New ERA rules around availability provisions – Oct 2016



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New ERA rules around availability provisions – how they might affect your ability to manage your workforce

Amendments made to the Employment Relations Act 2000 (“ERA”) in April this year were intended to address concerns around so-called ‘zero hour contracts’. These are contracts that contain no guaranteed minimum hours, but require the employee to be available to work at the employer’s request. Employees cannot work for another employer during the time they have committed to be available, yet they are not paid unless they are called to work.

In order to address concerns regarding the fairness of zero hour contracts, the ERA now provides for “availability provisions”.

However disputes between the fast food chains McDonalds and Burger King with Unite Union, who is reportedly pursuing court action for breaches of the law regarding zero hour contracts, highlight the potential difficulties in relation to these amendments. The union says the two companies have reneged on agreements that guaranteed employees fixed shifts and hired new staff rather than offering additional shifts to existing employees, which presumably is in breach of an agreement between the parties.

 

The New ERA provisions

Availability provisions allow for work being made available to an employee at the employer’s discretion and the employee being required to work if requested. This is a similar, but not identical, concept to zero hours contracts.
To create safeguards for employees, the ERA provides availability provisions that can only be used if:

  • There is a genuine need for the provision, which may relate to the demands of the business.
  • The applicable employment agreement also provides for guaranteed hours. These can be one or a combination of a specified number of hours, days of the week or start and finish times. There can be provision for flexibility in relation to days and times. For example, guaranteed hours can be a specified number of hours, but worked on any days and times as set by the employer.
  • Reasonable compensation must be paid. The ERA provides a non-exhaustive list of factors that may be taken into account when assessing whether compensation is reasonable. These include the number of hours the employee is required to be available, the proportion of available hours to agreed hours, the nature of any restrictions (i.e. what the employee can’t do during this time – do they need to stay in a certain location, not drink alcohol etc?) and the rate of pay the employee receives when they do work. The ERA also confirms the parties may agree that a salary includes compensation for an availability provision.
  • Employees may refuse to perform work over and above their guaranteed hours if the applicable employment agreement does not contain an availability provision. Any employee who refuses work in these circumstances is not to be “treated adversely”.

What does this mean for employers who need a flexible and available workforce?

There are some issues of interpretation and room for dispute around these new provisions. Until these issues can be clarified by the courts, we suggest that when applying these new rules employers consider the following issues:

  • Whether there is a genuine need for an availability provision. Employees and unions may argue that due to the nature of the employer’s business, demand can be met by traditional rostering or shift arrangements.
  • What constitutes reasonable compensation? Will it be sufficient to pay a penal rate, say time and a half, for work under an availability provision? Alternatively, would an allowance for availability (similar to on-call) be sufficient?

Employers should carefully consider whether they need to implement availability provisions. If flexibility is required, an alternative option may be to have additional hours (i.e. work in excess of guaranteed hours) worked by agreement only; the employee is not required to work additional hours they may be offered. The downside of this option is that there may not be any guarantee of having sufficient employees available who are willing to work at any one time.

 

Employers who decide to implement availability provisions should ensure these are drafted carefully to meet the technical requirements of the ERA. A ‘one size fits all’ approach is unlikely to be successful, so consideration needs to be given to important details such as how guaranteed hours are structured, the number of hours to be covered by the availability provision and how employees will be compensated.

 

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