Sleight of Hand

With 90 day trials, the government has broken its decades-long bargain with workers

by Harry Johnson

New Zealand workers have been cheated by the introduction and extension of 90 day trials in the workplace. In 1973, workers were given the statutory right of access to personal grievance procedures in exchange for a reduction in their right to strike. The government has now reneged on its obligation to provide this access with respect to new workers, in relation to unjustifiable dismissals.

In its comprehensive review of industrial relations in 1983, the Department of Labour stated: ‘The strike is the traditional means by which workers may demonstrate their collective strength. It is common in democratic countries, and is generally viewed as an integral part of the right of workers and their organisations to defend their interests.’ This right is supported by the International Labour Organisation.

New Zealand Governments have nevertheless acted on various occasions to reduce the need and the right to strike – largely justifying this on the basis of concern over disruption to economic activity, and for the sake of fairness. The latter relates to concern that unrestrained industrial action leads to outcomes that favour the powerful, rather than outcomes that are necessarily just. In exchange for the right to take industrial action, successive governments have instead provided various procedures for settling differences – and also the mediators, conciliators and adjudicators who seek to ensure that these procedures work.

In relation to disputes over workplace dismissals, this exchange effectively took place in 1973 with the enactment of the Industrial Relations Act. Alan Geare notes in The System of Industrial Relations in New Zealand that the trade-off reflected a growing interest over the preceding decade in American models of industrial relations. He also notes the impact of an increase in anxiety over economic performance that had been marked by a rise in unemployment in the late 1960s.

The first attempt to implement a statutory procedure to cover dismissals was made in 1970 in an amendment to the Industrial Conciliation and Arbitration Act. However, the definition of dismissals was regarded as incomplete, and the provision consequently failed. The clarity of a full definition was subsequently provided in the Industrial Relations Act. The Industrial Conciliation and Arbitration Amendment Act also left the Minister of Labour with a final decision to stop industrial action over dismissals if it occurred, and to compel the parties to follow a required procedure. The Industrial Relations Act prohibited industrial action in relation to grievances outright.

All the subsequent major changes to our framework industrial relations legislation (the Labour Relations Act 1987, State Sector Act 1988, Employment Contracts Act 1991, and Employment Relations Act 2000) have generally embedded the trade-off. The most significant changes for personal grievance procedures involved the shifts from compulsory to voluntary union membership. The initial shift applied briefly in 1983 and then became a permanent feature with the enactment of the Employment Contracts Act.

The changes resulted in the establishment of statutory procedures that could operate independently of the involvement of unions and thus cover non-union workers. The general procedures were also applied to state servants on the enactment of State Sector Act.

The sea change in this general experience has come with the current government. Within days of coming to office in 2009, it provided small employers and their employees with the right to agree to allow the dismissal of employees inside the first 90 days of employment without providing a reason. The Minister of Labour explained the measure as a response to ‘current challenging economic times’ and the need to increase the willingness of employers to take on new staff. The government argued that the measure would allow small employers – burdened by a lack of human resource management capacity – to employ workers, particularly from ‘specific groups at risk’, without having to consider bearing the cost of fighting personal grievance actions.

Clearly, there was an assumption here that new employees (despite the costs to themselves) were in the habit of indulging in personal grievance actions against their employers that had no foundation. The groups at risk were identified as persons with criminal records, migrants, and new entrants to the workforce. There was also irony in that the historical provision of personal grievance procedures was triggered by concern over poor national economic performance. The same reason has now been used to justify the un-picking of the legislative provision.

The provision has now been extended to all employers, although it is clear that many larger employers have the managerial capacity to deal competently with employment relations obligations and problems. The State Services Commission has also quickly responded to the extension with an instruction that government agencies ensure that all new collective agreements contain the provision for the 90 days trials. The necessity for this is hardly clear in that the provision was ostensibly designed to allow employers to take risks to employ more staff. In addition, the move might well be seen to be at odds with the government claim that the provision would only be adopted with the free choice of employees.

In fact, the universal extension of the 90 day trial and the State Services Commission action beg the question as to where this might all end. Erling Rasmussen in Employment Relations in New Zealand notes the longstanding interest of some New Zealand business groups in a permanent condition of ‘employment-at-will’ applicable to all workers, and that this is indeed the general reality of employment ‘for many American workers’.

The recent changes have of course, been opposed. The blatant injustice of the reduction of the right to make a case against an unfair action before a mediator or an adjudicator has been the primary objection. Opponents have also noted that employment agreements are often offered on a ‘take it or leave it’ basis with no effective option for workers not to agree to 90 day trials, and that those primarily affected by the adverse changes are the most vulnerable in the workforce.

Other objections include: there is no reliable evidence that the provisions will, or have increased, employment. Arguably, the opportunity to dismiss without reason aids only bad employers, and the effect may well be that the labour market may tighten because (a) immigrant workers may be discouraged from coming to New Zealand and (b) workers in general may be reluctant to change jobs because of the increased insecurity of new employment.

The particular point of this article is to add a historical dimension to these objections. In essence, workers gave up the right to strike as their final defence against bad employers who unfairly sack their workers, in return for access to a fair judicial procedure. In doing so, they paid a price for the procedure and in a sense obtained a proprietary right in relation to the procedure. The government has abused its power in ignoring this right. Redress in like kind would now entail the full restoration of the right to strike. For most however, the immediate goal will simply be the fair restoration of the procedure for all.

For the moment, it is all looking very much like a crooked three thimble game – a rigged procedure where after all the shuffling, the fast hand movements and the distractions, you find that the workers’ pea, which had been under one of the thimbles, has vanished altogether.