Employment Relations Act 2000

Employment Relations Act 2000

NOTE: Set out below is a description of the Employment Relations Act 2000 and its general application to employers and their employees.  How the law is applied depends on the situation and often the employment agreements we have in place.  Therefore, before applying the principles set out below, discuss the specific situation with your HR Business Partner.

Legal Position

The Employment Relations Act 2000 is the main legislation governing employment relationships and specifies the rules governing the formation and renewal of all employment agreements (individual and collective) covering all wage and salary earners. It also contains rules and procedures for upholding and enforcing the respective employment rights of employers, employees and unions, and places important obligations on parties to an employment relationship, such as the duty of good faith.

Main Features
  • The parties to an employment relationship must deal with each other in good faith.
  • Membership of unions is entirely voluntary, and any arrangement or pressure to compel either membership or non-membership of a union is unlawful.
  • Only unions registered under the Act may negotiate on behalf of employees for collective employment agreements.
  • Registered unions may access workplaces with the employer’s approval (which may not unreasonably be withheld).
  • Employment relations education leave is available to unionised employees.
  • There is specific provision for multi-employer and/or multi-union bargaining, and a right to strike in support of a multi-employer collective agreement is provided for under the Act.
  • Employees are still free to negotiate individual employment agreements within the framework established under the Act.
  • Individuals engaged as contractors can challenge whether, in fact, they have employee status.
  • Labour Inspectors have a wide range of functions including the ability to issue “demand notices” to recover arrears of wages and holiday pay.
  • The Mediation Service and the Employment Relations Authority (“the Authority”) are provided for the resolution of employment relationship problems.  Wherever practicable, mediation is to be used in preference to judicial hearings.
  • There are rules in respect of contracting out an employee’s work or part of their work, which differ depending on the type of work undertaken by an employee.
  • There is provision for an employee to request flexible hours of work, and for minimum rest periods/meal breaks and arrangements for breast feeding in the workplace.
Good Faith

Good faith is the key concept underpinning the Act. The philosophy means that the conduct of employment relations must be based on the understanding that employment is a human relationship involving issues of mutual trust, confidence and fair dealing, and is not simply a contractual economic exchange.

The Act therefore requires employers, employees and unions to deal with each other in good faith. The basic requirements are that the parties may not mislead or deceive each other, and must be active and constructive in maintaining a constructive employment relationship. There are also good faith obligations that only apply to the employer party, such as the provision of information where decisions potentially affecting the continuation of an employee’s employment are being considered. Good faith applies to all aspects of the employment relationship including, but not limited to, collective bargaining, interaction generally between employers, employees and unions, union access to workplaces, and as noted to consultation about matters affecting the employment of staff such as restructuring.

The parties’ good faith obligations may be enforced by way of compliance order obtained from the Employment Relations Authority. There are penalties for breaches of good faith e.g. in collective and individual bargaining where the failure is deliberate as well as being sustained and serious or was intended to undermine the bargaining or the employment relationship. The Employment Relations Authority can fix new terms of employment where serious and sustained breaches of good faith have undermined the bargaining process.

Good Faith and Collective Bargaining

The Act does not define “good faith bargaining”, but it does set out the minimum requirements that must be met in any bargaining for a collective agreement. These are that the union and the employer parties must:

  • Use their best endeavours to agree a process for conducting the bargaining in an effective and efficient manner.
  • Meet periodically to bargain.
  • Consider and respond to proposals.
  • Recognise the role and authority of the representatives and advocates of the other party (or parties).
  • Not bargain either directly or indirectly about employment conditions with the people for whom the representatives act.
  • Not undermine the authority of the other party (or parties) in the bargaining process.
  • Provide information on request that is reasonably necessary to support, reject or respond to claims made. If this information is considered confidential, it must be referred to an independent reviewer appointed by the mutual agreement of the parties. The reviewer will decide whether, and to what extent, the information may be disclosed. If the decision is that the information may not be disclosed, the reviewer will answer any questions in a way that protects the confidentiality of the information.
  • Once collective bargaining has commenced the Act stipulates that the process should result in a collective agreement unless there is a good reason, based on reasonable grounds, not to.
  • An employer may lawfully communicate with employees during collective bargaining provided that the communication is factual, does not amount to direct negotiation and does not undermine or do anything that is likely to undermine the bargaining or the authority of the other representative in the bargaining.
  • It is not a breach of good faith for an employer to agree that a term or condition of employment of an employee who is not bound by a collective agreement should be the same as or substantially the same as a term or condition in the collective agreement. However, it is a breach of the duty of good faith to do so if the employer does so with the intention of undermining the collective agreement and the effect of the employer doing so is to undermine the collective agreement.

