Holidays Bill

I am pleased to be able to make another contribution to this debate, and, just to kick off this part, I want to develop a theme of trust. I ask members of this House how they can trust this Government. When the Prime Minister and members of her caucus travelled the length and the breadth of this country and were asked whether they would introduce legislation into the House that gave employees precisely 4 weeks’ holiday, their answer was no, they would not.

💬 Hon David Carter: It was dependent on the audience—they said that to the employers.

Mr Carter is quite right. I thank him for the clarification—that is, when they were talking to business audiences. The Government will rue the day it said it would not do this—

Opposition member: They were telling lies.

I do not want to use that word. It is not very parliamentary, but I agree that it does rhyme with “flies”. The point that really concerns me is that the Prime Minister, Mr Cullen, and Mr Maharey said that they would not introduce this type of legislation, and the business people of this country took them at their word. Will the business people of this country ever trust them again? I bet they will not. They will not trust the Prime Minister, Michael Cullen, Steve Maharey, or any of them.

The other thing that concerns me also—and I speak about trust—is the issue of enforcement around sick leave—5 days. My experience is that a good contract is one that gathers dust. Good employers and good employees work together. Only when there is an abuse of that trust do those types of contracts ever come out of the bottom drawer and the dust has to be blown off them. That type of trust cannot be legislated for. What is more important is the spirit in which those individuals are working together.

I now turn to clause 67 and look at who can enforce the Act, and we now get down to the crux of what this legislation is all about. It is union muscle that is putting pressure on this Government. The people who can enforce the Act are an employee, an authorised representative, a representative of a union of which the employee is a member—and that really gets down to the heart of it, does it not—and a labour inspector. The way I read this legislation, a labour inspector is code for labour police. Labour inspectors will be asked to mediate on a contract that they have absolutely no knowledge of. How can they do justice to that? They will know very little about the business they will be asked to mediate on. They will not know anything about the circumstances of that business, or the spirit in which those employment contracts were constructed. Yet inspectors will come in and have more power than the Gestapo, more power than the police, and it will result in an abuse of power.

I warn the Government that the business sector will react. This Government will rue the day it went around the countryside saying it would not do that, but at every turn it has done the opposite. There is a word for that, and it rhymes with “flies”. This is something the business people of this country will not forget.

I turn to clause 68, “Penalty for non-compliance”. Some of these provisions are so punitive. An employer who is an individual is liable to a penalty not exceeding $5,000. An employer that is a company or other body corporate is liable to a penalty not exceeding $10,000. The imposition of such a penalty will simply drive a number of businesses out of business. The worst possible outcome and the thing that will really hurt employees is that employers will become risk-averse. This type of legislation will make employers think that it is not worth taking the risk of employing people, of mortgaging their homes, and taking risks to expand their business.

The CHAIRPERSON (Hon Clem Simich): I call the Hon David Carter.

💬 Jill Pettis: This is the graveyard gang!

Do not be ridiculous. When I look at Part 3, my thoughts go to small-business people who are operating on their own, who are overworked, and are perhaps thinking of employing staff for the first time. If anybody was thinking of making that decision, and turned to Part 3, I suspect that person would be immediately alarmed and concerned about whether it was worth taking on that extra employee. In looking at some of the penalties for non-compliance, most new employers would think twice about taking the opportunity of giving a fellow New Zealander a job. What has struck me about the debate as we move to Part 3, and about the earlier parts of the debate, is that Labour members on the other side of the House all have one thing in common—none of them has ever employed anybody in their lives.

💬 Hon Damien O'Connor: Don’t tell lies.

None of them has ever employed anybody.

💬 Hon Damien O'Connor: Don’t tell lies.

Damien O’Connor is interjecting and saying that I am telling lies. Lianne Dalziel was a union employee before she came here—unions are well represented in this legislation but have never employed anybody. Margaret Wilson, the architect of the legislation, used to be a law lecturer. She has never employed anybody in her life. Now she is waving her hands acknowledging that she has never employed anybody. That is evident when one looks at the sorts of impositions and penalties this bill imposes on people who might be thinking of employing somebody.

The other thing that struck me as I considered Part 3 is that because these Labour Party members of Parliament have never been employers, they do not appreciate that most businesses know that their biggest asset is their staff. The biggest asset a business in this country has is the people who work for it. So why would an employer go out of his or her way to damage that substantial asset? The truth is that in most cases employers do not do that, but, sadly, on slim occasions we get a bad employer.

