Government discussion paper on PGs

In case you missed it the government has just released its discussion paper on personal grievances. Submissions due by 24 March - a whole 3 weeks to consider and respond to one of the core areas of employment law!

When I read it in detail I will comment. However even a brief glance over it shows a strong focus on employer concerns with loaded questions that will encourage criticisms of the current law. Interestingly there is virtually no mention of why the PG protection exists or of the problems that employees might face in taking a grievance. Even the basic notion that employees should have a clear right to protection from unjustified and arbitrary actions or other actions that cannot be objectively justified seems to have been overlooked.

The Ministers press statement can be found at the following link which contains a link to the discussion papers http://www.beehive.govt.nz/release/submissions+sought+personal+grievances

personal grievances and the mythical grievant

I suspect that the proposals to reform personal grievance law will help fill out this blog over the next few weeks. One of the most common criticisms of the personal grievance process is that it favours form over substance and that totally undeserving employees gain large payouts when clearly guilty of serious misconduct or even criminal conduct. One such example is the employee who was held to be unjustifiably dismissed for theft because the employer never told him that theft was misconduct. John Hughes wrote an illuminating article on this mythical case over a decade ago (The Grievant Who Never Was [1998] ELB 136). Apart from showing the mythical employee left no forensic record, Hughes gives examples that suggest, if anything, that the courts tended to lean in the opposite direction when theft or unauthorised taking of property is suspected. As Hughes points out the courts have upheld dismissals or reduced remedies to nil even where there have been serious procedural failings. Generally all that is asked of employers is that there is a proper factual foundation for their action. Hughes also makes the point that "demonstrably inaccurate political statements" and a misunderstanding of case law are a poor basis for legal reform.

Fast forward to early January this year and the sensationalist headline that appeared in a number of news headlines: "Worker fired for supplying drugs gets payout". A spokesperson for the employer concerned was apparently quoted saying that "employers are being shafted" and "its so unbalanced its not funny." The most issue of NZLawyer has an interesting article on this case "Don't believe everything you hear.." written by Aaron Lloyd and Bridget Smith of Minter Ellison (not previously suspected of being a hive of left-wing activism) who clearly went to the trouble of reading the case before commenting. What their analysis shows is clear procedural failures and a failure to properly define why the employee was being dismissed. Briefly, the employee had admitted supplying marijuana to a co-employer at some stage in the past and the employer then suspended and later dismissed him. The authors sum up the problem as follows: "the company failed to properly establish exactly what is was that Wilkinson had done. In particular it was not clear whether there was a recent alleged sale, when any previous exchange of drugs had occurred, or where any alleged sale or exchange may have taken place. In particular the company took no steps to ascertain if the activity...was inside or outside work hours, or whether or not it was on company premises." It seemed all that was established was that sometime in the past the employee had given a colleague drugs outside of work. There was no proper investigation, no opportunity to respond and no proper connection established between the non-work conduct and the work. As the authors note the fact that (non-work) actions amount to a criminal offence does not by itself justify dismissal.

This was a clear example not of employers being shafted but of an employer failing to follow even the most basic procedural steps - in spite apparently of having the benefit of HR advice.

In my next post I will provide an idiots' guide to procedure. For the moment I will close with a statement on its importance:

Megarry J explained this in John v Rees [1969] 2 All ER 274 at 402:
"It may be that there are some who would decry the importance which the Courts attach to the observance of the rules of natural justice. ‘When something is obvious,’ they may say, ‘why force everybody to go through the tiresome waste of time involved in framing charges and giving an opportunity to be heard? The result is obvious from the start.’ Those who take this view do not, I think, do themselves justice. As everybody who has had anything to do with the law well knows, the path of the law is strewn with examples of open and shut cases which, somehow, were not; of unanswerable charges which in the event, were completely answered; of inexplicable conduct which was fully explained; of fixed and unalterable determinations that, by discussion, suffered a change. Nor are those with any knowledge of human nature who pause to think for a moment likely to underestimate the feelings of resentment of those who find that a decision against them has been made without their being afforded any opportunity to influence the course of events."

Where the US goes....NZ follows?

Today's New York Times (17 Feb) reports that the IRD are "starting to aggressively pursue companies that try to pass off regular employees as independent contractors". The report notes that companies are using so called independent contractors to avoid paying a range of taxes and the like including social security, Medicare and unemployment insurance. The report also states that "several studies have indicated that, on average, misclassified independent workers do not report 30 percent of their income". This enthusiasm is driven partly by budget deficits, the report notes that California’s attorney general is currently seeking $4.3 million from a construction firm and that last year he won a $13 million from two companies that had misclassified 300 janitors, cheated the state out of payroll taxes and not paid minimum wage and overtime, and partly by the appointment of a new top law enforcement official in the Labor Department.

As usual of course employers blame the uncertain state of the law for this problem - rather than the fact they are trying to get the best of two worlds. If I recall correctly Chief Judge Goddard once said something to the effect that if employers stopped trying to see how close to the wind they could sail and instead steered a safe course such problems would melt away. These problems are of course not unique to the US and are well known in NZ where the same problems exist with both tax and the avoidance of minimum employee protections. I have not followed our own IRD's moves on this matter but I did note that the Department recently appealed the decision in Penny v Commissioner of Inland Revenue. This case involved doctors providing their professional services through a trust structure to limit their tax liability - the Commissioner argued that the salaries received via the trusts were artificially law. Perhaps there is also a new enthusiasm in NZ!

