What to Say When

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Below is the first in our series of one liners we use in response to challenging behaviours. We hope they come in handy for your own work situations. If you have any of your own that work please email them in and we can include them.

Passive Aggressive Colleagues

We have a passive aggressive person on our team who constantly moans to his colleagues but won’t say anything to me. The team want him to stop. What can they say to him?

Next time he corners them in the tea room and he his being negative about the latest thing, get his colleague to say : “That sounds really important to you, let’s go and tell the manager.”

Crying

What do I say to the employee who always cries when I raise something with them. Firstly accept crying as being okay, not something to be intimidated by. Acknowledge they are upset, but don’t be put off from discussing what you intended, or hearing what they have to say. A response to tears can be as simple as passing over some tissues and saying: “I can see this is upsetting for you, I will give you a couple of minutes.” Just sit there. Say nothing. It is more likely than not they will start talking again. The key is to not allow the tears to bring the discussion to an end. It may temporarily put it on hold, but always come back to it.

Blaming

Next time someone simply blames others e.g. says, ‘but I couldn’t do it because John did/didn’t do that thing’, respond with “I’m interested in what you could do differently next time so that we still get the necessary outcome”. For example: Ted hasn’t completed the report he was supposed to do for you. It was John’s fault (according to Ted) because he didn’t get the information to Ted to complete the report. What could have been done differently? Ted could have chased John for the information, communicated to John a timeline, told you before the report was due that there was possibly a delay, or completed other parts of the report while he waited for the other information. All things Ted could have done. Place the responsibility back on to Ted. i.e. the person who blames others.

What is work?

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There will be significant implications for many employers following a recent Employment Court Case. If your employees attend training, meetings, work functions or travel for work purposes you may need to reconsider how you pay them.

The case involved the Smiths City Group. Every morning prior to opening, the sales manager at each of their 29 locations holds a 15 minute morning meeting to discuss issues and talk about sales promotions and targets. The employees were not paid for their attendance.

In January 2016 a Labour Inspector issued an improvement notice to Smiths City that required the organisation to undertake an audit to identify where wages had been paid below the statutory minimum. The audit was for all employees who attended the 15-minute morning meeting who was on, or close to, the minimum wage rate and it applied across all 29 stores. The audit had to cover all current and previous employees for the last six years. The company was to calculate the arrears of pay below the minimum wage and reimburse those arrears accordingly.

Smiths City objected to the improvement notice claiming the 15 minute meeting was not work. In addition, Smith City was claiming the commissions and bonuses paid to employees ensured they were paid above the minimum wage even when the hourly base rate was at the minimum wage and the 15 minute meeting was deemed to be work. The matter went to the Employment Relations Authority and the Authority agreed with Smith City, rescinding the notice. The Labour Inspector appealed, and the case was heard by a full bench of the Employment Court.

The Employment Court looked at the Idea Services case (known as the Sleepover case) as the basis for determining whether the 15-minute meeting was “work” for the purposes of the Minimum Wages Act.

Smiths City argued that the employees were not compelled to attend the meetings, that the meetings didn’t put a significant degree of constraint on the employees, and there was no responsibility on the sales staff during the meetings, and they argued that the meetings were not critical to the business.

The Employment Court found that staff were required to attend the meetings, and that while there were different expectations of behaviour in the meetings compared to when they were in the store, that it did not alter the fact that their personal freedom during those 15 minutes was constrained by the employer.

The Court rejected Smiths City’s claim that there was no responsibility on the employee during the meetings, but rather like a training course, the employees were expected to sit, listen and learn the information being presented by the Sales Manager so they could apply it during the day.

The Court also rejected Smiths City’s claim that both the employer and the employee benefited from attending the morning meeting, by earning higher commissions.

Accordingly, the Court found that the sales employees who attended the morning meetings were working during those 15 minutes.

That left the Court to consider whether Smiths City had breached the Minimum Wage Act. Smiths City contended that when the sales commission was taken into account, all of their sales staff earned more than the minimum wage. The method of payment was justified by the company because wages, and commission, were earned over the whole pay period which it considered to be the correct interval for the calculation of minimum wage.