💬 Brian Connell: Very bad.

Very bad, but it is rare, because why would somebody go out of his or her way to be a bad employer? It just does not happen very often. But this legislation is designed to marshal everybody in, just in case there is a rogue employer out there. There are penalties for non-compliance—for example, $5,000 if an employer does not write down when an employee took bereavement leave. If an employer happens to corporatise—and more than likely the person will have done that, because it is a very easy way to dodge the 39c tax rate—and dodged the huge compliance costs imposed by this unfriendly-to-business Labour Government, he or she will cop another substantial penalty if this employment law is breached. If it is a company, it will be fined $10,000, because the employer perhaps neglected to record correctly when an employee took some annual holidays.

The other thing that strikes me about this legislation is whether the Government is sincere in trying to create an economy that will get New Zealand back into the top half of the OECD. When we look at the Holidays Bill, and, in particular Part 3, we see that it does not do much to make it easier for this country to grow. I see that United Future agrees with that comment. The bill provides for 5 days’ sick leave, 11 statutory holidays, and 3 days’ bereavement leave—all of which adds up to 8 weeks in any year.

Part 3 of the Holidays Bill deals with enforcement and other matters. So it is about enforcing the legislation and setting out who does what. But how will Department of Labour inspectors be able to go out and enforce the legislation, when their political masters are lacking discipline? Let us examine this point. The Hon Roger Sowry put a question to the Hon Steve Maharey as to why Labour had continued to say it would not be introducing the legislation in this term in office. Steve Maharey said that Labour did not think employers at this time were in a position to take on 4 weeks’ annual leave in addition to other changes in their environment. How can employees of a Government department set out to enforce the provisions of the holidays legislation when they know that their political masters are a bunch of people who do not know how to tell the truth?

💬 Hon Lianne Dalziel: How many employees would that member have?

I invite the chatty Minister of Immigration to take a call and have her say, instead of chipping away. If Government members have something worthwhile to say, they should take a call and use their own time.

Let us come back to the Holidays Bill. I looked through Part 3 and tried to find out whether, when the inspectors from the Department of Labour go into places to inspect records, etc., they will also enforce the provision that employees who continuously take sick leave—for more than 3 days—should provide a medical certificate. Where is the level playing field? I understood that this legislation was supposed to be conducted in good faith. We have heard an abundance of comments from Labour members, but they have never trusted employers, because, as my capable colleagues—like the Hon David Carter—have pointed out, they have never been one! So the Government does not know how employers actually behave. All that it has are those very out-of-date employer-employee barriers—that is, they do not trust each other. I would like the Minister of Labour, Margaret Wilson, to take a call and say whether the enforcement provision would be carried out even-handedly on both parties: both on employers who carry out their obligations in good faith and on employees who, for their part, also have to oblige.

I move to the provisions about enforcement and other matters in Part 3. I would like the Minister to take a call and reassure the public that the minority Labour Government believes that the enforcement of this legislation will lead to economic growth. The Rt Hon Prime Minister, who said that she would always tell the truth, be transparent, and have integrity, promised that the Labour Government would return New Zealand to the top half of the OECD. I invite the Minister to take a call and say whether the enforcement of this holidays legislation will assist New Zealand on to the path back to the top half of the OECD. Of course, we would also like the Minister to answer some questions as to how many additional inspectors will be employed in order to visit all the workplaces and check on holiday records.

Before I start on Part 3 of the Holidays Bill, I say that it is quite sad that this legislation, which aims to have a work-life balance for New Zealanders, will come at such a significant price to those New Zealanders who can least afford to pay the bill. I could argue that the Government is writing cheques that the poorest-paid New Zealanders cannot afford to cash. That manifests itself most in Part 3 when we see the holiday and leave record that must be kept. That record will be longer than it would have been had the provision for 4 weeks’ holiday not been slipped into this legislation in such a covert and an underhand way. I find it rather sad that those who most need to have a work-life balance and a higher level of income so that they can provide for their families are being dictated to by this Government, which states they must have an extra week’s holiday.

