Zero Hour Contract Constrictions

A law change restricting zero hour contracts becomes effective from 1 April 2016, following amendments to the Employment Relations Act 2000 ("Act").

Zero hour contracts are currently used in a number of industries such as tourism, agriculture and hospitality, where businesses struggle to predict the specific workload in advance and require employees to be available to work, without any guarantee of hours.  The law change means that this will no longer be permitted, and all employers who currently use zero hour arrangements need to review and revise their employment agreements and staffing arrangements.

Take the example of a Queenstown tour company that operates daily boat tours, where tourists may make last minute bookings.  This means the business often has to hastily arrange more employees to operate the boats, but until now, they have managed this unpredictability by having employees ready and able to work.  However, those employees have not been paid where no work became available.

Now, under the Act, employers must meet a number of criteria before they may use an availability provision.  An availability provision must be set out in the employment agreement and may only be used where the employee has agreed minimum hours of work and there are genuine reasons for including an availability provision.  Reasonable compensation must also be provided for the employee's availability.

In determining whether a business has a genuine reason for such a provision, the following must be considered:

  • Whether it is practicable for the employer to meet business demands for the work without an availabilty provision.
  • The number of hours the employee is required to be available; and
  • The proportion of those hours to the agreed hours of work.

When determining reasonable compensation payable for availability, relevant factors including the following must be taken into account:

  • The number of hours the employee is required to be available,
  • The proportion of those hours to the agreed hours,
  • Any restrictions that arise from the availability provision,
  • The rate of pay for work available for, and;
  • If paid by a salary, the amount of the salary.

If you need to use an availability provision, we recommend that you seek advice so that a tailored solution for your specific circumstances can be developed, to ensure that you comply with the Act.  Importantly, not using an availability provision does not restrict you from contacting an employee and requesting they work.  However, in that case, the employee will be free to decline which may create an issue in terms of staffing cover.

A number of other changes have also been made to employment legislation, and we have discussed those here http://www.wearehr.co.nz/news/employment-standards-legislation-bill-passes

We recommend that you review and revise your employment agreements to comply with the new law.