The Court accepted that the commission does form part of wages, but said it didn’t satisfy s 6 of the Minimum Wage Act. The Court found that commission and incentive payments were not earned for attendance at the meetings and were not connected to hourly rates of pay generally. They were achieved against targets specified by the company. The commission payments were deemed to be additional income earned over and above the contractual hourly rate, and not a substitution for it.

The Court stated that Smiths City’s method of calculation did not satisfy the Minimum Wage Act. The Court reinstated the Labour Inspector’s Improvement Notice. This means Smith City will be required to backpay, for a six year period, any hourly paid employee who attended the morning meetings.

If you have concerns about how your remuneration is structured and whether you are inadvertently failing to meet minimum wage requirements, please contact our team.

Chapman ER News – Employer Successful in Constructive Dismissal Case

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We have seen an increased occurrence of employees resigning and then raising a PG, stating that their resignation was constructive dismissal and unjustified.  In many instances they haven’t previously raised their concerns with their employer or the issues raised appeared minor with the employer believing each was addressed at the time as no further concern was raised by the employee.  However, post-resignation, the employee might list all of the minor issues trying to prove that a trend existed. They may even claim an illness that they believe resulted from issues in their employment.

It is reassuring to see the Employment Relations Authority reject a recent claim of constructive and unjustified dismissal by Kathryn Gifkins that she was forced to resign from her position at Marinoto Rest Home in Taranaki.

The claim followed two incidents; one regarding a false accusation of Gifkins dragging a resident and the other about her being stalked by a dementia patient.  Gifkins​ claimed her manager did nothing about either incident and so felt she had no option but to resign i.e. her resignation was constructive dismissal and was unjustified.

Gifkins was employed as a healthcare assistant at Marinoto Rest Home in July 2016. Two issues arose, shortly after she started which she said were of “significant concern for her”.

She soon realised that she was expected to dispense medication to patients which was something she felt uncomfortable doing in case she made a mistake and also felt it was a a registered nurse duty.

Her manager, Barbara Kay, said Gifkins did not convey her concerns about making a mistake and commented that Gifkins was “very competent” at providing medication and had no concerns about her confidence.

The Authority was satisfied the dispensing of blister pack medications was a reasonable activity for Gifkin’s position.

The second issue Gifkins had was with a dementia patient who became “infatuated” with her.

The patient told her he wanted to marry her and proposed to her. He continuously sought her out, giving gifts, making phone calls to her home and following her to the car park.

Despite complaining to Kay about feeling harassed, she said her concerns were never addressed.

However, Kay argued she told Gifkins she did not have to go to the area of the rest home where the patient was living, she did not have to care for him or communicate with him.

Gifkins said it was difficult to distance herself from him due to the size of the rest home.

The Authority member said it was clear Gifkins received unwanted attention from the resident, but she could not apportion blame to the rest home as options were given to her by management to reduce the interaction.

In May 2017, Gifkins resigned. This followed an incident which Gifkins described as “the final straw”.

Gifkins claimed that earlier that day Kay falsely accused her of dragging a patient when she and another carer were trying to lift a patient off the floor into a chair.

Gifkins claimed Kay yelled “Are you dragging him or lifting him?”. Kay admitted she said those words, but denied she yelled them, or directed them solely at Gifkins.

Gifkins said she was unhappy with the way she had been treated and felt distressed that Kay had not listened to her or been responsive.

The Authority member noted that Kay’s manner, along with the words used at the time of the incident, may have been “insensitive and unhelpful in the moment” and added “I accept, however, that Ms Gifkins was unhappy and resentful as a consequence, but I am not at all persuaded that the interaction could be regarded as a breach of Ms Gifkins’ employment, let alone one that could be fairly characterised as dismissive or repudiatory conduct that would make it reasonably forseeable Ms Gifkins would resign, an employer is under no contractual obligation to behave sensitively towards its employees.”

A constructive dismissal occurs where an employee resigns from employment but really the resignation was forced or initiated by the action(s) of the employer.

The Authority assessed whether a substantial risk of resignation was reasonably foreseeable and found that it was not in this case.

