Small business-owners have won a reprieve for 90-day trial periods for new employees under a compromise deal fought for by New Zealand First. Shane Cowlishaw reports.

Winston Peters has flexed his muscles within the coalition agreement to remove a Labour plan for an arbitration system for all employers, and to keep the trial period unchanged for smaller employers. But Labour won the removal of the trial for all employers with more than 20 staff.

The first tranche of the new Government’s employment law changes were released on Thursday and stuck largely to the pre-election script, except for a surprise regarding the controversial 90-day trial legislation.

Introduced by the previous National government, the trial allowed employers to fire employees within the first three months of them starting a job.

Aimed at encouraging employers to hire new staff, the tool was criticised for leaving workers with no recourse if they felt unjustifiably dismissed.

Labour campaigned to introduce a referee service as an avenue for those who felt they were fired unfairly, but instead 90-day trials will now only be available to businesses who have fewer than 20 staff.

The law changes will also see workers’ rights to rest and meal breaks restored alongside their ability to take part in low-level industrial action without fear of reprisal.

Unions were also the winners, with the onus on employers to conclude collective bargaining restored and pay rates required to be included in all collective agreements.

“The fact is, we know very little as a Government about how [90-day trials] are being used, the impact on workers and the impact on businesses.”

Changes to an obscure section of the Employment Relations Act covering employees who are affected by restructuring — the subject of heavy lobbying during National’s tenure — will also be reversed.

90-day compromise

During a press conference announcing the changes, Prime Minister Jacinda Ardern admitted the decision to retain 90-day trials for small businesses was a carve-out on behalf of New Zealand First.

The party’s voter base contains many small business-owners and the concession will keep Winston Peters and his party happy.

Ardern said 70 percent of workers would no longer be affected by a 90-day trial as they worked for larger firms.

When asked why small businesses should be allowed to retain the option, Ardern said larger businesses had HR departments and could still use probationary periods if desired.

Workplace Relations Minister Iain Lees-Galloway said he had asked government officials to do further research into the use and effectiveness of 90-day trials and they would be monitored closely.

“The fact is, we know very little as a Government about how they are being used, the impact on workers and the impact on businesses.”

A study by the think-tank Motu in 2016 found 90-day trials had little, if any, effect on hiring or overall employment.

But that same research also suggested the trial periods did not significantly increase smaller firms’ overall hiring, raising questions about why it should be kept at all.

National leader Bill English lauded the current high employment rate and warned the Government’s changes could threaten that.

“If anything they’re going to make it harder for businesses to make the kind of investment that’s required to enable higher-paying jobs and more jobs.”

When asked what evidence he had that the 90-day trials had created more jobs, English admitted there was only anecdotal evidence rather than “systematic micro-economic evidence”.

Professor Gordon Anderson, of Victoria University’s School of Law, said the announced changes were nothing adventurous.

He doubted the removal of the trial periods would upset larger employers, many who had told him they were not keen on the tool as it sent a signal there was no need to do proper recruitment.

Equally, he believed the referee system proposed by Labour would have been a waste of time.

“To be honest National only made it worse, so if they’re going to reverse some of that legislation it might simplify that process.”

He was not surprised small businesses had earned a carve-out, considering their ties to New Zealand First.

“Given it never actually achieved much, given all the thousands of people it should have employed, and as far as I could see was probably being abused fairly extensively, although mostly by the small employers more than anyone else.

“That sort of small employer market is one that can make a lot of noise with National and New Zealand First as well and always seem to regard themselves as particularly hard done by. “

Part 6A tweaks reversed

Also scrapped were changes made by the Government in 2012 to a section of the Employment Relations Act that has been subject to heavy criticism and intense lobbying.

Part 6A, which sets out rules about what happens to employees when their work is restructured, has long been an unpopular clause with both businesses and unions.

Most of the workers affected by the legislation work in building and cleaning industries and the law ensured businesses had an obligation to take on any existing staff and meet their entitlements when taking over another business or service contract.

After widespread lobbying on the clause, then-Labour Minister Kate Wilkinson announced changes that exempted small businesses from their obligations.

But it failed to please most, who continued to criticise the legislation as messy.

Yesterday, Lees-Galloway announced the 2012 changes would be repealed and employees would be given more time to decide whether to transfer to a new employer.

One of the most outspoken voices on Part 6A in the past decade has been Grant McLauchlan, managing director of Dunedin-based CrestClean.

The company was at the losing end of several Employment Court cases after breaching the Act, which he argued had removed the ability of Crest to choose who they employed.

McLauchlan said he applauded the new Government’s decision to remove the small business exemption as the legislation was a shambles.

“To be honest National only made it worse, so if they’re going to reverse some of that legislation it might simplify that process.”

The clause provided protections for a highly transient workforce, most who left the company within a year anyway, and more clarity was needed.

Victoria University’s Anderson agreed Part 6A was “inordinately complicated” and could be tidied up to prevent dirty tricks played by some employers on employees and other businesses.

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