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March 01, 2009

Small businesses and "fire at will"

Idiot/Savant at No Right Turn observes that the Employment Relations Amendment Act – the “fire at will” law that allows small businesses to sack employees within the first 90 days with no process and no reason – comes into force today, and advises, “If you have any sort of choice at all, I suggest not working for a small business.”

This is an obnoxious law, but this is terrible advice on how to respond to it.

Yes, there will be small businesses which abuse their employees by using this law to sack people because they fall sick or complain about discrimination or decline to work overtime, or just for no reason at all.

But many, many small businesses will want nothing to do with this kind of behaviour.  My own employer, Mindscape, is a small business – currently the two directors and me – and I find it inconceivable that we would use this law in an abusive way.  Wellington is a small town: word of abuse would spread almost instantly around our potential employee pool.  We want high-value people, and high-value people won’t waste their time on an employer if that employer has a reputation for screwing people around.  It’s bad, bad advice to suggest that people should choose an EDS or a Datacom over a Mindscape just because we’re covered by the “fire at will” law and the big companies aren’t.

Obviously, different businesses and different locations will be more or less affected by such considerations.  A small manufacturing shop in Auckland employing semi-skilled labour could get away with abuse for a far longer time than a software development shop in Wellington.  (Though it would be interesting to see if an “ERAA Watch”-type Web site a la NoCowboys could gain any traction in warning people about abusive employers.)  Nevertheless, small businesses tend on average to need higher-value employees, and these people often do have a choice of where to work, and will therefore choose an honest employer over one with a track record of abuse.  The mantra of “you don’t shit where you eat” remains an important one for businesses of all sizes.

Small businesses are a lot of fun to work for, much more than big businesses, and with plenty more opportunities for their employees.  I’d hate to see people put off working for great small businesses like Mindscape just because this obnoxious law gives free rein to the bad ones.  Better advice would be, “If you have any sort of choice at all, I suggest not working for an arsehole.”  And that applies no matter what the size of the business.

[Note: I usually don’t bother with this disclaimer because it’s bleedin’ obvious, but since I used the word “we” when talking about Mindscape I should probably make it clear that I am speaking only for myself, not for my employer.]

March 1, 2009 in Current Affairs | Permalink


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Why do you label it (more than once) as "obnoxious" law?

My impression is that it is the "take a bit more risk" bill, in that a small business owner is not threatened by expensive Employment Court settlements, if the person turns out to be "not as advertised" or incompetent or unreliable, despite your best efforts at finding all that out during the hiring stages.

It is not the "fire at will" bill. There still has to be reasonable grounds for letting the person go. And for the unions to threaten to picket small businesses that do so, legitimately, is just fear-mongering and intimidation. Welcome to the Mafia.

Put it this way. If you had a candidate for a job, who had a prison record for fraud, but during their home detention they had set out to become a software developer. No formal education, but by extensive reading and community involvement on the internet, they managed to learn C# and OO and patterns and then put those into practise in valuable open source contributions and profitable (and legal!) web ventures, would you hire them (assuming that they were the best of the pool of applicants)?

Posted by: David White at Mar 2, 2009 11:55:24 AM

Hi David,

I find the law obnoxious for two main reasons. First, it means a worker has no job security in those first 90 days. If I take a new job in October -- possibly turning down other offers in order to do so -- I'd like to have some confidence it will still be there in the run-up to Christmas. An abusive employer can use the threat of termination to force unreasonable conditions on employees -- and can then fire them anyway on day 89 so as to replace them with a new employee who can be similarly threatened. Second, it replaces sound contractual agreements with arbitrary "making it up as I go along" requirements. If it's important to an employer that employees be able to work overtime, then *put it in the contract*, don't fire the employee two months into the job for something you didn't tell him about when he took the job.

If the intent of the law is to make it easier to get rid of employees who are genuinely incompetent or unreliable -- an intent which nobody can argue with -- then the law should be written to do that: for example, to make the employment court process cheaper and faster (for both employer and employee). The ERAA seems more like those stop and search laws that they keep passing in the UK: the reasons given are laudable, but the actual law itself is far more general than those reasons, meaning it can become used for harassment or other abusive purposes. Making it easier for small businesses to take a punt on someone is laudable, but is better handled by well-written contracts and a streamlined dispute resolution process. That would protect employees from abuse, and employers from the mistaken perception of (or malicious claims of) abuse (because they could point to the contract clauses and the tribunal outcome).

Regarding your example, I would probably hire the fraudster subject to additional reference checks, and agree safeguards as part of the employment contract. The 90-day rule wouldn't actually help me here because (a) if I found him defrauding me I could fire him anyway, confident in the knowledge that the employment contract protected me, and (b) even the most bone-headed fraudster would have the nous to wait until day 91 before stealing the bank account password *grin*...

Posted by: Ivan at Mar 2, 2009 12:42:55 PM

Wellington is a small town. And yet...
I have helped women, through linuxchix and wellington girl geek dinners, to find new employment because their current employer was treating them like crap. Yet word doesn't get around, and those subjected to it keep it quiet.
You're in the same industry as me, and yet I'm fairly sure you don't know which companies are run by sexist jerks in this town.
I don't buy the argument that word will get around and therefore employers will play fair.

Posted by: Brenda at Mar 3, 2009 12:19:12 AM