Individual Employment Agreements Notes

Law Notes > LAWS 363 Employment Law Notes

This is an extract of our Individual Employment Agreements document, which we sell as part of our LAWS 363 Employment Law Notes collection written by the top tier of University Of Canterbury students.

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The regime under the ECA 1991 gave little recourse for the courts to look into IEAs unless the contract was harsh or oppressive. There was deference to party autonomy. Key sections:
s 10 ECA - presumption of equal bargaining power.
S 18 ECA - requirement of contracts in writing only if requested by EE.
S 25 ECA any breach of bargaining provisions in ECA would not make contract illegal or unenforceable.
S 57 ECA - Courts could only look into IEAs if harsh/oppressive. Tucker Wool Processors v Harrison - NZCA said that the spirit of the ECA was for "take it or leave it" contracts. Principal of Auckland College v Hagg - held lawful to rely on revolving fixed term agreements, allowing ERs to rule out holidays and other rights required for continuous service EEs. Part 6 ERA contains rules for IEAs developed in response of concerns under the ECA regime and the, now, statutorily recognised inherent inequality of bargaining power (s 3). It has now been noted that the whole thrust of the ERA is to protect EEs from abuse (Warwick Henderson Gallery v Weston) Requirements in Section 63A - ERs must:
(2)(a) supply a copy of the IEA to EEs,
(2)(b) advise them that they can seek independent advice
(2)(c) give a reasonable opportunity to seek independent advice,
(2)(d) consider and respond to issues raised by the EE
BUT this does not go as far as requiring negotiation, it is simply consultation. Section 65 = IEAs should be in writing and the wage rate and job description should be included. Section 66 = if ER wants a fixed term contract the reasons must be genuine and written. Section 67 = probationary periods must be in writing. Section 67A = requirements for a trial period must be met and in writing. Probationary versus trial period: Trial Period Gives ER 90 days to terminate without reason.

TP is unenforceable unless in agreement and given prior to commencement of work. There must be an explanation of the TP in the IEA. Including that they are statutorily barred from grievances for unjustified dismissal.

Probationary Period EE can only be dismissed with good reason. The period exists to notify the EE that they are under extra scrutiny. ER must give good training and feedback. There is no specified time period. Probationary periods must still be in writing (s 67).

Section 63A provides the ONLY avenue for challenges to unlawful precontractual behaviour. The HRA and PA93 have their own dispute settlement mechanisms. Section 60A notes that GF applies when in employment. IEA standards are lower than for collective bargaining, for 2 reasons:
encourage collective bargaining.
Ease compliance costs with small employers (who typically use IEAs). B - Negotiation: the applicable principles 9

Section 63A: Bargaining for individual employment agreement or individual terms and conditions in employment agreement. National Distribution Union v General Distributors - ER unilaterally offered to pay IEA staff a pay increase similar to that given to the union (CEA). IEA staff were asked to accept or reject, or approach managers if they had a problem. The court warned that this was close to being a 'take it or leave it' scenario, but the opportunity to approach managers meant it met the s 63A requirement to respond to issues raised by EEs. Williams v Chesterton Group - EC found a breach of s 63A when an IEA was given too late and the company failed to address matters raised by the EE. The EE had drafted an alternative that the ER had not even considered (damages awarded for $4500). The Wellesley v Adsett - issue was whether A was permanent or casual in absence of written agreement. Other staff believed he was permanent but he was paid more than other staff. A's hours had been reduced to the point that he was effectively terminated. EC held that A's belief that he was a permanent staff member was reasonable and that the ER had acted unsatisfactorily given that they hadn't followed s 63A. $1000 awarded for failing to set out agreement in writing. Goddard CJ has said that s 63A is a serious obligation and not just a technicality (Varney v Tasman Regional Sports Trust). Failure to provide an agreement or details about wages and hours in the context of a young employee was a serious breach of s 63A (Xu v McIntosh). Breach of s 63A does not make contract illegal or unenforceable: Olsen v CHH - existing EE involved in restructuring was offered a new position. CHH admitted breach of s 63A, arguing that this made the IEA unenforceable. HELD: failure to meet s 63A didn't affect O's employment and she could bring a PG. Section 63A(7) covers "prospective employees" which is wider than those intending to work as defined in s 5 ("a person who has been offered and accepted, work as an EE") - so you can apply for breach even if you have not been offered work (nobody ever does). C - Application of Good Faith PreEmployment Generally GF doesn't apply preemployment but a CL requirement to not mislead/deceive may apply. Murray v AG - 2 plaintiffs hired by IRD after saying that they didn't have criminal convictions. At the time they knew they were being investigated (but not charged) for fraud. Convicted after being employed then dismissed. HELD that there was no duty of GF preemployment BUT only after concluding agreement. Material misrepresentation can lead to cancellation under s 7 Contractual Remedies Act 1979: Skywards Catering v ApthorpHall - EC held that right to cancel under CRA1979 is something that an ER can use when basing a dismissal on preemployment representation. S 7 CRA can arise if: 1) parties must agree expressly or impliedly that the truth of the representation was essential. 2) the misrepresentation substantially reduces the benefit of the contract to the party relying on it - harder to prove. Imperial Enterprises v Attwood - ER cannot rely on CRA to avoid contract where the misrepresentation arises from a question which breaches the HRA. In this case the EE had not disclosed medical problems that were not relevant to the job. Section 12 Fair Trading Act 1986 may apply. Sinclair v Webb & McCormick Ltd - Barker J held that s 12 FTA covers 2 situations: 10

