Continuity of Employment (Part 6A) - Subpart 1

25 August 2015

Object

The object of subpart 1 of the Act is to provide protection to specified categories of employees if as a result of restructuring, their work is to be performed by another person. The categories are those listed in Schedule 1A which cover cleaning services, food catering services, caretaking, or laundry services. These categories are included because:

• The employees are employed in sectors where restructuring can occur frequently,
• Their terms and conditions of employment can be undermined in the process, and
• They have little bargaining power.

The Act provides certain protections to such employees in that they have:

• A right to transfer to the new employer on their existing terms and conditions of employment,
• A right to bargain for redundancy entitlements from the new employer if they are made redundant for reasons due to the transfer; and in the absence of agreement the Authority may determine their redundancy entitlements.

Exempt Employer

An employer employing 19 or fewer employees is exempt from this sub part. To establish eligibility for the exemption the employer is required to provide a written warranty confirming that they and their associated persons employ 19 or fewer employees. The associated persons limitation is to ensure larger employers do not set up smaller units to take advantage of the exemption. In this context a person is an “associated person” of the person providing the warranty if:

• The person is a holding company or subsidiary of the person providing the warranty.
• The person and the person providing the warranty are subsidiaries of the same body corporate.
• The person proving the warranty is a subcontractor of the person and was engaged either before the restructuring or on the date on which the restructuring takes effect
• The person has, either before the restructuring or on the date on which the restructuring takes effect, granted a franchise to the person providing the warranty. However, this does not apply where the person granting the franchisee is not involved in the negotiating, tendering, or entering into an agreement under which the person providing the warranty is to perform the work.

The Act specifies in detail:

• The person to whom the warranty is to be provided. This varies depending on whether the situation involves contracting in, contracting out, subsequent contracting or sale or transfer of business.
• Who is responsible for disclosure of information so the employer wishing to provide a warranty has sufficient information to identify and contact the employer of the employees who perform work that is to be performed by employees of another person as a result of the restructure.
• When the information is to be provided.

Notice to Employees

As soon as practicable, but not later than 15 working days before the date on which the restructure takes effect, the employer of the employees affected must provide them with:

• Information about whether they have a right to elect to transfer to the new employer,
• An opportunity to exercise that right,
• Sufficient information for employees to make an informed decision,
• The date by which an election must be made, which is 5 working days after they are provided with the above information, or such later date as may be mutually agreed.

The information to be provided must include:

• The name of the new employer,
• The nature and scope of the proposed restructure,
• The date it will take effect,
• A statement to the effect the election must be in writing and signed by the employee,
• Notice that certain information will be provided to the new employer about employees who elect to transfer,
• Those employees are entitled to access their personal information and to request correction of that information.

The notice must specify that an election may be delivered, sent by post or sent by electronic means (fax, email etc)

If the employees do not have a right to elect to transfer (due to the new employer being an exempt employer) the employer must also provide the employees with information that:

• The new employer is an exempt employer,
• The employees do not have a right to transfer to the new employer,
• If the warranty provided is false the employees may raise a personal grievance against the new employer,
• The remedies available do not include reinstatement.

The employee’s employer must send an election to the new employer a soon as practicable, but no later than 5 working days after receiving it from the employee.

If the restructuring is a contracting in or subsequent contracting, person A must give the employer sufficient notice and information about the restructuring to enable the employer to meet its obligations to provide information to its employees. In this context sufficient notice means no later than 20 working days before the date on which the restructure takes effect.

Liability for costs of service related benefits

Where an employee elects to transfer to the new employer, liability for service related benefits must be apportioned between the employee’s employer and the new employer. In the absence of agreement:

• The employee’s employer is liable for the costs the employer would have had to pay if the employee had resigned on the day before the specified date (eg annual holidays and alternative holidays).
• The new employer is liable for the costs of any service related benefits which accrued before the specified date but would not have been paid to the employee if the employee had resigned on the day before the specified date (eg unused sick leave)
• The employee’s employer must pay the correct amount to the new employer by the specified date unless otherwise agreed.
• There are also specific rules concerning responsibility for such costs where only part of the employee’s work will be performed by the new employer, or where the work will be performed by more than one new employer.
• Any disputes may be resolved as an employment relationship problem.

Implied Warranty

There is an implied warranty by the employee’s employer that the employer has not, without good reason:

• Changed the work affected by the restructuring,
• Changed the employees who perform the work (for example by replacing them with less experienced employees),
• Changed the terms and conditions of one or more of the employees (for example by giving them a large pay increase).

Disclosure of information to transferring employees – Subpart 2

This subpart makes provision for the disclosure of employee transfer costs information (ie data for all employees concerned) and individualised employee information relating to employees who have elected to transfer.

“Employee transfer costs information” means information about employment related entitlements of employees who would be eligible to transfer to the new employer if the proposed restructuring were to proceed (unless the employer is exempt) and includes:

• The number of eligible employees,
• The wages or salary payable to them in a stated period (week, month etc),
• The total number of hours the employees spend performing the work concerned in a stated period,
• The costs of service related entitlements,
• The cost of any other entitlements, including entitlements agreed but not due until a future date or time.

“Individualised employee information” means information about the employee including:

• Any personnel records relating to the employee,
• Information about disciplinary matters concerning the employee,
• Information about personal grievances related to the employee,
• Information the employer is required to keep by law, including:
  • The employment agreement,
  • Wage and time record,
  • Leave record
  • Tax code declaration ,
  • Employer contribution to KiwiSaver,
  • Student loan scheme deductions,
  • Child support deductions.

Disclosure of individualised employee information to the new employer must be made as soon as practicable, but no later than the date on which the restructuring occurs unless a later date is mutually agreed.