Good Faith and Individual Employment Relationships

The duty of good faith also applies to the relationship between an employer and an individual employee and specifically to the process of bargaining over individual employment agreements.

During individual agreement bargaining employers must consider and respond to issues raised by employees on a case-by-case basis. This is required to be a genuine two-way process as opposed to a “take it or leave it” stance by the employer.

The Act supplements this general duty with a specific prohibition against unfair bargaining. Unfair bargaining includes where an employee:

  • Does not understand the provisions or implications of his or her individual employment agreement by reason of diminished capacity due to, for example, the employee’s age, sickness, emotional distress, mental or educational disability, or a disability relating to “communication”.
  • Relied on the skill, care or advice of the employer at the time he or she entered into the agreement.
  • Was induced to enter into the agreement by oppressive means, undue influence or duress.
  • Has not been given the required information or the opportunity to seek independent advice before entering into the agreement.

An employee may apply to the Authority if he or she considers there has been unfair bargaining.

If unfair bargaining is found to have occurred, the Authority may direct the parties to seek to resolve the problem themselves through mediation. If mediation fails to resolve the problem, the Authority may cancel or vary the individual employment agreement. Compensation may also be awarded.

Freedom of Association

Under the Act, employees have the freedom to choose whether or not to form, or be part of, a union. Union membership remains voluntary, and preference may not be given to a person on the basis of either membership or non-membership of a union or a particular union. This does not however, prevent a CA from containing a term or condition that is intended to recognise the benefits of a CA or arising out of the relationship on which a CA is based.

Undue influence may not be applied in an attempt to persuade a person towards or away from membership of a union or a particular union.

Recognition and Operation of Unions

Only unions that are registered under the Act have the right to represent employees in bargaining for collective agreements.

A union is entitled to represent its members in relation to any matters involving their collective interests as employees, or in relation to an employee’s individual rights if the union has an authority from that employee to do so.

Attendance at Union Meetings

Union members are entitled to attend at least two union meetings each calendar year.

If the meetings are held at times when an employee would otherwise be working, attendance is to be on ordinary pay. The meetings may be for no longer than two hours each, and the union is required to:

  • Give the employer at least 14 days’ prior notice.
  • Advise the employer of the duration of the meeting.
  • Make arrangements with the employer to ensure that the employer’s business is maintained during the meeting (and, if appropriate, ensure that sufficient union members remain available to work); and
  • Give the employer a list of members who attended the meeting.

Access to Workplaces by Unions

Subject to the employer’s consent (which may not unreasonably be withheld) union representatives may enter a workplace on union-related business (which includes the recruitment of employees as union members) or for purposes relating to the employment of the union’s members.

Union representatives may gain access:

  • At reasonable times and in a reasonable manner, having regard to the normal business operations in the workplace, and
  • If they believe on reasonable grounds that a union member is working in the workplace or that the union’s membership rules cover the employees.

The union representative must also comply with the employer’s reasonable health and safety requirements and any relevant security procedures. An employer may not rely on these requirements to unreasonably deny a union representative access to the workplace.

Access may be denied:

  • On the grounds of religious belief, but only if the employer holds a current certificate of exemption issued by the Department of Labour; or
  • In order to avoid prejudice to the security or defence of New Zealand, or to the investigation or detection of offences.

Deduction of Union Fees

Unless it specifically provides otherwise, a collective agreement is to be read as if it contains a provision requiring the employer to deduct the employees’ union fees from their salary or wages. The union fees deducted are to be paid to the union in accordance with any arrangements agreed to between the employer and the union.

Union Education Leave

The Act provides a statutory entitlement to employment relations education leave. The number of days leave (which is to be on pay) that may be taken in any year is calculated using the formula set out in the Act.