Ending the union "monopoly" on bargaining-what monopoly?

In 2008 National's workplace relations policy featured only five substantive items one of which was its policy of ending the "union monopoly" on collective bargaining, newly rephrased as "restoring" rights to bargain without belonging to a union. Non-union bargaining was of course a feature of the ECA - or more accurately non-union non-bargaining. Negotiating a non-union "collective" employment contract was primarily a tactic used by employers as a method of accessing the power to lockout small groups of unorganised employees to force a reduction in wages and conditions. However at,rather than speculate on what National might have in mind for the future, I want to address a slightly different question - is there anything in the current law that prevents non-union employees bargaining?

Let us assume that a group of employees wish to bargain and for the moment that the employer is willing to talk to them. To start with most employers already use "collective" terms of employment (or more accurately standard terms of employment/contract) which form the basis of their employment agreements. Employment documentation typically consists of such terms supplemented by a letter of appointment tailoring the employment to the individual employee. Functionally this starts to look pretty much like the arrangement that exists with a collective agreement - a basic agreement plus some individual terms.

There is of course no reason whatsoever that an employer cannot agree to negotiate the contents of its standard terms with its employees, and even agree that those terms be available and offered to all existing and new employees. Behold - the employees have now bargained without belonging to a union. Moreover as they are negotiating individual employment agreements for themselves the general duty of good faith would seem to apply to the negotiations.

So what's the downside?
(a) the specific bargaining in good faith provisions in Part V won't apply,
(b) they can't strike (or be locked out)- but were such a group even going to have the capacity to strike anyway?

Of course the employer may refuse to negotiate/bargain (unless the good faith provisions can be invoked to require this)and the employer may not agree to what is requested but that is not unusual in normal collective bargaining.

The point is that if employees want to negotiate/bargain their standard terms of employment there is no legal impediment to doing so and it is difficult to see what any "right" to bargain might achieve - except of course for the employer who would again be free to lockout small groups of employees - but I'm sure National don't intend that.

Hiring employees and registering companies

I was struck by the comments on company registration, reported in today's Dominion, by Phil O'Reilly from Business NZ. Mr O'Reilly seemed perturbed that company registration might be made more difficult and argues that claims that it is too easy to set up a company are misplaced. Given that, if media reports are to be believed, registration requires little more than a signature with no verification of the accuracy of the information provided or of the identity of directors I wondered if Mr O'Reilly might also argue that hiring employees also involves excessive costs - why bother to require authenticated documents or check cvs or referees? And in another context, anyone who has tried to enter a bank in recent times will know that photo ID and other proof of residence etc is required for even relatively ordinary transactions.

One might have thought that company registration might require at least the same level of scrutiny as being employed or opening a bank account!

And finally I will be off-line for awhile as the Banks Peninsula track beckons. I trust all readers are having or have had a good holiday.

Doorey’s Workplace Law Blog

I added this blog as “In the Law Professor Blog Award category Doorey’s Workplace Law Blog and University of Alberta Faculty of Law Blog are repeat winners with both continuing to inspire and be read in 2009. David Doorey was our best new law blogger last year, and his volume and quality of posts were again top notch. “

It's the Workers Stupid!

It being good to start the new year on a positive note I thought I might share the conclusions of a recent article with you. The article's title, "Labor Market Regulation and Productivity Growth: Evidence for Twenty OECD Countries (1984-2004)", pretty much gives away the content. The paper looks at the relationship between a range of labour relations indicators and labour productivity growth in 20 OECD countries which fall into three distinct groups: Nordic (N), Continental Europe (CE) and Anglo-Saxon (AS). The author report that

"Differences are particularly strong between AS countries and all other countries in earnings inequality, tenure, degree of wage bargaining coordination, employment protection and the management ratio."

Somewhat unexpectedly (for those of us deafened by neoliberal rhetoric) they conclude:

"we find that labour productivity is higher in countries featuring relatively regulated labor markets. This directly contradicts the claim that 'excessive labour market regulation' or 'rigid labor markets' are a major cause of slow labor productivity growth.."

The authors go on to caution that further deregulation may lead to deteriorated productivity performance. And why?

"Because it fails to effectuate the contribution that workers can make to the process of organizational and technological innovation which raises productivity."

In their review of the literature the authors identify a number of reasons for this claim, for example

"worker cooperation, commitment and participation depend to a large extent on the trustworthiness of employers in honoring their commitments to long-term employment and fair productivity gain sharing "

and , guess what, the most solid foundation for that trust is the ability to enforce those commitments (authors' emphasis). And strangely employment security by providing workers with some insurance against wage risk stimulates worker investment in education which in turn has a positive impact on productivity growth.

So it appears that employment security does matter after all and that workers are not commodified automatons.

See: Storm and Naastepad (2009)"Labor Market Regulation and Productivity Growth: Evidence for Twenty OECD Countries (1984-2004)" 48 Industrial Relations 629-654.(Unfortunately New Zealand is one of the 10 OECD members not surveyed.)