The Minimum Wage Increases from 1 April 2018.

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While the Government must review the Minimum Wage annually the new Government has already pledged to get it up to $20 per hour by 2020. The first step to this target is the increase that comes into effect from 1st April 2018

The new minimum wage rates are:

Adult – $16.50 an hour
Starting-out – $13.20 an hour (up from $12.60)
Training – $13.20 an hour (up from $12.60)

If you already pay above the minimum wage there is no obligation to increase it proportionally.

If you have any employees earning less that $16.50 an hour then you MUST increase their pay rate to the appropriate new minimum wage

Employees who are paid wages need to be paid for the actual hours they work. This includes any extra hours completed.

For Salaried staff you need to consider if they are being paid below minimum wage for total hours of work.

Employment Relations Amendment Bill

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The first wave of changes to legislation in the employment arena were announced last week. There was nothing unexpected, except for possibly the usefulness of NZ First to act as a hand brake for more widespread changes.

One of Labour’s flagship policies was the abolition of the 90 day trial period. The great news for SME’s is that if you have 19 or less employees, the trial period will still be available to you. An unexpected turn of events and a moved that has disappointed unions. Unions however did get a number of changes they were seeking.

The purpose of this Bill is to implement the Government’s post-election commitments to restore key minimum standards and protections for employees, and a suite of changes to promote and strengthen collective bargaining and union rights in the workplace. Read here a summary of the changes, and over the next few weeks we will detail how the changes may affect how you operate your business.

Proposed Amendments

Restoring Key Minimum Standards and Protections for Employees
  • Removing the exemption for employers with fewer than 20 employees from the current rules about business transfers, which will allow vulnerable workers of these employers to elect to transfer to an incoming employer
  • Extending the time frame for vulnerable workers to elect to transfer to an incoming employer and placing information and notification requirements on employers in respect of their employees’ personal information
  • Reinstating the right to prescribed rest and meal breaks, as applied previously regarding number and length of breaks within specified work time, with limited exceptions for essential services where certain conditions exist
  • Restoring reinstatement as the primary remedy in unjustified dismissal cases, where the employee requests it and where reinstatement is practicable and reasonable
  • Limiting trial periods to employers with fewer than 20 employees
Collective Bargaining and Unions

The proposed amendments include:

  • Removing the requirement for a union representative to gain consent from an employer before entering a workplace
  • Requiring employers to allow union delegates reasonable time during working hours to perform their duties in respect of the employees of that employer.
  • Reinstating that the parties are required to conclude a collective agreement, and repealing the provisions that enable the ERA can determine that bargaining has concluded
  • Reinstating the ability of unions to initiate collective bargaining 20 days before an employer
  • Repealing sections 44A to 44C that allow employers to opt out of multi-employer collective bargaining once bargaining has been initiated
  • Requiring that collective agreements must contain rates of pay and that rates of pay must be agreed during collective bargaining
  • Repealing the ability of employers to deduct pay as a response to partial strikes
  • Requiring that new employees are afforded the same terms and conditions as the applicable collective agreement relating to their work for the first 30 days of employment
  • Restoring key minimum standards and protections for employees
  • Requiring employers to provide the applicable collective agreement and union contact details and the option to join the union at the same time as they provide an intended individual employment agreement to an employee
  • Requiring that employers provide information about the role and functions of the applicable union when the intended employment agreement is given to prospective employees
  • Encouraging an active choice by a new employee on whether to join the union, and whether to object to the employee’s employer providing the employee’s name and notice of the employee’s choice to the relevant union
  • Extending the grounds for discrimination to include an employee’s union membership
  • Extending the time frame under section 107 for which an employee’s union activities may be considered to contribute to an employer’s discriminatory behaviour from 12 months to 18 months

Personal Liability for Employment Breaches

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Most business owners, directors, managers and employees are unaware that they can be personally liable for penalties and the payment of legislative entitlements. A person who incites, instigates, aids, or abets any breach of an employment agreement is personally liable for a penalty of $10,000 for each breach.