The entitlement is calculated on the basis of the number of union members employed by the employer. The entitlement is not affected by whether there is an applicable CA in force, or whether bargaining has been initiated.

The leave entitlement is calculated by the union every 1 March (or such other date as may be mutually agreed) and advised to the employer. If the union wishes an employee to take education leave the employee must give the employer not less than 14 days’ notice.

No individual union member may take more than five days leave in any one year, unless the employer agrees otherwise.

Collective Agreements (CAs)

It is perhaps in the area of collective bargaining that the Act has its most obvious impact on employment relationships.

Multi-party bargaining

In addition to “one-union, one-employer” collective bargaining, the Act provides for multi-employer as well as multi-union bargaining.

Multi-employer bargaining is where:

  • A union approaches two or more employers with a view to covering its members under one CA.
  • Two or more employers approach one or more unions with a view to negotiating a single CA.

Multi-union bargaining is where:

  • One employer approaches two or more unions with a view to negotiating a single CA; or
  • Two or more unions approach one or more employers with a view to negotiating a single CA.

The duty of good faith extends to all parties involved in the collective bargaining process. In other words, good faith is required not only between individual unions and the employer, but also between all the unions and all the employers (and employees) involved in bargaining for a particular collective agreement.

When may bargaining be initiated?

A union (or unions) may initiate bargaining:

  • At any time when there is no applicable CA in force between that union and the employer; or
  • Within 60 days before the expiry of the current CA.

An employer may only initiate bargaining within 40 days before expiry of a current CA. In addition, an employer may only initiate collective bargaining where the proposed coverage of the agreement is the same (or partly the same) as another agreement that the employer was, or is, a party to.

The Act sets out slightly different rules where there is more than one applicable agreement, more than one union, or more than one employer.

How is bargaining initiated?

Bargaining is initiated by one party providing the other party with a written notice identifying the intended parties and the intended coverage of the agreement.

As soon as possible after receiving the notice, but in any event within 10 days, the employer must advise all of its employees whose work would be covered by the intended coverage clause (whether or not the employees are union members) about the bargaining and the parties to it.

Joining bargaining after it has commenced

Another union or employer may become a party to the bargaining only if the parties consent to this and the new party complies with the Act’s general requirements (e.g. relating to secret ballots).


At the beginning of the bargaining for a CA (or for the renewal or a variation of it), the union must advise the other parties to the agreement of its ratification procedure. The union may not sign any CA (or variation of it) unless the agreement (or variation) has been ratified by the employees in accordance with that ratification procedure.

Term of Collective Agreements

CAs must be for a specific term, not exceeding three years. The expiry date may be specified, or the CA may state that it will expire on the date on which a specified event occurs. For example, the parties could agree to negotiate a CA that will expire on the date of completion of a specified project or on the completion of a specified training course (even if it is not possible to state in advance what that actual date may be).

If a union party to a CA initiates bargaining for a replacement agreement before its expiry, the CA will continue in force (and be enforceable by the parties) for a further period of up to 12 months, or until the date the bargaining ends, whichever is the earlier. In other words, a CA with a three-year term potentially could be effective for up to four years. This additional 12-month provision does not affect the ability of employees to take strike action when bargaining for a new CA.

Content of Collective Agreements

A CA may contain anything in it that is lawful and not inconsistent with the Act. It must be in writing and signed by each union and employer party. In addition, a CA must include:

  • A coverage clause (this should clearly specify the type of work to which the agreement applies).
  • A clause setting out how the agreement may be varied during its term.
  • Its expiry date.
  • A plain-language explanation of the services available to resolve any employment relationship problem, including a reference to the 90-day period for raising a personal grievance.
  • A clause dealing with the rights and obligations of the employees and the employer if the work of any of the employees is contracted out or the business (or part of the business) is sold or transferred.
  • An Employee Protection Provision.

Click here for Collective Bargaining Process Flowchart

Individual Employment Agreements (IAs)

An employee may agree to be employed under an IA. However, the Act sets out specific rules to be followed in setting the terms and conditions of that type of agreement.

