Employment Relations (Termination of Employment by Agreement) Amendment Bill

Thank you, Madam Speaker. I move, That the Employment Relations (Termination of Employment by Agreement) Amendment Bill be now read a first time. I nominate the Education and Workforce Committee to consider this bill.

Firstly, guys, I would like to thank my team because this has been a huge effort. For all of you that know, being a first-time MP and having a member’s bill in the tin, the chances of it being pulled are quite rare, so I’m pretty excited to have this be pulled and I want to acknowledge my team and my staff that have really helped us on this. I also would, firstly, like to acknowledge the business community, the various different chambers of commerce across the country that I’ve spoken to and heard their advice, and also the employment law experts that I’ve been talking to. Thank you so much for all the advice and encouragement you’ve given to me in helping shape this idea to come to life.

Today marks an important step forward, a step towards making the employment process in New Zealand simpler, fairer, and more practical. This bill fosters a collaborative approach, empowering employees and employers to approach the sensitive issue of employment termination not as adversaries but as partners. It’s about making sure that when an employment agreement needs to come to its natural conclusions, there is no unnecessary stress placed on both the employee and the employer. Instead, this allows for them to deal with these situations quickly and fairly.

As someone who has owned a small business and as the ACT Party small-business spokesperson, I know—and I’ve heard from the voices of countless businesses, owners throughout the country—of the very real obstacles that these businesses in New Zealand face. The challenges have been made clear: the ongoing effects from COVID, rising costs, and tight margins that all contribute. However, the current employment system represents one of the biggest barriers to business success, productivity, and small to medium sized enterprises (SMEs) taking a chance on employing somebody new. The complexity, the time, the stress, and the process can feel like mountains to climb, but this bill is part of a broader effort to streamline our employment processes and make them more balanced.

What is the problem we have here and what is happening? Firstly, I’d like to talk a bit from a business perspective. What is happening out there is the difficulty that businesses find when they get themselves in a situation where they have an employee and, for whatever reason, the communication or the relationship is breaking down—and there can be various things that can happen in this situation.

Under our current law, we don’t have a lot of opportunity and options to approach somebody to discuss potentially ending that contract. What is happening out there is employers are using the likes of restructure, redundancy, performance review, which are really good processes and we should have these processes but they are using these to move people on because they’re unable to have a conversation about what it might take in order for them to leave when that relationship has started to break down.

This is incurring all kinds of different problems at the end. Personal grievances (PGs), whether that is because the process has been not followed quite correctly or because the process was followed correctly but six months of a potential restructure, if you have to go to work and work together, you’re probably going to end up in a PG, and then you’ve got the other side of things. If you’re an employer and you’re going through some of these processes, whether you’re being made redundant, especially in a small team, you quite often know that this is possibly not what is happening here but you’re going through these processes. It’s extremely distressing and dehumanising for everybody involved.

We have processes in place. We have things like the mediation process if there’s a dispute. We also can enter non-prejudice. But all of these things take an awful lot of time, they cost an awful lot of money, and they have the same outcome at the end. Why can’t we say that, actually, an employer and an employee can come together to discuss what it is that’s happening within the employment and how they can move on, and, in doing so, that employee may be rewarded with a monetary sum and all kinds of other things which I’ll discuss.

Let me be clear: this will not undermine workers’ rights. It’s about creating a system that’s fair and transparent for both the employers and employees. When this relationship breaks down, as we all know, I would say everybody sitting here tonight has either been an employer or an employee, worked in a workplace where employment relationships are breaking down and where the dynamics are changing in the team. We need manageable processes in place to be able to deal with these quickly.

Now, let’s dive into some of these key provisions in this bill. This bill allows for employers to initiate what’s called a “protected negotiation” with employees about the potential termination of their employment contract. This process is designed to be confidential so both parties can have an open and honest discussion about the employment without the fear of this being used against them in a potential PG dispute. This is particularly useful in situations where a business may need to make difficult decisions such as downsizing, restructuring, or moving people on.

