In April 2016, the Government amended the Employment Relations Act to get rid of “zero hour” contracts – the sort of contracts that required the employee to be available for work, but did not obligate the employer to offer any guaranteed hours.

Following the amendment an employer may still retain some degree of flexibility by including in the employment agreement an “availability provision”, which deals with a period for which an employee is required to be available beyond their guaranteed hours. An availability provision will set out:

• the agreed hours of work;
• the number of guaranteed hours of work;
• the days of the week on which work is to be performed;
• the start and finish times of work; and
• any flexibility in days of week or start and finish times.

The employer must have genuine reasons based on reasonable grounds for using the availability provision. Factors the employer will have to take into account will include:

• whether the employer could practically meet business demands for the work to be performed by the employee without including an availability provision;
• the number of hours for which the employee would be required to be available; and
• the proportion of the hours to the agreed hours of work. 

[In the Fraser case (see below) the Employment Court has said these reasons should be in writing in the employment agreement otherwise the availability provision is not enforceable]

The availability provision must provide for the payment of reasonable compensation to the employee for making himself or herself available to perform. Factors the employer must take into account in setting the level of compensation will include:

• the number of hours for which the employee is required to be available;
• the proportion of the hours to the agreed hours of work;
• the nature of any restrictions resulting from the availability provision;
• the rate of payment under the employment agreement for the work for which the employee is available; and
• if the employee is remunerated by way of salary, the amount of the salary.

In Fraser v McDonald’s Restaurants (New Zealand) Limited [2017] NZEmpC 95, the Employment Court considered McDonald’s individual employment agreements in which employees are guaranteed 80% security of their weekly capped hours, based on an average of the previously fixed quarter’s worked hours (there is a calculation for new employees who have not worked a full fixed quarter). 

McDonalds also created an ability to schedule staff beyond those guaranteed hours due to varying customer demand. Under the individual employment agreement and a brochure/pamphlet explaining employment conditions, there was a process for the employee to follow if they could not work those additional hours, including a fair notice period for refusal.  There was also a process if they were concerned about scheduling. 

The plaintiff’s case was that McDonalds had effectively created a right for itself to require an employee to accept any work scheduled and that the rostering scheme forced workers to take on employment beyond the guaranteed hours.  In particular, given that the minimum hours were calculated on the previous quarter, the plaintiff argued that workers were compelled to accept shifts otherwise they would see their minimum hours reduced.  The plaintiff also argued that the emphasis on the importance of the flexibility of the employee disproportionately advantaged the employer and lacked the mutuality of obligations one hoped to see in the employment relationship.

The Court did not accept these arguments.  It held held that the McDonalds clauses were not availability provisions:

• The extra hours were not compulsory and an employee could decline to work them.  There was a genuine consensus process.
• If employees meet their agreed minimum hours each quarter, their minimum hours would not reduce; and
• In this case, flexibility was a two way street which also suited many of the employees who were students or transitory workers.

Two points of note:

• If using an availability provision, this needs to be carefully worded in the employment agreement to meet the statutory obligations
• If there is not an availability provision, the law does not require guaranteed hours.  Parties to an employment agreement can set out mutually agreed rostered hours. 

                                                                                                Kathryn Dalziel

If you have any questions or would like further advice about this decision, please get in touch with us.