders are seeing are based on the ACT-National coalition agreement.
Reading out the full laundry list of ACT’s coalition commitment achievements could easily use up my allotted time, so I’m not going to do that. But I do want to share just a few policies that I believe will make a real difference:
- This Government has delivered tax cuts to ease the cost of living.
- We’ve cut wasteful Government spending to get inflation under control.
- My colleague, David Seymour, has established the Ministry for Regulation to cut red tape to make doing business simpler.
- We’ve introduced legislation to toughen sentences for attacks on workers and give weight to the victim’s circumstances at sentencing.
- And we’ve agreed on core features for a replacement of the Resource Management Act centred on property rights.
My Workplace Relations and Safety portfolio also features a number of ACT-National coalition commitments.
In the first 100 days of Government, we repealed Fair Pay Agreements and brought back 90 day trials.
In September, I announced changes that will provide greater certainty for contractors and businesses. The current process for workers challenging their employment status through the courts can be costly for businesses and can increase uncertainty. The Government agreed to amend the Employment Relations Act to provide a gateway test that businesses can use when responding to a claim that a person is an employee and not a contractor.
One of the policy areas I am most excited about is the reform of health and safety law. I recently completed a health and safety roadshow across the country, visiting 11 different towns and cities around New Zealand, and meeting with many Kiwis to discuss how the law is working for them. We have some exciting work to do, and I am grateful to the people I have met across the country, for their honesty and openness in sharing their concerns.
And just last week, I announced a change that will provide greater flexibility and certainty in the dismissal process for high-income earners. The change means that employees earning above $180,000 will be unable to raise an unjustified dismissal claim, a type of personal grievance.
High-income earners have a major impact on organisational performance.
An efficient dismissal process for high-income earners will lessen impacts for businesses when a worker might not turn out to be the best fit. This change will provide greater labour market flexibility, enabling businesses to ensure they have the best fit of skills and abilities for their organisation.
Today I am pleased to announce the Government has agreed to another ACT-National coalition commitment to simplify personal grievances.
Personal grievances are intended to balance employer and employee interests and protect employees from unfair employer behaviour, something we know happens. But we currently don’t have the balance right. Personal grievance settings have tilted too far in favour of employees and are creating additional costs for employers.
And let’s be clear: relationship breakdowns in the workplace are a stressful time for everyone involved. Employers sometimes need to act swiftly and decisively when dealing with a relationship breakdown in order to avoid lasting damage to the business or creating a toxic atmosphere for the rest of the office. Dismissing an employee is often a decision businesses make very reluctantly.
Of course, the consequence of costly personal grievances ultimately falls on workers. When it is costly or downright impossible to fire an employee, businesses are going to be more hesitant to take on new workers and give people a shot.
I’ve heard from employers and employment lawyers that the process requirements when dismissing an employee are increasingly hard to meet, leading to uncertainty and potential costs for employers. I know small businesses particularly struggle, but even large employers can struggle to protect against complaints about management styles and the handling of interpersonal disputes.
If employers fail to follow the correct process for dismissal, employees can raise a personal grievance. This has resulted in what many would agree are ludicrous situation, where even employees who have engaged in serious misconduct are granted financial remedies to be paid by their former employer.
In 2021 a truck driver was fired for falsifying information on their time sheet which put both the worker and the employer at risk of a fine for incorrect logbook keeping. In this case the employer had to pay the worker $10,500 in compensation for the humiliation and distress caused by the job loss and 13 weeks of lost wages.
In 2022, a restaurant worker was fired on the spot for stealing food from the restaurant. While the worker admitted to stealing the food, the employer had to pay the employee $21,000 in compensation for hurt and humiliation.
I’ve also heard from employers that the risk of poorly behaved employees being reinstated into their role is the worst-case scenario for them. I’ve heard of situations where the employee uses the threat of reinstatement as a bargaining chip when negotiating a financial settlement with the employer.