Terms and conditions if employee is a union member:

  • Where the employee is a union member and there is an applicable CA in place, the employee may be employed (if he or she so agrees) on additional individual terms and conditions, but only to the extent that those terms and conditions are not inconsistent with the CA.
  • If the applicable CA expires, the employee is regarded as being employed under an IA based on the terms of the expired CA. However, the employee is free to vary the terms and conditions by mutual agreement with the employer.
  • If an employee bound by an applicable CA resigns from the union, the employee is regarded as being employed under an IA, based on the terms of the CA. However, the employer and employee may mutually agree to vary those terms and conditions as they see fit. The employee may not participate in any bargaining for a new or different CA, or be bound by a different CA until 60 days before the expiry of the CA that the employee was previously a party to.
  • If there is no applicable CA in place, the employee is employed under an IA, and the terms and conditions of that agreement will be those mutually agreed by the employer and employee, which as a minimum include the terms required by any relevant legislation.

Terms and conditions if employee is NOT a union member:

  • If the employee is not a union member and there is no applicable CA in place, the employee’s individual terms and conditions are those mutually agreed by the employee and employer (in the form of an IA and as required by the Act).
  • If there is an applicable CA in place, for the first 30 days of his or her employment a new employee must be employed under an IA on terms and conditions that are not inconsistent with the CA.
  • Once the 30-day period has passed, the new employee and his or her employer can agree to new terms and conditions of employment, including terms inconsistent with the CA.
  • An employee who is not a union member (and who therefore is employed under an IA) may at any time become bound by an applicable collective agreement by joining the union if he/she is eligible to do so.
Information to be provided to new employees

The Act provides additional safeguards aimed at protecting prospective employees in any individual negotiations with potential employers.

Where an applicable CA exists

If the new employee is not a union member but the work to be performed by the employee falls within the coverage clause of an applicable CA, the employee must be advised about and given a copy of that CA. The employer must also advise the employee:

  • That the employee is entitled to join the applicable union.
  • About how to contact the union.
  • That if the employee joins the union he or she will be bound by the CA.
  • About the 30-day rule and the terms and conditions of employment that will apply.

Where the employee agrees, the employer must inform the union as soon as practicable that the employee has entered into an IA.

Where no applicable CA exists

Where there is no applicable CA, the employer must provide a prospective employee with a copy of the intended IA. The employer must tell that person that he or she is entitled to seek independent advice about the proposed agreement, and give the person a reasonable opportunity to obtain that advice.

While an IA may contain such terms as the employer and employee may agree, there are as noted above certain minimum requirements. In particular, the IA must:

  • Be in writing (a simple oral agreement is not sufficient).
  • Include the names of the parties, and an indication of the place of work and the hours to be worked by the employee.
  • State the salary or wages that will be payable.
  • Include a description of the work to be performed.
  • Include a plain-language explanation of the services available to resolve any employment relationship problem (including a reference to the 90-day period for raising a personal grievance).
  • Must contain an Employee Protection Provision.
Fixed Term Employment

Employers and employees may enter into IAs for a fixed term. The employer must have a genuine reason based on reasonable grounds for the fixed term.

Note: The employer cannot use this type of arrangement to deprive an employee of his or her rights under the Act or to assess the employee’s suitability for permanent employment.

Before entering into a fixed-term agreement, the employer must:

  • Have genuine reasons based on reasonable grounds for specifying that the employment of the employee is to end in that way; and
  • Advise the employee of when or how his or her employment will end and the reasons for his or her employment ending in that way.

“Genuine reasons” for fixed-term agreements could include the following:

  • To cover an employee on parental leave or other absence (e.g. study leave or special leave without pay).
  • To undertake a specific project or work of a finite duration (e.g. the implementation of an IT system).
  • To cover those situations where there is no guarantee of funding for the work beyond a specific period.
  • To cover a temporary increase in normal workloads (e.g. seasonal fluctuations).

Managers must ensure that the terms of any fixed-term agreement are very clear, and accurately set out the agreement reached with the employee. The agreement must include a statement of the reason for the fixed term and specify when and how the employment will end and the reasons for it ending in that way.

Care is needed if an existing fixed-term contract is to be renewed. A genuine reason will need to exist at the time of the renewal which will in fact be a new agreement rather than an alteration to the previous one.