Before I go too much further, I want to say that the New Zealand First member, Mr Peter Brown, made a statement in his speech earlier to the Committee that, in his opinion, New Zealanders would not be able to enjoy higher wages and that they could not effectively achieve productivity growth. He argued that, therefore, the bone that the Government was throwing them—the fourth week—was about as good as it could get, and that on that basis they should support it. That is a hopeless attitude for any member of Parliament to have. Frankly, it is nothing short of a disgrace. I, for one, believe that New Zealanders can achieve higher standards of living. I simply point out to Mr Brown that between 1970 and 1990 New Zealand had 0.5 percent per capita growth, because we had all the wrong policies driving our country, in the greater part. Between 1990 and 2001 we have grown at above the OECD average of about 2.5 percent. This legislation is a retrograde step. It is an anti-business, anti-growth step that will not deliver opportunities and higher wages.

As Part 3 quite clearly points out, what this legislation will deliver is a holiday record that will have to be filled out. Under this Government, it will be a longer record than it would otherwise have been. What an unfortunate record it will be. When, at the end of their second term in 2005, all five Labour members sit on the Opposition benches and huddle in their caucus, and when they look back and ask themselves what went wrong and what the Armageddon was that took the once-popular Labour Government and dispatched it to become nothing more than a minority party that could hold its caucus in the back of an MX5, one of the things they will look back to will be this very anti-growth Holidays Bill.

I want to spend a moment on clause 73(2)(f), which provides for payment. Members who have taken the time to traverse the important aspects of this bill will know that in both clauses 7 and 45 the topic of ordinary pay is raised. One of the things that came up in the Transport and Industrial Relations Committee that we noted in particular was that under the previous National Government, when freedom was put back into the labour markets, it was very possible for employers and employees to sit around the table and, in a spirit of cooperation, nut out a fair definition of ordinary pay by saying to one another that there were times when there was a bit of give and a bit of take—a bit of ying and a bit of yang—and coming to agreement on an overall wage rate that could be used. They did not do that in the expectation that the current Government would come along and argue that that would be the rate of pay applied to time and a half for holiday payments on a statutory holiday. As we heard from the restaurant industry, that will signal the death knell for many small restaurants in our country, which will not be able to afford to operate because they will be paying time and a half and granting a day in lieu.

I rise on behalf of the ACT party to speak on Part 3 of the Holidays Bill. This is the bill that was supposed to make the calculation of holiday pay and the arrangements between employers and employees simple, easy to understand, and what they would have expected if asked—in other words, intuitive.

Part 3 deals with penalties and enforcement. I will go quickly though the points that I see there. I did not sit through the select committee process, for which I am thankful when I read that report, but I will look at it as I imagine an employer, an accounts clerk, a wages clerk, or human resources coach—as they are now called—would in trying to work out what it is they must do. First, clause 66 is yet another imposition of pain-in-the-neck explanation that the diligent employer will have to make. Subclause (2) states that when “an employee enters into an employment agreement with an employer, the employer must inform the employee—(a) about his or her entitlements under this Act;” We do not know how much has to be done there.

If this legislation was really just recording the standard assumptions and the general knowledge that everyone has—the folklore, as it were—about holiday pay, it would be superfluous. If this legislation was really trying to facilitate employment and trying to help the marginal employers—the ones who could well provide a job as long as it is not too much trouble for them—it would be trying to avoid the formalities accompanying employment. It would be trying to ensure that employers who are not all that sophisticated do not worry about the pitfalls—about what they had not done. When I look at the penalty provision, I see that that was maybe recognised by the select committee, because it has omitted, as far as I can see, a penalty for a breach of clause 66. What kind of obligation is it when there is no penalty? Is the provision there just to be educative? Is that what its purpose is? Is it more of this law that is not really law—more of just slogans? I cannot tell.

As I look also at the arrangement, clause 66 reminds me of just how much complication destroys employment. The emergence of labour contractors and human resource managers, and the outsourcing of consultants is probably a reflection of what the Hon Margaret Wilson has done to employment law. People who would otherwise have a direct relationship with employees will have to employ middlemen to control and deal with their employees, because they simply cannot run the record-keeping that is required. Just the holiday record-keeping clause—just the amount that has to be kept by the employer for holiday and leave records—has subclauses (a), (b), (ba), (c), (ca), (d), (e), right through to (ga) and (gb), and right through to (m). That is the number of particulars that must be kept just about holidays, bereavement, and sick leave. What do we find that the penalties are? They are $5,000 for an employer who is an individual, and $10,000 for a corporate that fails to comply with these provisions.

