A worker leaving your organisation can pose a significant risk. To avoid any legal or financial issues, it’s important to handle the situation carefully and adhere to labour laws and regulations.
Employers need to make sure they follow a fair process, which usually means giving notice as stated in the employment agreement, unless the dismissal is due to serious misconduct. If the issue is serious misconduct, the employee can be dismissed immediately, without notice.
There must always be a valid reason for the dismissal, such as the employee’s performance, behaviour, or genuine redundancy. An employee has the right to challenge the decision if they believe their dismissal was unfair. This highlights how crucial it is for employers to stick to legal standards throughout the dismissal process.
Under the Employment Relations Act 2000, an employee can file a personal grievance claim if they believe they have been unjustifiably dismissed by their employer. To dismiss an employee fairly, the employer needs solid evidence and must follow a fair process. This means the employee should be given a chance to respond to any accusations before a final decision is made.
If an employee thinks they were unfairly dismissed, they should file a complaint with their employer within 90 days. If they miss this deadline, they might lose their right to make the complaint, unless the employer agrees to extend the time, or the Employment Relations Authority allows it for special reasons.
An unfair dismissal occurs if the process isn’t handled fairly or if there is no good reason related to the employee’s behaviour, ability, or business needs.
Dismissal following an absence usually pertains to a situation where an employee has stopped attending work without explanation, which could be considered job abandonment.
The employer must handle such circumstances cautiously, ensuring there are fair grounds and that a reasonable process is followed for dismissal. It is legal, under specific situations, to dismiss an employee for an unexplained absence. However, it requires that the unexplained absence amount to the employee abandoning their employment.
If an employee provides a reasonable explanation upon their return or communicates effectively during their absence, dismissal may not be justified.
The required notice period for employment termination depends on what’s stipulated in the employment agreement between the employer and employee. However, if the employment agreement does not specify a notice period, a ‘reasonable notice’ must be given. In New Zealand, a two-week notice period is generally seen as fair and reasonable.
However, what is fair and reasonable can depend on several factors, such as the role of the employee, the level of seniority, the time it might take to replace the employee, and industry norms.
In some cases, two to four weeks’ notice might be considered fair and reasonable. It is always best to refer to the employment agreement or consult with HR to understand the obligations for a particular role or company.
This helps both the employer and the employee adjust to changes. The employer has time to get ready for the employee’s departure, while the employee has time to find a new job. It’s important that the notice periods are clear and agreed upon to end the employment relationship respectfully and professionally.
Any employee subjected to redundancy must be given notice and paid for the duration of this notice period unless there is a mutual agreement to waive it. This allows for arrangements such as an employee leaving earlier upon securing new employment. While working through the notice period can be mandated by the employer, there might also be negotiations to agree otherwise.
There is no legal entitlement to redundancy pay unless it is specified in your employment agreement. If the employment agreement includes a clause relating to redundancy pay, the employer must adhere to the terms outlined in that agreement. These redundancy clauses typically cover the procedural steps and the redundancy pay employees are entitled to receive.
Both trial and probationary periods are used as means for employers to assess new employees, but they serve distinct purposes and come with different legal implications.
A trial period is specifically designed to allow an employer to assess the suitability of a new employee for a role. It can last up to the first 90 days of employment and is only applicable to employees who have not previously been employed by the employer.
One of the key aspects of a trial period is that during this time, an employer can dismiss an employee without the employee being able to bring a personal grievance claim for unjustified dismissal, though other legal rights remain intact.
On the other hand, a probationary period is used for a similar purpose of assessing a new employee’s performance but is different in that it can last for an agreed length of time and start at any point during the employment. It is not limited to the initial 90 days and can be applied not just to new employees, but also to existing employees who have taken up a new position within the same organisation. Unlike the trial period, the detailed conditions and expected outcomes of probationary periods are usually more thoroughly outlined in the employment agreement.
While there is flexibility in the duration of a probationary period, it is customary practice for these periods to range from three to six months, depending on what is agreed upon in the employment agreement.
In essence, while both types of periods aim to evaluate new employees, trial periods offer employers a more specific, legally defined framework for the initial stages of employment, typically with less recourse for the employee in case of dismissal during this period. Probationary periods, however, provide a broader, more flexible framework for assessing employee performance and fit over a potentially longer duration, and with different legal implications regarding dismissals and grievances.
Employers need to have a valid reason for dismissal and must give the necessary notice as stated in the employment agreement, unless the termination is related to serious misconduct, in which case the employee may be asked to leave immediately.
Valid reasons for the termination of employment in New Zealand can include misconduct, either serious or repeated, performance issues, incompatibility, incapacity, and redundancy. Employers can’t fire employees for unfair reasons, like discrimination or because the employee made a complaint about the employer.
Typically, a fair employment termination process involves conducting a thorough investigation into the issues, giving the employee an opportunity to respond to any allegations of wrongdoing, considering their explanation, and providing the employee with support during any disciplinary or dismissal processes, including the right to have a representative or support person accompany them during meetings.
If the employee believes the dismissal was unjustified, they have the right to raise a personal grievance with their employer, and, if necessary, elevate the matter to the Employment Relations Authority for mediation and resolution.
Upon termination of employment, an employee is entitled to be paid for any annual leave that they have accrued but not taken. This payment should be included in their final pay.
