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Individual Employment Agreements Notes

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Individual Employment Agreements Revision

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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
­ 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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