Last week, a select committee recommended that the Employment Relations (Termination of Employment by Agreement) Amendment Bill should proceed. This is a significant development for employers in New Zealand, and it’s important to understand what this proposed change could mean for your business.
Please note that it is not law yet.
What is the Termination by Agreement Bill?
The Bill proposes a new, more structured way for employers and employees to mutually agree to end an employment relationship. Currently, these arrangements, often called "without prejudice" exit negotiations, often happen in a legal grey area.
If passed, this Bill would introduce a formal, legally recognised process for "termination of employment by agreement."
What Would This Mean for Employers?
The goal of the Bill is to provide a clearer, more straightforward alternative to managing difficult employment situations, particularly where both employer and employee know that things are not going well. Here’s what it could mean for you:
- A Formalised Process: The Bill would establish a clear framework for initiating and finalising a mutual termination. This includes specific requirements for how the agreement must be documented.
- Protection from Future Claims: A properly executed termination by agreement would prevent the employee from bringing a personal grievance related to the end of their employment. This offers greater certainty for your business.
- A Requirement for Legal Advice: For an agreement to be valid, the employee must have received independent legal advice before signing. This is a critical step to ensure the process is fair and binding.
Why is This Important?
Navigating employee exits can be one of the most challenging aspects of running a business. A difficult termination process can be costly, time-consuming, and damaging to team morale.
This Bill aims to create a less adversarial path that protects both the employer and the employee, allowing both parties to move forward with clarity and confidence. It offers a practical and pragmatic alternative when it's clear the employment relationship is no longer working.
What Happens Next?
The Select Committee commented that the original Bill was poorly drafted and essentially rewrote it to make it workable and to add in some safeguards.
The Bill will now return to Parliament for its second reading. It is not yet law, and its final form could still change as it is further debated in the House.
We will continue to monitor the Bill's progress and provide you with clear, practical updates on what you need to know. Staying informed will help you prepare for any changes to your processes.
Do you have questions about how this might impact your business or current employment challenges? You don’t need to have all the answers—that’s what we’re here for. Contact us for a confidential chat.