If an employee on parental leave resigns, any person filling that position under a fixed-term agreement is not automatically entitled to on-going employment in that role. The employer is entitled to advertise the permanent position and to select in the usual way whichever candidate is best suited to the permanent role.

Dependent Contractors

Notwithstanding the wording of their contracts, some contractors who are “dependent” on the employer may be regarded as employees for the purposes of the Act.

In determining whether a person is an employee or a genuine independent contractor, the Authority or Court is required to consider the “real” relationship between the parties taking into account all relevant factors. The terms of the contract or any other statement by the parties that describes their relationship will be taken into account, but will not be determinative.

Only those people who choose to apply to the Court for a determination of their status (or agree to the union or some other person making an application on their behalf) will be bound by any decision of the Court.

Managers should consider carefully whether their continued use (and the extent of their use) of dependent contractors is appropriate.

Contractor arrangements (or “contracts for services”) are more appropriate for engagements for a fixed period or to undertake specific (and specialised) consultancy work. For example, the contract could specify a termination date, or state that it will terminate on the completion of a particular project or on the occurrence of a particular event.

Before entering into any contractor arrangement, managers must ensure that the intended contractor clearly understands the consequences and agrees to the arrangement. In particular:

  • There must be clear evidence of the “informed consent” of both parties (e.g. a paper trail should be kept with respect to any pre-contractual discussions).
  • The person should not be “pressured” to enter into a contract for services. The situation should be fully discussed with the person before any such arrangement is entered into, and the person should be invited to seek tax advice from an independent accountant or other adviser.
  • The contract document itself must be clear in its terms and consistent with an independent contractor arrangement.
  • Advice should be obtained beforehand.

Mediation Service

Consistent with the emphasis on good faith, the Act promotes mediation as the preferred method of resolving any employment relationship problem.

The Employment Relations Service of the Department of Labour provides specialist, nation-wide mediation services, which are available to the parties to an employment relationship any time.

There is an option for employers and employees to obtain an assessment from a mediator of the risk of proceeding with, or defending, a claim.  This can occur informally without either party being represented.

Where a matter has been mediated but not resolved, the matter will be given priority by the Authority.

Mediators of the Mediation Service have the power to make written recommendations to the parties if they so request.  The parties must agree in writing that the mediator’s recommendation will be full, final and enforceable unless one or both parties notify the mediator within a specified timeframe. If one or both parties reject the recommendation the Authority investigation will continue.  The same process is available from members of the Employment Relations Authority.

Any person who wishes to access these mediation services may contact the nearest Department of Labour. Mediation services may be provided in a number of ways (at the discretion of the Department of Labour), depending on the circumstances and the needs of the parties. For example, in addition to formal or face-to-face meetings or conferences, mediation services could be provided via telephone, facsimile, the internet or email.

Employment Relations Authority

Where mediation fails, or is not appropriate, an employment relationship problem may be referred to the Employment Relations Authority (which has replaced the Employment Tribunal). Applications to the Authority are to be made in the prescribed form.

In all cases, the Authority must first consider whether mediation has been or should be used, and it may direct the parties to try mediation (or further mediation).

Most of the Authority’s work will relate to personal grievances and disputes. However, the Authority has a broad jurisdiction.  For example, it may decide issues relating to good faith (both generally and in the bargaining context), certain proceedings relating to strikes and lockouts, and applications for interim reinstatement.

It can also play a role in facilitating resolution of deadlocked bargaining situations as a forum of last resort. This may include determining the settlement of unresolved collective bargaining situations in certain circumstances.

The objective of the Authority is to investigate employment relationship problems in a speedy, practical and non-adversarial way. Accordingly, the Authority is an investigative body. It may call evidence itself and may require any person to attend an investigation meeting to give evidence, regardless of whether any of the parties wishes that person to attend. In exercising its powers under the Act, the Authority must comply with the principles of natural justice and act as it thinks fit in equity and good conscience.

The Authority has the power to award a penalty to any person who without sufficient cause obstructs or delays an Authority investigation, including failing to attend an investigation.

There is a statutory right to cross-examination in the Authority.

The Authority may dismiss frivolous or vexatious claims or defences of claims.  This allows the Authority to dismiss cases (or parts of cases) with little or no merit without having to go through a full investigation.