I have noticed something possibly more significant, for which there seems to be no penalty. No penalty is provided for breaches of clauses 28 to 33, and those are the clauses that deal with these complicated arrangements for statutory holidays. There seems to be no expectation of enforcement. I can hardly believe it—there must be general enforcement powers somewhere else, and perhaps the Minister can explain it. This detailed prescription of when a company can close down and require everyone to take annual leave at one time of the year seems to have no parallel enforcement provisions. That might be material. It might be that this is the saving loophole that employers are looking for. It seems that the Minister, the Hon Margaret Wilson, decided that it was not appropriate, for example, for an employer to keep a skeleton staff going at a plant. Clause 28, which I thought would have an enforcement provision in Part 3, states that one can have a closedown period.

I want to move to clause 77. This clause is about employment conditions if an employee is dismissed and re-employed within 1 month. The question that arises—and I ask the Minister to seriously consider what I am saying, and what I would like clarification on—is this: if somebody is on a fixed-term contract and the contract finishes, then within the 1-month period that person who was on a fixed-term contract is re-employed by that particular firm, is that regarded as continuous employment? I do not know the answer to this, and that is why I am asking the Minister. If somebody is on a fixed-term contract—and a lot of firms have fixed-term contracts, because they do not know whether there will be continuity of work in the long term—and that contract finishes, is that deemed to be a dismissal if, within the 1-month period identified in clause 77, that person is then re-employed by that particular firm? Is that regarded as continuous employment under clause 77? I say to the Minister that it is a genuine question. A lot of businesses will want to know the answer to it. What is suggested in clause 77 presupposes that that is the case, and the extra costs associated with it, and the extra provisions that a firm will have to go through could be quite horrendous. That is the first part of clause 77.

The second matter that I want to bring to members’ attention concerns the situation where there are casual or temporary employees. That is deemed to be similar to a fixed-term contract, because they are taken on for a certain period, on a casual or a temporary basis. The employer does that because there is not ongoing work, or because of their skills, or whatever the reason is for wanting to be able to use those people only for a fixed term. I would consider those people to be similar to those on a fixed-term contract. Does clause 77 apply to them? The Minister has advisers with her this evening. It is a very simple question that I am asking. I would like some clarification as to my understanding of what clause 77 means. Clause 77 will affect a lot of businesses, and I believe that we need to know what it means so we can pass that information over to them.

I want to look, in particular, at clause 71, “Powers of Labour Inspector”. I will not read it out. The labour inspector’s powers are quite immense. Clause 72 states the extent to which the labour inspector can go. I draw members’ attention to the subset of clauses that I mentioned briefly in an earlier speech, and to clause 8A(2)—and this is in Part 1, so we are going back to the implication that clause 72 has—in particular, which states: “A Labour Inspector may determine the amount of the employee’s ordinary weekly pay or relevant daily pay, as the case may be.” What extraordinary powers the labour inspector has! I do not know of any other business where a labour inspector could determine what the weekly pay would be.

Opposition member: Labour police.

That is it—the member has said it—and that is what it says. The clause states: “A Labour Inspector may determine the amount of the employee’s ordinary weekly pay or relevant daily pay, as the case may be.” The same applies in clause 8C, which determines the working-day.

I move, That the question be now put.

I rise on behalf of the ACT party to talk on Part 3 of the Holidays Bill. This is the part that talks about provisions for employers who do not follow the guidelines properly. I would like to start by reminding members that the bill is estimated to cost $700 million to the economy. Recently, a business group worked out that the costs imposed on small business by this Government are something like $43,000 a year. That is $43,000 in extra compliance costs per year for medium-sized small business. A lot of that estimated cost will be caused by the provisions in the Holidays Bill. I say to the Government that for some small businesses this bill will be the straw that breaks the camel’s back. It will be the final piece of legislation from this Government that makes small-business owners say: “I’m just going to close my doors, I can’t be bothered any more.”

Almost every day this Labour Government is making the cost of doing business in New Zealand higher. That is so stupid, because we have a more competitive marketplace. As a nation we are in a more competitive global market, and this Government should be making it easier to do business, and less costly to do business, so that New Zealand businesses can be more productive and more profitable. This Government is doing exactly the opposite. Because small businesses have had all the new employment laws and all the other costs shoved on their shoulders, they have to hire extra advisers. They have to hire extra employees to help them go through the plethora of new regulations they have to deal with. All of that increases the cost to business, which in many cases is passed on to the consumer. So ordinary mum and dad Kiwis find that their pay packets just do not go as far these days as they did before Labour members got their hands on the levers of power in this country.

