2015-Sep 18: Checklist for Minimum Employment Standards

Visa Pak 229 - Guidelines to staff required to reviewing employment agreements submitted with work applications being in compliance with minimum employment standards

Visa Paks

18 September 2015

Immigration Officers are often required to review employment agreements for compliance with minimum employment standards when making decisions on applications for work visas. The guide below has been produced by the Labour Inspectorate to assist you with doing that.

If a question arises during this process the matter can be referred to our standards team through this mailbox:

labourstandards@mbie.govt.nz

Action

Please discuss these guidelines with staff and make available for reference when deciding applications with employment agreements.

Individual Employment Agreements

The list below covers five elements to check in relation to individual employment agreements.  The first covers what must be in an agreement but the other four are checks to ensure that the agreement is not limiting or negating some key employment standards.  This is in no way an exhaustive checklist but provides a good place to start.

If an employer were to act on an agreement which included clauses such as some of those described in this check they are likely breach employment legislation, disadvantage employees and undermine the employment standards and operation of the labour market.  Reviewing employment agreements and addressing any weaknesses that come to light is a way to limit the risk of this occurring and improve outcomes for employees, employers and New Zealand.

A Five Point Check

  1. Mandatory Requirements
    There is a short list of elements that the law requires to be included in all individual employment agreements.  So, a first check of an individual employment agreement is that it provides for these mandatory requirements.  In general these are basic elements that we would all expect to see but you might be surprised that the list does not include minimum employment standards such as holiday pay.  The reason for their exclusion is that those minimum entitlements apply regardless of whether or not they are stated in the employment agreement and so it is not mandatory to include them.  The basic elements that must be included in an employment agreement are:
    1. the name of the employer & employee – this seems obvious but it is important that the employer named is the true legal entity of the employer – so not a trading name for example.
    2. a description of the work to be performed
    3. where the work is to be performed – this doesn’t have to be one location – it could be over a number of sites and the nature of some jobs is that the work is performed over an area.
    4. the times the employee is to work
    5. the wages or salary payable – employees can be paid in all sorts of methods such as commission, piece-rates, salary or wages.  Essentially it is negotiable between the parties but whatever is negotiated cannot lead to an employee being paid under the minimum wage.
    6. a plain language explanation of procedures for resolving employment problems – this has to include reference to the 90 day time limited within which a personal grievance must be raised.

      Technically, there are two other elements that must be included in individual employment agreements.  These are less obvious then those above and that have risen out of legislative changes over the years.  These are:
    7. advice that where any work is performed on a public holiday, no less than time-and-a-half is paid.
    8. for most employers - a clause explaining what provisions are in place in the event of restructuring.
  2. Premiums
    It is unlawful for an employer to charge an employee a premium for having their job.  It is unlikely that you will come across a clause in an employment agreement that blatantly charges an employee for their job but there are ways in which the charging of premiums can sometimes be hidden in agreements.  For example - a clause that labels the first few weeks of a job an ‘orientation period’ and then stipulates that if an employee leaves within 6 months they will have an amount deducted from their final pay.

    Things to watch for in relation to premiums
    1. an employee being charged for basic on-the-job training if they leave within a period.
    2. an employee being charged for an orientation or learning period if they leave within a specified time.
  3. Deductions
    A basic requirement of employment law is that wages must be paid when they become due - without deduction.  There are exceptions to this general rule.  One such exception allows employers to make deductions when they have the written consent of a worker to make a deduction.  Sometimes deduction clauses purporting to amount to written consent can be found in employment agreements.  These clauses can be genuine, precise and fair but sometimes they are not, in which case the Ministry does not believe they amount to genuine written consent.  It is also important to add that the law gives the absolute right to employees to withdraw their written consent to a deduction so an ideal deduction clause would also inform the employee of this right. 

    Things to watch for in relation to deductions:
    1. vague or generalised deduction clauses - To be considered genuine written consent the Ministry believes that a deduction clause needs to be specific in terms of when, what for and the amount (a figure or how the amount would be arrived at).  We do not believe that general or vague clauses amount to written consent and can sometimes be misused to try and deduct money off employees for spurious and arguable reasons.
    2. penalty clauses - Deductions should be about recovering some sort of genuine pre-estimation of cost (for example the replacement value of an unreturned item of uniform).  Sometimes deductions clauses go beyond this to cynically impose a penalty on employees to try and ensure continued service.  A good example to highlight this is –a clause requiring 1 month’s resignation notice and a deduction of a full 4 week’s wages for a failure to work out the last day or so of the notice was considered a penalty clause by the courts.  However, a more reasonable clause requiring a shorter period of notice and a deduction for an amount equivalent to the amount of unworked notice is unlikely to be considered a penalty.
    3. premiums – watch out for clauses wanting to make deductions for orientation or on-the-job training.
  4. Minimum Wage
    Minimum wage rates provide dollar figures which employees simply cannot be paid less than.  The rates are reviewed annually and so change over time.  The current minimum wage rates can be found on the Ministry’s website.  It is not common to find a clause in an employment agreement that refers directly to the minimum wage but consideration should be given to whether there is anything in the agreement which suggests the minimum wage may not be provided for.

    Some things to watch for in relation to the minimum wage:
    1. where an employment agreement includes an useful indication of the working hours and an annual salary (or a set weekly, fortnightly or monthly pay figure) do a quick calculation to ensure that the resulting rate is no less than the minimum wage.
    2. if an hourly rate is stated – simply ensure this is no less than the applicable minimum wage
    3. watch for any mention of unpaid trial or training periods.  All hours of work should be paid
  5. Holiday Entitlements
    While employment agreements do not have to include clauses covering the minimum holiday entitlements it would be usual for agreements to include them.  A question mark would be left hanging if an agreement did not cover the basic holiday entitlements off.  Detailed information on holiday entitlements can be found on the Ministry’s website but at a high level the minimum holiday entitlements are:
    1. 4 weeks paid annual leave after 1 year’s employment
    2. a day off, on pay, for public holidays that fall on otherwise working days
    3. payment at no less than time-and-a-half for work performed on public holidays
    4. the granting of an alternative holiday for work performed on a public holiday which occurred on an otherwise working day
    5. sick leave of 5 days per year and bereavement leave - both after 6 month’s employment.

      Attention should be paid to any holidays clauses in employment agreements to ensure they are not attempting to limit or deny the entitlements listed above.

      Some things to watch out for in relation to holidays:
    6. Forfeiture of leave –clauses which require employees to use their leave within a certain period of becoming entitled or they will forfeit their leave.  An employer who ‘forfeited’ such leave would simply be failing to provide for holiday pay and be in breach of the Holidays Act.
    7. Inclusive holiday pay – In very limited circumstances the entitlement to 4 weeks of paid annual leave can instead be provided for by adding an extra 8% to the wage each pay period.  If there are clauses referring to inclusive rates of holiday pay firstly check that the base pay rate is specified (and that it is the minimum wage (or above) before the 8% is added).  Secondly such an arrangement can only be applied where the work is either 1) a genuine fixed-term employment agreement of less than one year, or 2) involves such intermittent and irregular work that holiday pay cannot be calculated in the normal way.