While reinstatement is rarely awarded by the courts, it can happen. I’ve heard of an example where a health professional was fired on the spot for being physically violent toward a patient. The Court determined that it was appropriate to reinstate the worker into their former role despite the employer’s concerns that the worker may physically assault another patient.
Remedies granted to employees have been significantly increasing in size. In 2023, the average remedy was about $25,000 per case. This increase in remedies is largely driven by compensation for hurt and humiliation, with the average amount awarded nearly tripling since 2014.
While courts can reduce the amount awarded in remedies where the employee contributes to the personal grievance, remedy reductions ordered by the courts have become smaller in the last few years, with the average reduction being around 40% in 2013, and just 22% in 2023.
It is obvious that some employees are now trying their luck at raising a personal grievance in the hope that they will get a financial pay out. And as the statistics show, the odds do appear to be in their favour.
This is not the balance personal grievance settings are meant to strike.
With that in mind, I am happy to announce the Government is delivering on another ACT-National coalition commitment: to give more consideration to the employee’s behaviour in the personal grievance process.
ACT was the only party to campaign on this policy, and I am pleased to share the changes Cabinet has agreed to.
First, we’re going to get tougher on serious misconduct in the workplace. That includes behaviour such as violence, bullying, harassment, fraud, theft, dishonesty or using illegal drugs at work.
Behaviour like the examples I just shared erodes the basic trust and confidence that are essential to the employment relationship.
This is why the first change I am making is to remove eligibility for any remedies where the employee’s behaviour amounts to serious misconduct.
Employers can now be assured that if an employee acts in a destructive or fundamentally inappropriate manner, employers can take the necessary disciplinary action without the risk of being liable to pay the employee remedies.
The second change I am announcing is to remove eligibility for reinstatement and for compensation for hurt and humiliation when the employee has contributed to the personal grievance. These include situations where the employee has repeated instances of lateness, misuse of company resources or under-performance.
I know there are situations where employees could raise a personal grievance if they are put on performance management, or where employees who fall out with their colleagues may raise personal grievances over the employer not intervening in the way they would like.
Removing eligibility for reinstatement where the employee has contributed will reassure employers that reinstatement of a poorly behaved employee back into the workplace is no longer an option. If the employment relationship has clearly broken down in the eyes of one or both participants, no party should be forced to make the relationship work.
I also believe it is important to remove compensation for hurt and humiliation in order to deter employees who try their luck at raising a personal grievance in the hope that they will get a financial pay out.
Finally, the Government is introducing changes that should make the personal grievance process less gruelling.
The courts will now be required to consider whether the employee’s behaviour obstructed the employer’s ability to meet their obligations to act as a fair and reasonable employer.
I’ve heard examples of employees avoiding or delaying investigation or disciplinary meetings, or failing to respond to the employer’s communications about their concerns. This could result in a personal grievance being established due to procedural errors which are not fully the employer’s fault.
This change will address concerns that some employees can be obstructive, preventing the employer from running a fair and reasonable process. It will ensure that obstructive employee behaviour is consistently considered when deciding whether to establish a personal grievance.
We will also be relaxing the threshold for procedural errors. The size of an employer’s procedural defect will no longer be a key focus of the court’s assessment – what matters is whether the employee has been treated unfairly. If they have not, the employer shouldn’t be penalised.
This will ensure that the fairness of the situation is more important than any particular procedural error and will allow employers to take appropriate action when an employee does something wrong.
Overall, these challenges will strike a better balance, and will ensure the personal grievance system remains focused on those workers who have been genuinely wronged.
This Government is committed to cutting the red tape and regulations that are stopping both businesses and employees from realising their full potential. Every day we’re working to empower New Zealanders to peacefully make a difference in their own lives and the lives of those they care about, no matter their background.
That is certainly my focus, and I am confident that the changes I have announced today will help to deliver this vision.
Thank you once again for having me here today and for your hospitality.
ENDS
