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New Bill to allow contracting out of personal grievance provisions

Late last year Scott Simpson, the National MP for the Coromandel, introduced a Member’s Bill that is designed to allow employees on salaries of greater than $150k per year to agree to a provision in their Individual Employment Agreement to contract out of the personal grievance provisions in the Employment Relations Act 2000 (the Act).

The personal grievance provisions of the Act are intended to protect workers from unjustifiable dismissal or disadvantage. This currently overrides any existing contracts agreed to by the parties.

Simpson’s Bill will amend the Act to allow employees with an annual gross salary over $150,000 to contract out of the personal grievance provisions. Under this Bill, if that option is taken, whatever the employee and the employer have agreed to in their employment contract stands. This removes the threat of personal grievance for the employer in exchange for agreed terms with the employee.

The Bill however provides some protection on an employer “forcing” an employee to agree to a contracting out provision. The provision to contract out only applies when the employee is negotiating with their employer to make an Individual Employment Agreement AND the employee’s IEA provides for an annual gross salary, greater than $150,000.

Where an employee and employer agree on a provision to contract out, the provision is only valid if the following occurs:

(a) The provision is in writing; and

(b) The agreement is signed by both the employee and the employer; and

(c) The employee had independent advice BEFORE signing the agreement; and

(d) The lawyer giving the advice explained the effect and implications of the provision to the employee they signed BEFORE the agreement; and

(e) The lawyer witnessed the employee’s signature on the agreement; and

(f) The lawyer certifies that they complied with (d) and (e) above.

This Bill went through its first reading in the House on 22 March 2017 and is currently at select committee stage. Submissions close on Friday 5 May 2017.

This Bill has quietly slipped into the House, however does provide an interesting take on personal grievances. While employers may like the Bill as it means that if employees agree to such a contracting out provision they remove the potential of costly grievance processes, it remains to be seen if employees would forego their right to raise a personal grievance unless they are able to negotiate some up-front compensation loaded into their salary package.

Currently an employer is only required to give the employee an opportunity to seek independent advice on an offer of employment or variation as part of the offer and acceptance process. This change to the Act, if passed, goes one step further when a contracting out proposal is being negotiated. In this situation, the employee must take legal advice and their lawyer must not only inform them of the consequences of agreeing to the provision, their lawyer must also witness the employees signature. This will introduce a cost to the employee in agreeing to such a provision which the employee may seek to ensure is compensated for as part of agreeing to contract out of the right to raise a personal grievance.

This step also provides a protection mechanism for the employee, as it means the employer cannot ‘force’ the employee to agree such a provision.

At time of writing this, there had been no submissions to the select committee. This means that the Bill is therefore likely to proceed to a second reading unchanged.

If people wish to make a submission, there is little time remaining to do so before the Select Committee closes off and moves the Bill to a second reading. To make a submission go to the Parliamentary website.

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