Employer Owes $2.4 Million To Employees

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In a recent investigation into wage payment irregularities at SOE Landcorp, the Labour Inspector found significant issues. The Inspector determined that over the last seven years Landcorp had been incorrectly calculating the entitlements of approximately 1,400 employees.

There appear to be two main areas where Landcorp incorrectly calculated the entitlements:

a) Landcorp did not include the employee’s accommodation allowance into the calculation of gross earnings. This had a flow on impact to the calculation for sick, annual, bereavement and public holiday leave.

b) Landcorp breached the minimum wage for employees who were on salary, but worked long hours during peak season.

The amount owed to 1,400 former and current employees is approximately $2.4 million.

Employers can take several lessons from this decision.

Firstly, even if the employer uses a payroll system to calculate entitlements, it is up to the employer to ensure that the payroll system is calculating this correctly. In Landcorp’s case the payroll system incorrectly excluded the accommodation allowance from the gross salary calculation. MBIE have stated that at the end of June 2017 it has 140 cases which it categorised as payroll audits. Of those 118 had been investigated which led to 53 enforceable undertakings, 29 improvement notices and 2 cases lodged with the ERA.

Secondly, where employers have salaried employees on lower salary levels (less than $55,000 at present) and those employees are working long hours over a peak period of work, the employer must calculate the weekly/fortnightly pay ensure that employee is paid above the minimum wage for every hour they work in that week/fortnight.

“Confrontational” Parking Warden Ordered to Pay $11,500

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The Employment Relations Authority (ERA) ordered Yoon Cheol Hong to pay Auckland Transport (AT) $11,500 following a determination that found Mr Hong was not unjustifiably dismissed from his job as an Auckland Transport parking officer, neither was he unjustifiably disadvantaged before his dismissal.

Mr Hong worked as a parking officer, patrolling Auckland city streets and issuing infringement notices for vehicles parked illegally.

AT required, and trained, its officers in various ‘de-escalation’ techniques to manage members of the public who abused or threatened parking officers. The primary technique was described as ‘detach and walk away’.

AT held concerns because Mr Hong made comments which confirmed AT’s fears that Mr Hong would, while on patrol in the streets, sometimes challenge abusive members of the public rather than ‘detach and walk away’.

The incident that triggered the dismissal process was when a man swore at Mr Hong and threatened to break his neck after getting a parking ticket. Mr Hong called for Police assistance during the incident. AT’s concern was that Mr Hong had refused to follow lawful and reasonable instructions issued by them which placed his own health, safety and welfare together with some of the wider parking team at considerable risk which was completely unacceptable to them.

Mr Hong had told AT when he reached a ‘trigger point’ he would not observe de-escalation methods due to his own views on what was and was not tolerable. AT were concerned that Mr Hong was likely to respond in ways that made inflammatory or potentially inflammatory situations worse. This meant AT had lost trust and confidence in Mr Hong.

The Authority said that it was within the range of reasonable responses for AT to conclude what Mr Hong deliberately did, and would likely continue to sometimes do, was contrary to instructions and was serious misconduct.

Auckland Transport sought $36,500 from Mr Hong to pay back what it had spent to defend itself in the unjustified dismissal case; $35,000 for a two-day investigation meeting and $1500 in costs to oppose the interim reinstatement application.

Auckland Transport’s actual legal costs were said to total $55,868.

Over the course of the employment dispute, Auckland Transport had offered Mr Hong two settlement offers prior to the case being heard by the Authority. Both offers, one for $12,500 and another of $15,000 were not accepted.

The authority ruled Mr Hong’s refusal of these settlement offers were cause for a “steely” approach in awarding costs, hence the award to AT of $11,500.

Paying contractors or working as a contractor

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IRD’s latest update to tax agents includes some clarification around contractors and withholding tax.

There is a misunderstanding that all contractors are now subject to withholding tax. This is not the case. The change is only for contractors hired by a labour hire business.

From 1 April 2017, contractors working for a labour hire business under a labour hire arrangement must have withholding tax deducted from their income.

Activities and examples of a labour hire business
One of the main activities of a labour hire business is arranging for a person to perform work or services directly for:

  • its clients, or
  • clients of another person.