Cases that have not been actively pursued by a party within three years must be treated as being withdrawn.

Employment Court

Where a party is dissatisfied with a decision of the Authority, it may apply to the Employment Court for a judicial hearing. Any such application must be made within 28 days of the Authority’s decision and be in the prescribed form.

The applicant may request that the matter be considered as a “de novo” hearing. If the Court agrees, the hearing will be heard afresh – the Court will rehear all the evidence from witnesses as well as legal submissions.

The Employment Court otherwise operates generally as it did under the Employment Contracts Act. The Court has exclusive jurisdiction “to hear and determine tort and injunction applications arising out of strikes or lockouts (including applications relating to industrial pickets), and to declare whether a person is an employee or independent contractor”.

As required of the Authority, before agreeing to hear any matter referred to it the Court must first consider whether mediation has been or should be used, and it may direct the parties to try mediation (or further mediation).

Appeals from the Court may be made to the Court of Appeal on matters of law but now only with leave of the Court. A further right of appeal on a point(s) of law also exists to the Supreme Court of New Zealand.

Department of Labour

Labour Department inspectors have wide ranging powers, including the ability to serve “demand notices” (effectively a form of instant fine) on employers to recover minimum code entitlements, such as arrears of wages and holiday pay.

Employee Protection Provisions

All employment agreements (collective and individual) must contain employee protection provisions dealing with possible restructuring situations.

In this context “restructuring” means

  • Contracting Out, or
  • Selling or transferring part or all of the part or all of an employer’s business.

It does not include:

  • Contracting In
  • Subsequent contracting
  • The sale or transfer of any shares in the employer’s company.

To protect employees in such restructuring situations the employment agreement must include details on:

  • The process the employer will follow in negotiating with the new employer in any restructuring that affects any employee(s).
  • The matters relating to the affected employees’ employment that the employer will negotiate about with the new employer, including whether they will transfer on their existing terms and conditions of employment.
  • In the event that an employee does not transfer, the process to be followed to determine what, if any, entitlements are available.

Note: an employee may elect not to transfer to the new employer but in such cases any technical redundancy provisions in the relevant employment agreement would apply.

Vulnerable Employees

In the case of certain categories of vulnerable employees (such as cleaning, catering, caretaking or laundry workers as defined in Schedule 1 of the Act) there are special extra protections in business restructuring situations.

Note: Such employees have the right to transfer to the new employer on their existing terms and conditions of employment.

In this context “restructuring” means

  • Contracting Out
  • Contracting In
  • Subsequent Contracting
  • Selling or transferring part or all of the part or all of an employer’s business.

It does not include the sale or transfer of any shares in the employer’s company.

“Contracting In” means a situation where:

  • A person (person A) has an agreement with another person (person B) under which person B performs work as an independent contractor for person A; and
  • The work or some of the work is actually performed by employees of person B or of a subcontractor; and
  • The agreement, or that part of the agreement, under which person B performs the work expires or is terminated; and
  • The work is to be performed by person A or employees (if any) of person A.

“Contracting Out” means a situation where:

  • A person (person A) enters into an agreement with another person (person B) under which person B is to perform work as an independent contractor for person A; and
  • The employees of person A are actually performing, or employed to undertake, the work or some of the work before the agreement takes effect.

The definition of contracting out applies whether or not the work is to be performed by—

  • Person B or employees (if any) of person B; or
  • A subcontractor or employees (if any) of a subcontractor.

“Subsequent Contracting” means a situation where—

  • A person (person A) has an agreement with another person (person B) under which person B performs work as an independent contractor for person A; and
  • The work or some of the work is actually performed by employees of person B or of a subcontractor; and
  • The agreement or that part of the agreement under which person B performs the work expires or is terminated; and
  • Person A enters into an agreement with another person (person C) under which person C is to perform the work as an independent contractor for person A.

The definition of subsequent contracting applies whether or not—

  • The work concerned has previously been the subject of a subsequent contracting.
  • The engagement of person B as an independent contractor constituted a contracting out.

The work is to be performed by—

  • Person C or employees (if any) of person C; or
  • A subcontractor or employees (if any) of a subcontractor.

To access the complete Act click here