Can employers initiate a termination conversation with employees, without fear of personal grievance risk? The Education and Workforce Committee (the Committee) released its report on the Employment Relations (Termination of Employment by Agreement) Amendment Bill (“the Bill”) late last year. The Committee recommended, by a majority, that the Bill be passed. However, the Bill has been subject to a significant re-write and now includes more detail around procedural requirements to safeguard parties involved in termination conversations. Read on to find out more.

Original Proposal

The original Bill sought to provide a framework for protected conversations between employers and employees to allow them to come to mutual agreement to terminate an employment relationship.  The Bill sought to introduce “pre-termination negotiations”, being protected conversations between parties about potential termination, regardless of whether there is an employment relationship problem, and offering employers legal protection in respect of the conversation. 

Proposed amendments

The Committee considered the Bill and determined it should be more closely aligned to the existing legal framework in the United Kingdom.  It has recommended additional safeguards to protect the employer and employee in the case of procedural error or unfair negotiations. 

The amended Bill sets out procedural requirements including:

  • How and when a ‘request’ to begin negotiations must be made;
  • Requirements for the employer to make a record of the request and the employee’s response;
  • That a request by itself would not be grounds for an employee to raise a personal grievance for unjustified dismissal or disadvantage; and
  • A request could not be made more than once in any six-month period (unless there were genuine reasons based on reasonable grounds), and that a reminder given a ‘reasonable time’ after the initial request would not constitute a new request.

Notably, employers need to inform the employee of their right to decline the request before initiating any pre-termination negotiations.

Under the revised Bill, where agreement to terminate employment is reached, it would be full and final, and enforceable, where it is in writing, signed by the parties, specifies the sum payable to the employee for agreeing to the termination, and states the agreement has been made in accordance with section 100N of the Employment Relations Act 2000.  The employee must be given the opportunity to seek independent legal advice on the proposed agreement before signing.

Evidence of negotiations leading to a termination agreement would not be able to be brought before the Employment Relations Authority or Employment Court except for in limited situations. In the event an employer entered unfair pre-termination negotiations, if the employee was unable to understand the provisions or implications of the agreement, the Authority could cancel the termination agreement and provide specified remedies.

Opposition

Both Labour and the Green Party have raised concerns the Bill will tip the power too far towards the employer and create an imbalance in any employment relationship.  It was noted that having the power to dismiss employees without cause or fair process is contrary to good faith and access to justice, and this proposal was addressing a problem that already had a solution, being a without prejudice conversation for a mutually agreed exit.

What do we think?

For those responsible, pragmatic and diligent employers, this Bill represents an efficient way to reach a mutual agreement to terminate an employment relationship, without the current risks around entering without prejudice conversations.

We look forward to monitoring the progress of this amended Bill though Parliament.

For more information

If you or your organisation need advice on leave entitlements and/or this latest update, please do not hesitate to reach out. For more information, contact 04 472 0020 or one of our employment law experts.

 

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