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SME cleaners, caterers get exclusion from 'vulnerable worker' provision

Tuesday 30th October 2012

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Labour Minister Kate Wilkinson has granted an exemption to small and medium-sized cleaning, catering, orderly and laundry businesses from having to keep to 'vulnerable worker' provisions.

Cabinet yesterday signed off on the changes to Part A of the Employment Relations Act after a review found "significant operations issues around transferring employees' entitlements and information to the new employment," Wilkinson said in a statement. The review found larger businesses were better able to adapt to those provisions, and SMEs, which account for about a quarter of the affected industries, faced bigger proportional costs.

"That's why Cabinet has also agreed to exempt small and medium businesses - those with fewer than 20 employees - from the provisions of Part 6A where the SME is the incoming employer," she said. "Proposed amendments will fix these issues and provide more certainty and clarity for employers while at the same time protecting key benefits for affected employees."

The provision was introduced in 2006 by the previous administration, and meant low-paid workers couldn't have their pay and conditions cut or be replaced by cheaper contractors when a contract was re-tendered or a business sold.

The Department of Labour, now part of the Ministry of Business, Innovation and Employment, found that provision met its objectives in finding the right balance but was difficult to understand.

"The review has found that although this legislation seems overly complex and imposes costs on, and reduces flexibility for, some employers, the benefits of having special continuity of employment protections for certain workers outweigh these costs," the DoL said in its review.

"It appears from the available evidence that an appropriate balance of efficiency and equity is achieved through this legislation when compared with alternative approaches," the report said.

The report said smaller employers "face a greater level of risk in managing unknown financial liabilities they may incur in the transfer process."

The biggest bugbear for submitters was the inability of a new employer to apportion any employee entitlements to the outgoing business.

Other amendments include requiring an outgoing employer to pass on employees' information to the incoming employer, introducing a process to more easily apportion service-related entitlements and liabilities, require employees to decide on whether to join a new employer within five working days, and introduce penalties and compliance orders for breaching the provision.

The Department of Labour estimates some 5,500 people are covered by the provision, more than half of whom are in building and other industrial cleaning industries.

The tweak will be introduced with other changes to the act that were announced earlier this year and legislation will be introduced to Parliament later this year.

Business New Zealand chief executive Phil O'Reilly welcomed the proposed changes saying the provision had caused difficulties for companies operating in the specific industries.

"Requiring new contract operators to take on any staff working under the previous contract owner has been an unnecessary burden for a number of small businesses, and exempting businesses with fewer than 20 employees from this provision is a common-sense solution," O'Reilly said.

The Service and Food Workers Union panned the changes, saying it would give a competitive advantage to "cowboy" enterprises which could undercut their rivals.

"The reality is that the majority of employers in the industry are SMEs and this opens the door to massive exploitation of the lowest paid workers in New Zealand," national secretary John Ryall said.

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