The final pay, which includes compensation for unused annual holidays, must be provided to the employee on or before the pay day for the final pay period, which might occasionally be after the employee’s last day of work. Essentially, the employer is required to settle all dues, including payment for all hours worked since the last pay until the end of employment, besides the accrued leave payment.
Depending on the employee’s type of superannuation fund, the handling of superannuation can vary when employment terminates due to resignation, dismissal, or redundancy.
For KiwiSaver, which is a voluntary, work-based savings initiative in New Zealand, the employee’s account remains with the option to contribute independently or through a new employer.
The handling of these contributions upon termination depends on the policies of the specific superannuation or KiwiSaver scheme and the terms of the employment agreement. Typically, an employee’s fund should already account for their own contributions to their KiwiSaver or other superannuation funds. Employer contributions would cease upon termination, with the final contribution being processed along with the final pay, if applicable.
Post-termination restraints are enforceable, but their validity depends heavily on whether the restriction is considered reasonably necessary to protect the legitimate proprietary interests of the employer.
These legitimate interests might include protecting trade secrets, sensitive commercial information, and client relationships. The enforceability of such restraints is determined on a case-by-case basis, considering factors like the nature of the employment, the seniority of the employee, and the geographical and time limits set on the restraint.
Non-compete clauses are allowed, but they’re closely examined to make sure they’re fair. These clauses need to be reasonable for both the parties involved and the public. If a non-compete clause is too restrictive, it might be considered illegal.
While non-compete agreements can be a part of employment contracts, the specific conditions such as duration, geographic scope, and the nature of the restrictions need to be carefully considered to ensure they are justly protecting the legitimate business interests of the employer without unfairly restricting an individual’s ability to work in their field or start a business post-employment.
The law permits customer non-solicitation clauses, provided they balance the interests of the employer and the employee.
These clauses should only cover what is necessary to protect the business, not excessively restricting the employee’s ability to find employment or continue their work.
Employee non-solicitation clauses are allowed in New Zealand. These clauses aim to prevent former employees from soliciting their ex-employer’s staff, which could potentially result in the loss of staff to competitors or harm the ex-employer’s business operations.
Like other restrictive covenants, to be enforceable, non-solicitation clauses must be reasonable regarding time, geographical area, and scope. They must balance protecting the legitimate business interests of the employer with the employee’s right to use their skills and experience to work.
The courts in New Zealand will consider the nature of the employer’s interest in enforcing a non-solicitation clause, as well as whether the clause’s scope is no more than reasonably necessary to protect those interests. The courts will not uphold a non-solicitation clause that is considered to be overly restrictive or not serving a legitimate business purpose.
Certain entitlements and obligations can be waived upon termination, as part of a mutual agreement between the employer and employee.
One common instance where a waiver may come into play is regarding the notice period. For example, an employment agreement might state a required notice period that either the employee or employer must give if they decide to terminate the employment. However, both parties can agree to waive this notice period. This could happen if an employee wishes to leave immediately for a new job opportunity or if the employer prefers the employee not to work through their notice period.
Another example is the waiver of certain claims against the employer. When employment ends, it’s common for an employee to be offered a termination or severance package in exchange for agreeing to waive any further claims against the employer, such as personal grievances or any legal action related to their employment. This is typically formalised in a settlement agreement, also known as a record of settlement, which, once signed by both parties and, if necessary, approved by the Employment Relations Authority, becomes full and final. However, it’s crucial that both parties enter into such waivers voluntarily, fully informed of their rights, ideally with legal advice.
However, not all rights can be waived. Employees cannot waive their right to minimum statutory entitlements under New Zealand’s employment laws, such as minimum wage, annual holidays, and sick leave. In addition, a waiver of the right to file a personal grievance for unjustified dismissal, disadvantage, or discrimination must be carefully considered and subject to strict legal scrutiny to ensure it does not undermine the employee’s rights or imply duress.
Meanwhile, redundancy situations may involve specific waivers, particularly in terms of managing the notice period or waiving the rights to seek redeployment within the organisation. Such waivers are also subject to negotiation and must respect the minimum statutory rights of employees.
When a business or part of it transitions through an asset and goodwill purchase, individuals’ employment does not automatically continue with the new owner. Instead, employees must agree to a transfer to the acquiring entity, giving them some degree of choice in their employment future during such corporate restructuring efforts.
In addition, the rights of the affected employees include being consulted about the transfer and its implications as required by Employment Protection Provisions in the Employment Relations Act 2000. This consultation process includes providing information to the employees and their union if applicable, considering their input on the transfer, and discussing the potential effects on the current terms and conditions of employment.
On the other hand, in scenarios of a business acquisition via a share purchase, the employment relationships remain intact and unchanged. This means that for employees, it’s as if the company has not changed, providing a layer of employment security throughout the transition. Meanwhile, when a business is sold or transferred, employees may have their entitlements (such as annual leave) negotiated to be transferred to the new employer, depending on the agreement between the outgoing (vendor) and the incoming (purchaser) employer.
There are different ways an employment contract can come to an end. But whatever the situation, you need to understand the rules that cover the end of employment in New Zealand — or you could end up facing legal issues.
Our solutions ensure your business is protected from risks when a relationship with a worker comes to an end — whatever the reason. We can also help you to avoid missed opportunities by re-deploying talent where possible.
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