1) where an EE is told that a term means something that it doesn't. 2) where EE is mislead as to the nature/extent of duties. ANZ v Svensson - Compliance with s 63A normally removes the possibility of a s 12 FTA application because the presence of written agreement removes likelihood of EE being mislead. The absence of a written agreement does not mean that the employment relationship is invalid (Warwick Henderson Gallery). D) Unfair Bargaining Section 68: bargaining for an IEA is unfair if a party to the agreement has known or ought to have known about circumstances leading to diminished capacity e.g. age, sickness, mental disability, a disability relating to communication, or emotional distress (subs(2)(a)). Or Subs(2)(b) the person relied on the "skill care or advice" of the first party, or (2)(c) is induced by "oppressive means, undue influence, or duress" or (2)(d) didn't have the chance to get independent advice under s 63A ERA. Oppressive means is something more than imbalance, to the point of being unjustifiability onerous. It may be severe, cruel or merciless (Tucker Wool Processors v Harrison). Oppressive means includes gaining an unfair advantage by an unconscientious use of power, used by a stronger party over a weaker party, by unfair or improper conduct, coercion from the outside, overreaching, cheating, and generally some personal advantage is gained - but not always. (Contractors Bonding v Snee) Duress is coercion of the will so as to vitiate consent (Moyes & Groves v Radiation NZ Ltd). NZ Dairy Workers Union v NZMP Ltd - EC held s 68 was breached by an arrangement between ER and union to deduct a bargaining agent's fee from wages of nonunion member EEs. ER said that if the non
union EEs didn't agree they would not get a pay increase or improvement in conditions. This part was later overruled but only because of a lack of evidence. Mazengarb has noted that this is where you would expect a challenge (if ever) to a s 63A breach and a failure to seek independent advice. E) Statutory Requirements as to Content Section 65(2) - an IEA must not contain anything contrary to law or inconsistent with the ERA. The Minimum Code - EEs entitlements to holidays, minimum wages or parental leave. There is a prohibition on preference because somebody is/not a member of a union (s 9(2)). Reasonable reasons must be given if an ER wants to rely on a fixed term agreement (s 66). See notes on page 9 regarding trial and probationary period requirements.

F) Statutory Requirements as to Form Section 65 requirements:
Must be in writing but does not require a signature (collective agreements do require signatures).
Requires names of ER and EE 11

A description of the work to be performed by the EE. An indication of where the work is to be performed. An indication of the arrangements as to the times that EE is to work. Wages or salary payable to the EE. A plain language explanation as to dispute resolution under the ERA.

Terson Industries v Lodger - a range of clauses were held to be unlawful, including one that tried to exclude an EE's right to defend an injunction brought by the ER. Warwick Henderson Gallery v Weston - W went from part time to full time work and wanted to be paid commission. WHG wouldn't pay commission without W signing a written agreement. CA held that the fact that the IEA was not in writing didn't render it unenforceable and that W was entitled to commission. Therefore failure to comply with s 63A requirements will not invalidate IEA (per s 63A(4)) because the ERA is designed to protect EEs. Designlink Ltd v Raymond - suggests that some oral variations to IEA may be enforceable, but here the variation concerned the identity of the ER, which was too fundamental to vary orally on the facts, and the written agreement stood. "Verbal Formation of an Employment Agreement" - author made the mistake of not distinguishing between verbal and oral. "The moral of the story? Put everything in writing or beware!"
There are 2 parts to an IEA: (1) forming IEA; (2) terms and conditions of employment - only latter requires writing.
"there are no specific or essential terms that must be present" before an IEA is formed.
EC has recognised fours points to form IEA: (1) an explicit offer in that both parties know a job is offered (not just an invitation to treat or something less than an offer); (2) do not need agreement over every 'essential term'. There is "a minimum of formality" but communicated acceptance of the offer is required; (3) intention to enter into a legally binding contract; (4) consideration is not normally an issue.
Courts will "give effect to the agreement and not defeat the parties' intention by allowing them to rely on technicalities."
More detail given on: the offer, legislative minimum, ER's conduct, ordinary practice, conditional offers, acceptance, No acceptance, EE's conduct
Timing can be important and EEs should be advised to "accept an offer of employment as presented then attempt to negotiate all other terms and conditions after employment is secured."
To avoid unintended employment put everything in writing. G) Operation of Individual Employment Agreements If there is no relevant collective agreement then there is free negotiation. Section 61 - if there is a relevant collective agreement then when the EE starts work they are covered by it for the first 30 days. The ER has a duty to show the EE the collective agreement (ss6263). If the EE then joins the union then the collective agreement applies. There is nothing to stop one adding additional terms to the collective agreement provided they do not conflict with it. We now look at selected implied terms: TC, fidelity, confidentiality and the ER's duty to provide a safe working environment. i) Trust and confidence Mahmoud v BCCI - Lord Stein talked about implied terms and said that they may be modified or excluded by express terms. In NZ it is impossible to contract out of the health and safety term as it is statutory, what about TC?

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