Examples of labour hire businesses are:

  • an on-hire business
  • an employment agency
  • contract management, or
  • recruitment services.

Withholding tax rate
The standard withholding tax rate for this category is 20%. However, a contractor may choose a lower rate (the lowest rate is 10%) when they fill in their Tax rate notification for contractors (IR330C) form.

They can also apply to us for a 0% special tax rate by filling in a Special tax code application (IR23BS) form. We review their tax compliance history before deciding if we’ll issue a 0% rate certificate.

Sub-contractors

Businesses (eg an engineering business) hiring sub-contractors don’t come under the new legislation. The sub-contractors wouldn’t be paid schedular payments so withholding tax isn’t taken out of their payments.

See some examples of what is and is not a labour hire business

Minimum Wage Increase is Just the Beginning

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This article was published on the 2nd November by Chapman ER and sets out some of the employment related financial issues employers are going to face under the new Labour Government.

We recommend you stay up-to-date on matters that effect employers by subscribing to the Chapman ER newsfeed by clicking here and completing the request form.

The minimum wage is increasing. It already feels like old news, particularly in view of the stream of new government announcements. However, that is just the start of measures likely to increase wage costs. The Labour led government has also stated they will change the Equal Pay Bill the previous National government had proposed to prevent a case similar to the $2b aged care workers’ settlement. They are also introducing ‘Fair Pay Agreements’ which will set out minimum employment conditions across industries and sectors for terms such as wages, allowances, weekend and night rates, hours of work and leave arrangements. It sounds like reverting to old Award days to me.

If you are already gulping for air and deciding you will only engage contractors, be aware of the fish hooks of that approach. Within the first 12 months in government Labour has set out to extend the right to bargain collectively to contractors who primarily sell their labour, and investigate measures to improve job security for people in ‘precarious forms of employment’ which includes contracted and sub-contracted workers.

If you are now thinking you will engage youth workers as a more affordable option, there is no respite there. The Labour manifesto states they intend to abolish youth rates within 12 months.

To recap briefly on the minimum wage – it will increase to $16.50 from 1 April 2018. That’s a 4.8% increase.

In the Coalition Agreement it has also been stated that the minimum wage will increase to $20 per hour on 1 April 2021, with incremental steps in between. That is a 27% increase over 4 years. For a full time employee on minimum wage that is an annual salary of $41,600.

What does this mean for employers? To state the obvious, it will increase costs. For employers with proportionally more employees at or near the minimum wage level, that increase in cost will be proportionately higher. Industries that traditionally pay in the lower pay brackets are accommodation & food, wholesale & retail trade, and healthcare & social assistance. (Data source: Treasury)

If you currently have a wage differential between positions, for example a junior line operator, a senior line operator and a supervisor, your employees will want to maintain the differential. As such it is not only minimum wage earners who will expect a significant wage increase.

Unfortunately increasing minimum wage does nothing to improve productivity. I have yet to see employees working harder or smarter as a result of a pay increase. So you are not going to get better outputs as a result.

Some of the key options are:

  1. Absorb the increased costs by accepting lower profits (or in many cases operate at a loss).  One impact of lower profits is a reduction in investment in capital (as return on capital is reduced).
  2. Reduce costs. As labour costs have increased, reducing staff may be the necessary answer, particularly if wages is a high percentage of costs.
  3. Pass on the higher wage cost to customers through increased prices.
  4. Implement productivity improvements (e.g. technology, systems) so you can reduce employee numbers, and/or improve profit margins.
  5. Explore the possibility of changing to a high wage, high value business model.
  6. Sell up, leave the country or hide under a rock for the next three years.

It is important employers start to consider the impacts on their organisation now, and plan for it in advance. Increasing prices incrementally is often more palatable to customers than one large increase. Putting in place plans to increase productivity needs to happen before the business is in trouble. If you need to restructure your staffing this takes time, and again is better done before the business is in distress. Just keep in mind Labour has also stated they want to begin consultation on improving minimum redundancy protection for employees.

And the changes keep on coming.