Nine-day fortnight is fraught with legal hooks

The Dominion Post 14 March 2009

One of the ideas at the recent jobs summit was to have people work a nine-day fortnight. Prime Minister John Key this week announced the major details of how the Government will manage a nine-day working fortnight.

Such a proposal is fraught with legal fish hooks.

Legislation would certainly help employers to action the nine-day fortnight. A good starting point is the well known case of Hanlon v International Education Foundation.

Mr Hanlon was employed by the International Pacific College in Palmerston North. Mr Hanlon resigned from his position as vice- principal and filed proceedings in the Employment Court against his employer. The educational institution was Japanese-owned and directed and it is alleged that the employer brought in and applied at least some Japanese management techniques. One of the techniques Mr Hanlon claims was applied to him is known as "madogiwa-zoku", loosely translated as "window people". It seems people in some Japanese organisations who have been removed from active duty cannot be dismissed, because of a life-time employment expectation. Senior people are given desks in the most sought after positions - beside the window - but stripped of their duties and decision-making powers. Mr Hanlon said that he was given this treatment, and his role as vice-principal was taken from him. He resigned and claimed he was constructively dismissed.

We have a line of cases that say an employee has the right to work, and in particular that the employer has the obligation to provide the employee with work in accordance with their contract. So there are legal difficulties if an employer were to employ someone for ten days and only give them nine days' work.

The aim of a nine-day fortnight is that the employer only pays nine days' pay but keeps more people in work. The alternative is to make some people redundant and have the remainder of the workforce working a ten-day fortnight.

One way out is for the Government to pay the wages on the tenth day. The Government has said that it will pay employers $12.50 an hour per worker for up to five hours a fortnight. The critical thing is that the employer and employee have to negotiate a voluntary agreement to reduce the hours of work to a nine-day fortnight. Workers on the scheme cannot be made redundant.

The scheme is only available to businesses with more than 100 employees so most establishments will miss out. It is available for up to ten employees for each averted redundancy.

The scheme will be available for up to six months, to give the company time to restructure its operation and workforce, or until demand increases. There will be no extension to the six months, as it is not intended for the scheme to permanently protect weak companies.

The difficulty with the scheme is that it requires both employer and employee consent.

Workplaces may opt in, in return for a promise not to make workers involved in the scheme redundant. This may motivate workers to agree to the scheme, as their employment is protected during their involvement in the scheme.

The requirement that the workers be involved in training on the tenth day has been dropped. However, it has been indicated that training options will be made available to workers who opt in.

The Government is hopeful that up to 20,000 to 25,000 workers would be able to be retained in employment under the scheme.

Another difficulty will be that the economic recession is likely to need a sharper response from the private sector to cope with any drop in income for a business. To have to negotiate worker by worker for a scheme that saves one day's wages may be too slow for an employer, and the savings too little.

The Government could have introduced legislation to enable employers to force people to change to the scheme where redundancies were likely, but the scheme is voluntary. That may be both its strength and its weakness.

It is a strength because people will not be fearful that they are going to have the scheme forced upon them and an income drop.

It is a weakness because the alternative, to make people redundant and lose all income, will be the more attractive option for many employers.

The proposal is still a positive contribution to help soften the bleak world economic reality.

Peter Cullen is a partner at Cullen - the Employment Law Firm

Email: peter@cullenlaw.co.nz