One of the most important features of this bill is the introduction of a settlement agreement. In cases where appropriate, the employer can offer an employee a settlement agreement that includes compensation in exchange for the employee’s agreement to end their contract. The terms of the settlement might include a monetary sum, a reference, or other mutually agreed upon conditions. The employee would also waive any potential personal grievance claims against the employer in the future.

For the settlement to be enforceable, it must be in writing, signed by both parties, and must include a recommendation for the employee to seek independent legal advice before signing. This ensures that employees are fully informed of their rights and the implications of this agreement. Importantly, any discussions or offers made during the negotiation process will not be admissible in future legal proceedings related to the employment relationship. This is crucial because it ensures the confidentiality and encourages both sides to negotiate. This is actually happening, but it’s happening quite far down the track when people are in the non-prejudiced situation. Of course, if there’s evidence of dishonesty and illegal activity, predetermination discussions could actually be used as evidence in court, but these would be the exception rather than the rule.

There are several benefits to both the employers and the employees under this bill. For employers, it makes the process of dismissal less stressful, more efficient, saves time and money on legal costs and potential PG claims down the track. What I’ve heard from New Zealand businesses and especially our SMEs is that PGs have become the cost of doing business here in New Zealand, and this is not acceptable. It creates a more harmonious work environment by offering fairer processes for everybody involved. Within this framework, employers can feel more confident when hiring new staff, knowing there’s clear and straightforward processes for managing terminations when needed. For employees, this bill offers the chance to bypass a stressful, time-consuming process that leaving a job can have, and it won’t damage their reputation. This is particularly important in niche markets, where going through a large process—whether it’s performance review, whether it’s going back on a PG—your reputation can be damaged, and we don’t want that to happen and occur.

By allowing them to negotiate a settlement at the top end, this can give an employee certainty about leaving the workplace through things like financial compensation—something that is particularly important since many employment contracts nowadays don’t include redundancy pay. This is more so if you’re in a low to middle income job. The process is designed to be mutually agreed upon so the employee can withdraw at any time if they wish to no longer proceed. Even being offered to have this conversation, they need to agree to it in the first place. This ensures both parties have a fair opportunity to make the decision that is best for them.

Similar legislation has already existed in the UK for over 10 years. We’re seeing global trends towards more flexible, mutually beneficial termination processes. This bill is in line with that trend. It empowers both the employers and employees to reach an agreement on the best way to end their employment relationship on terms that actually work for both sides.

There have been a few questions that have come up during the process of this bill: firstly, does it create a power imbalance between the employer and the employee? The answer is no. While employees may initiate this settlement process, employees have the option to walk away at any time. They’re still entitled to all the rights provided under the Employment Relations Act 2000.

Second, could an employee raise a personal grievance down the track for having this conversation? No, and I think that this is a key, core message about this bill. It’s allowing people to have that conversation without risk of a PG coming back on you for having that conversation or approaching the conversation.

Finally, what about time frames, etc.? The bill does not prescribe specific time frames for the negotiation process. This is something that, should this bill pass, would be further explored by a select committee. There are other provisions that the select committee may want to include, and that could be around cool-down periods for signing negotiations. It could be what is considered a time frame. In the bill currently, it says, “a reasonable time for notification” and “reasonable time to consider a contract”. These are things that I’d be really keen for a select committee to hear from those that are working within businesses, from those employees, about what would be reasonable.

This bill is practical. It is much-needed reform. Like I said, the current system isn’t working. The processes that we have in place are there to be designed to be used for when they’re really needed, and we need something else. We need another tool in the kit, so I commend this bill to the House.

Members, this debate is interrupted and is set down for resumption next sitting day. The House stands adjourned until 2 p.m. tomorrow.

Debate interrupted.

The House adjourned at 9.59 p.m.