Common legal pitfalls in employment law

Eloise Callister-Baker and Gillian Service offer some valuable advice to help business owners understand, and deal with, their legal obligations as employers.

Staying on top of evolving employment law is essential to business operation. However, it can often fall by the wayside for a number of reasons – from being tighter on time and resources, to not having strong prior knowledge of the legal space.

If you are finding this a challenge as a business owner, rest assured that you’re not alone. In fact, when speaking with over 100 businesses, employment expert, SEEK found that almost half didn’t feel comfortable with their understanding of, or dealing with, legal issues as an employer.

SEEK’s research revealed that the top legal concerns for Kiwi employers include:

• Keeping up with and adhering to statutory obligations.
• Salary and compensation.
• Firing an employee.
• Interviewing new employees.

Developing your understanding of compliance and legal requirements can turn common legal concerns into day-to-day parts of your business operation. So here is some top line guidance to help you feel more comfortable on these common legal concerns.

Keeping up with and adhering to statutory obligations

It is the employer’s responsibility to ensure they keep up to date with the law and remain compliant. The Ministry of Business, Innovation and Employment’s (MBIE) Employment New Zealand website can be a helpful resource for employers seeking to understand their obligations.  The website includes a ‘news and updates’ section where employers can see alerts about the latest developments in the employment law space.

 If an employer is ever unsure about their obligations, they should seek legal advice.

Salary and compensation

An employee’s wages or salary must be paid in money.

New Zealand has a statutory minimum wage, which is the lowest rate of pay an employer can pay its employees (with limited exceptions). As at 1 April 2023, the minimum wage rates are:

• $22.70 per hour for adults; and
• $18.16 per hour for workers who are starting out or training.

If the employee is covered by a fair pay agreement, they will be entitled to be paid the higher of minimum wage and the minimum rate they are entitled to under the fair pay agreement.

There is no obligation on employers to increase an employee’s remuneration. However, an employer cannot decrease an employee’s remuneration without the employee’s agreement. Even where there is agreement, for a decrease to be effective, there will generally need to be a corresponding reduction in work or hours.

There are certain rules around how an employee is to be paid if their employer requires them to be available or ‘on call’ to work hours that are additional to their guaranteed hours. 

In these cases, the employee must have an availability provision in their employment agreement that, among other requirements, sets out reasonable compensation for the employee’s availability. Where an employee is paid a salary, it is possible for the employer and employee to agree that the salary includes this availability compensation.

Firing an employee

In New Zealand, an employer can only dismiss an employee ‘for cause’. This means the employer needs to have a justifiable reason for termination. Justifiable reasons include serious or repeated misconduct, sustained poor performance, medical incapacity or redundancy.

In addition, the employer needs to follow a fair and proper dismissal process. What this involves is:

• Proposing dismissal to the employee as a potential outcome in the process;
• Providing the employee with all information relevant to the proposal;
• Giving the employee the opportunity to provide feedback on the proposal;
• Inviting the employee to bring a support person or representative with them to the meeting to discuss the proposal;
• Genuinely considering the employee’s feedback and whether any reasonable alternatives to dismissal would be appropriate; and
• Communicating a final decision to the employee.

It is best practice to record this process in writing, although this is not required.

Interviewing new employees

A job applicant is not an employee until they accept an offer of employment. This means that employers do not have the same employer duties towards job applicants as they do towards their current employees.

However, employers who are looking to fill a role do still have obligations towards the people they interview.

One of the key obligations relates to privacy. When an employer asks questions during an interview, they are collecting the job applicant’s personal information. The employer will need to ensure it complies with the Privacy Act 2020 in respect of the collection, use, storage and disclosure of that information.

Employers who are interviewing will also need to keep in mind their obligations under anti-discrimination law. It is unlawful for an employer to ask any question of a job applicant that indicates, or could reasonably be understood as indicating, an intention to unlawfully discriminate against the job applicant. Examples of question topics that may be unlawful are questions about the job applicant’s age, sex, marital status, religious belief, employment status, family status or sexual orientation. 

Eloise Callister-Baker (pictured above) is a Senior Solicitor, and Gillian Service (pictured below) a Partner, at MinterEllisonRuddWatts.