Did the Labour Government worry about the concerns of the submitters? I say that it did not. Here are some quotations from some of the small-business people who submitted to the Transport and Industrial Relations Committee: “Small to medium business will not survive if this bill gets put into action.”; “will definitely have to cut staff.”; “This Government is making it tougher and tougher for businesses to keep going.”; “will have to hire more casual staff. We won’t be able to keep permanent staff on.”; “We will close on most statutory days.”; “Why has this Government got such a bad attitude towards business?”; and “This legislation obviously has been proposed by idiots. It will be inflationary and it will cause prices to go up.” When they were talking about the actual provisions for sick leave, they said: “There is no need for a doctor’s certificate.”, and “It will definitely lead to an abuse of this provision for sick leave.” Submitters are telling the Government that they think it will be tougher for small business, but the Government members on the committee obviously took no notice.

One of the submitters said: “The paperwork is now a nightmare.” I want to talk for a moment about the fact that the Government is now requiring employers to make detailed holiday and leave records with far more specific information than has ever been needed in the past, and if they do not do it properly and the employee later brings proceedings, then there is a good chance that the employer will end up being fined and it will be more costly on him or her. I make a note of clause 68, “Penalty for non-compliance”, which states that if an employer fails to comply with all the provisions in this bill, which are huge, then the employer can be fined—up to $5,000 if the employer is an individual, and up to $10,000 if the employer is a company. But, of course, that does not rule out all the other penalty rates under the Employment Relations Authority or the Employment Court.

I move, That the question be now put.

I want to continue along the same lines of my earlier speech, relating to clause 72. As I mentioned at the time, this clause gives powers to the labour inspector that—

💬 Hon Member: That would be a good job for the member.

I would not want to be a labour inspector. I have better things to do. I do not want that sort of job. I want a real job—a job that adds value and productivity—not a job as a Government stooge, which is what that member is suggesting. I have better things to do with my time.

I want to point out exactly what these labour inspectors will do, because they have immense powers—huge powers. Clause 72 identifies some subclauses that I want to go back to. In the debate on Part 1, I mentioned clause 8A(2), which states what powers a labour inspector has. He or she can determine the amount of an employee’s ordinary weekly pay or relevant daily pay, as the case may be. That is an immense power given to labour inspectors under that clause.

The provision I now want to bring to the Committee’s attention is one that has not been mentioned in the debate—clause 8C(2): “A Labour Inspector may determine whether the day would otherwise be a working-day for the employee.” Under that clause, it is not the employer—the person who pays the wages, pays the salaries, and carries the can—who determines whether an employee is to work on that day, and whether it is a working-day; it is the labour inspector who will determine whether the day would otherwise be a working-day for the employee. It is a complete and utter nonsense that a third party will determine the working-day. Not only that, the inspector will also be in a position to determine the ordinary weekly pay or the relevant daily pay.

National is opposing that sort of absolute nonsense prescribed in this bill, because it adds absolutely no value or credibility to the workplace. The people who will be affected by it are the employees. The employees are the losers with this sort of nonsense, because employers will say they will not be part of it. They will retrench, sell out, downsize, and contract work out, because the paperwork and the way that labour inspectors will be able to walk in and determine the daily pay rate are an absolute nonsense in the real world. But, of course, this Government would not know what the real world is, because it has never been part of it. Its members have never been involved in that area.

I also want to draw the Committee’s attention to the penalties regime under clause 68, which has been mentioned before by other members. The huge compliance associated with this clause—because the bill is so full of prescriptive detail—will be difficult to comply with. Many small-business employers will not understand the complexities of all the issues prescribed in the bill, so they will be prime targets in terms of being hit with the fees that come under clause 68. Subclause (1) states that if an employer is an individual, he or she is liable to a penalty not exceeding $5,000—if the paperwork is not done, if the book for leave provision for sick leave, bereavement leave, or whatever, is not kept. Is not that just great, for individuals, sole traders, or people working on their own, working their hearts out to make ends meet and make a dollar so they can grow their business and employ somebody, when at the end of the day if they get it wrong or make a mistake they are in for a fine of $5,000. Then, if the employer happens to be a company—and most will be companies, because in the marketplace at the moment small businesses are forming companies to get around the obnoxious 39 percent tax rate—

💬 Hon Lianne Dalziel: Ha, ha!

The member over there laughs, but her party would not know what actually makes business work. If a company is formed, the tax rate is 33 percent—and this clause states that that company would be fined $10,000 if it fails to comply.

I move, That the question be now put.