Changing Employment Agreement Terms in New Zealand
An employment agreement, which is a legally binding contract between an employer and an employee, sets out the terms and conditions of employment. Any changes to the terms of this agreement typically require a specific process to ensure fairness and compliance with New Zealand employment law.
Requirement for Mutual Agreement
Generally, the terms of an individual employment agreement cannot be changed without the mutual agreement of both the employer and the employee [Source: Employment Relations Act 2000, s 63(1)]. This means that an employer cannot unilaterally impose changes to an employee's core terms and conditions, such as pay, hours, duties, or location, unless the agreement itself provides for such changes and the employee has consented to that clause.
The Duty of Good Faith
All parties involved in an employment relationship are bound by a duty of good faith [Source: Employment Relations Act 2000, s 4(1)]. This duty applies when considering any proposed changes to an employment agreement. Good faith requires that employers:
- Are active and constructive in establishing and maintaining a productive employment relationship [Source: Employment Relations Act 2000, s 4(1A)(a)].
- Are responsive and communicative [Source: Employment Relations Act 2000, s 4(1A)(b)].
- Provide relevant information to the employee [Source: Employment Relations Act 2000, s 4(1A)(c)(i)].
- Give the employee a reasonable opportunity to consider the information and provide feedback [Source: Employment Relations Act 2000, s 4(1A)(c)(ii)].
- Consider the employee's feedback [Source: Employment Relations Act 2000, s 4(1A)(c)(iii)].
- Do not do anything, directly or indirectly, to mislead or deceive the employee [Source: Employment Relations Act 2000, s 4(1A)(d)].
Process for Changing Terms
When an employer proposes to change an employment agreement, they must follow a fair and reasonable process that adheres to the duty of good faith. This typically involves:
- Providing Information: The employer must provide the employee with all relevant information about the proposed changes, including the reasons for the changes and their potential impacts.
- Consultation: The employee must be given a genuine opportunity to discuss the proposed changes, ask questions, and provide their feedback or alternative suggestions.
- Opportunity for Advice: The employee should be given a reasonable amount of time to consider the proposed changes and to seek independent advice, such as legal or union advice, before making a decision.
- Consideration of Feedback: The employer must genuinely consider any feedback provided by the employee.
- Agreement in Writing: If an agreement is reached, any variation to an individual employment agreement must be recorded in writing [Source: Employment Relations Act 2000, s 64(1)].
Unilateral Changes and Personal Grievances
An employer generally cannot force an employee to accept changes to their employment agreement. If an employer attempts to unilaterally change an employee's terms and conditions without agreement, or by failing to follow a fair process, the employee may be able to raise a personal grievance. A personal grievance is a complaint an employee can make about an action by their employer that has negatively affected their employment [Source: Employment Relations Act 2000, s 103]. Grounds for a personal grievance can include an unjustified disadvantage to the employee in their employment [Source: Employment Relations Act 2000, s 103(1)(b)].
If an employee does not agree to a proposed change, the employer cannot simply implement it. Doing so could be considered an unjustified disadvantage or, in some cases, a constructive dismissal if the employee resigns as a result of the employer's actions.
Changes to Collective Agreements
For employees covered by a collective employment agreement, variations to the agreement are typically negotiated between the employer and the union representing the employees. A collective agreement has a specified term, usually not exceeding 3 years [Source: Employment Relations Act 2000, s 55(1)]. A collective agreement may be varied at any time by agreement of the parties to it [Source: Employment Relations Act 2000, s 56(1)].
When to Seek Independent Legal Advice
If you are an employer considering changing employment terms or an employee faced with proposed changes to your employment agreement, it is recommended to seek independent legal advice. Community Law Centres across New Zealand offer free legal assistance, or you can consult a private employment lawyer or your union representative.