Call 07 834 6000

Horse & Law - Issue 7 February 2014 - Employment Agreements - What Are They And Why Do You Need Them

21 February 2014

The equine industry is well known for entering transactions informally, often with little or no documentation. But employers in the equine industry could be running the gauntlet if they employ workers without a written and signed employment agreement, particularly if the employment relationship ends unhappily.

There are a number of legal reasons why an employer needs to ensure all employees receive, sign and return a copy of their individual employment agreement (‘IEA’).

Firstly, from 1 July 2011 it became law that all employers hold a signed employment agreement for every employee. An employer can potentially face legal action from a Labour Inspector which may result in a penalty if they fail to comply with this requirement. However, employment agreements are useful not just for avoiding penalties from the Labour Inspector. They provide evidence of what the parties intended their relationship to be based on from the outset and the standard of conduct expected, a founding document if you like.

In August 2013, the case of Hayter v Westbury Thoroughbreds Ltd t/a Westbury Stud [2013] NZERA Auckland 328 demonstrated just how useful formal documentation can be. Mr Hayter, Senior Stud Groom at Westbury, allegedly abused another employee while loading horses onto a transporter. The witness statements alleged that the abuse was in the form of an intimidatory threat of personal harm. Westbury not only had a signed employment agreement, but also had extensive documentation including House Rules and a Code of Conduct in place.

Mr Hayter was dismissed for serious misconduct and raised a personal grievance for unjustified dismissal. The case proceeded to the Employment Relations Authority (‘ERA’) where Mr Hayter claimed that the decision to dismiss him for this incident alone was an over-reaction on the part of Westbury. However, the ERA found in favour of Westbury. Crucially, the ERA held that “the code of conduct has a specific section relating to harassment which is defined so as to include all forms of harassment in the workplace and the house rules identify harassment of other employees as one of the actions constituting serious misconduct for which a penalty may be dismissal. So it follows that a finding that Mr Hayter had threatened Mr Wilson would equate to serious misconduct which could lead to summary dismissal.”

The mandatory elements of an employment agreement include the five ‘Ws’: who, what, where, when and wages. In other words, at minimum an IEA must state who the parties are, where the work is to be performed, what duties the employee is expected to do, the hours and days when the employee is expected to work and the wages they will be paid (usually expressed as an hourly rate or annual salary).

In addition to the five ‘Ws’, there are two further mandatory clauses to be included in an IEA. The first of these clauses is known as an Employee Protection Provision (‘EPP’) which basically lays out the procedure for dealing with employees should the business be sold. The second of these mandatory clauses explains the process for dealing with employment relationship problems and must inform the employee that if they wish to raise a personal grievance they have 90 days from the date of the matter that gave rise to the grievance or from the date that it came to their attention. Failure to hold either a signed IEA or an IEA that contains the latter clause may provide sufficient justification for the ERA to allow a grievance to be raised outside of the 90 day period.

As many employers have experienced, it can be difficult to get employees to sign and return their IEA. Many employees consider it unnecessary paper work and repeatedly forget to bring it back to work until eventually it is just forgotten about. Others are more deliberate with their memory lapses so that should the employer try to enforce an onerous term of the IEA further down the track, the employee can simply claim they have never seen or agreed to the term. Employers need to also be aware that if an employee’s IEA contains a trial period and the employee works even one hour prior to signing their IEA, the trial period is invalidated.

So how can employers overcome the problem of employees not signing and returning their IEA? Firstly, send out the IEA with a letter of offer at least a week in advance of the employee’s start date. The letter of offer should clearly state that the commencement date and the offer of employment itself are conditional on the employer receiving a signed copy of the IEA prior to the commencement date. If they turn up on the proposed start date and the IEA has not been returned, send them home and tell them their employment has not yet commenced. You may be surprised at how quickly the signed IEA is then returned.

The letter of offer should also state that the employee is encouraged to get independent advice before signing and indeed the IEA should be provided sufficiently in advance to demonstrate that such time was made available to them. Asking an employee to sign an IEA down at the stables on their first day of work clearly does not afford them the opportunity to seek independent advice prior to signing, even if the IEA contains a signed declaration by the employee saying that they did!

Once signed, the IEA can only be amended if both parties agree to it in writing. House Rules and Codes of Conduct, however, can be referred to as binding on an employee in the IEA but sit outside of the IEA itself and can be amended from time to time as an employer sees fit. If a new problem arises in the workplace that has not previously been considered, the House Rules can simply be amended to specify how it will be dealt with in future. However, employers must make sure employees are aware of any amendments and updates to these related documents.

Finally, it is relatively easy and inexpensive to have a standard IEA template set up for your business, with a one page schedule attached which is easily modified to reflect the different jobs, pay rates and hours for each employee. So the only question remaining is, why wouldn’t you do it?

 

Information in this article should not be a substitute for legal advice. With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters. You can find out more about us here.

The Norris Ward McKinnon Equine Team invites you to submit topics about Equine matters you would like more information on so that we may write pieces useful to you. Please email topics or questions to alice.nunn@nwm.co.nz.