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Disabled Persons Employment Promotion (Repeal and Related Matters) Bill
Government Bill
Explanatory Note
General policy statement
Overview
This Bill implements the Government’s policy as set out in Pathways to Inclusion by repealing the Disabled Persons Employment Promotion Act 1960 (the DPEP Act). This decision is consistent with the New Zealand Disability Strategy, and with the findings of the 2001 Vocational Services Review (as outlined in Pathways to Inclusion). By repealing the DPEP Act, the Government seeks to ensure that people with disabilities have the same employment conditions, rights, and entitlements as other New Zealanders (including minimum wage provisions for work of comparable productivity), and are therefore covered by all standard New Zealand employment minima. This Bill also amends the Minimum Wage Act 1983 to make the system for considering minimum wage exemption permits (formerly known as under-rate workers’ permits) more clearly focused and transparent. Under the proposed Bill, employment opportunities for people with disabilities in segregated (or partially segregated) settings will continue, but wages will be paid according to the work people do rather than the place where people work.
Act to be repealed
The DPEP Act provides that approved employers who operate sheltered workshops (providers or employers), and who employ people with disabilities, may be exempted from employment legislation. Under current policy, exemptions are granted only from the requirements of the Minimum Wage Act 1983 and (in most cases) the Holidays Act 2003. Providers are not exempted from any other employment or legal obligations. The proposed Bill allows for the phasing out of exemptions for current, legally approved providers over a transition period that began in 2001 and will expire on 1 July 2007 (the transition period). Legally approved providers are listed in Schedules 1 and 2 of the Disabled Persons Employment Promotion Order 2002.
Need for legislative reform
The DPEP Act does not fit with the Government’s approach to disability issues (as set out in the New Zealand Disability Strategy), which aims at achieving a fully inclusive society where people with disabilities have the same opportunities as other New Zealanders to participate in training, and employment, and to receive fair remuneration. The DPEP Act provides different employment conditions, rights, and entitlements for people with disabilities who work in sheltered workshops, regardless of their individual productivity. In addition, the DPEP Act—
– is not satisfactorily compliant with domestic and international human
rights legislation:
– blurs the lines between employment and other relationships that exist
between the provider/employer and the service user/employee:
– embodies outdated concepts about the ability, potential, and rights of
people with disabilities—concepts that are no longer appropriate or
acceptable:
– does not fit with government policy and strategies.
A range of legal and policy instruments remain to assist people employed in
segregated employment settings, including employment law, contract funding from government agencies, and the minimum wage exemption permit system under the Minimum Wage Act 1983.
Affected providers
Not all providers of vocational services, including (potentially) providers listed in Schedules 1 and 2 of the Disabled Persons Employment Promotion Order 2002, will be affected by this change. The change affects only those providers who have employment relationships with individuals who are employed in sheltered workshops. Providers who deliver services other than employment services (for example, community participation services) will not be affected by the enactment of this Bill. Providers who offer a mix of community participation and employment services will be affected only with respect to people they employ. Generally, affected providers receive government funding from the Ministryof Social Development, the Ministry of Health, or both. The repeal of the DPEP Act does not affect providers’ ability to seek or obtain government funding in the future.
Affected employees
Following enactment, all people with disabilities employed by affected providers will be covered by provisions of the Minimum Wage Act 1983 and of the Holidays Act 2003 (in addition to all other employment law and other law already applying, such as the Employment Relations Act 2000 (ERA) and the Health and Safety in Employment Amendment Act 2002). People with disabilities may have several types of relationship with a single provider, including that of an employee. When a person is not being employed by a provider, they may be using community participation services delivered by that (or another) provider. A Labour Inspector from the Employment Relations Service of the Department of Labour can help establish whether a person is in an employment relationship with their provider. As is the case currently, people with disabilities who are working in organisations covered by the DPEP Act may choose to seek employment in more inclusive employment options. The existing eligibility criteria for an Invalids Benefit will be retained for people with disabilities who are working in sheltered employment, pending review.
Employment relationships in segregated employment Whether individual employment relationships in segregated employment will continue to exist to be identified gradually over the transition period (which began in 2001 and expires 1 July 2007) and following the repeal of the DPEP Act. Providers should already have written employment agreements with people they employ, as the DPEP Act does not exempt providers from this or any other requirement under the ERA. In practice, not all providers may have written employment agreements. This may, in part, be because the lack of clarity about whether employment relationships exist in individual circumstances within some sheltered workshops. In some situations it may also be due to the fact that people with disabilities may have several types of relationship with a single provider. As a result, there may be a lack of clarity about the status of the different relationships that can exist between a service user/employee and provider/employer. Once the Bill has been enacted, any providers who have not yet made the necessary changes will receive direct assistance from Government. Officials will assist providers to identify individuals who are in employment relationships. Officials will provide guidance to both employers and employees on negotiating mutually acceptable written employment agreements, with individual or collective terms and conditions, including hours and wage levels (as per the ERA).
A new approach to employment
The Government recognises the diverse needs and aspirations of people withdisabilities, and the need to encourage a range of employment options to meet these needs and aspirations (New Zealand Disability Strategy, objective 4, action 4.8). A new approach to employment opportunities for people with disabilities, in organisations currently operating under the DPEP Act, is outlined in the communication document Pathways to Inclusion. The new policy approach is being implemented through both operational mechanisms (contracting practice) and legislative change (the Bill). The new approach includes the following elements:
– providers may offer community participation services, employment, or amix of both, but must meet employment standards for any employment relationships; and
– a revised minimum wage exemption permit system (amending an existingprovision under the Minimum Wage Act 1983) will ensure that, in cases where people with disabilities are working to capacity and cannot earn the minimum wage, wages are paid at the same rates as for work of comparable productivity.
Clause by clause analysis
Clause 1 is the Title clause.
Part 1
Preliminary provisions
Clause 2 is the commencement clause. The Bill comes into force on the dayafter the date on which it receives the Royal assent. Clause 3 provides that the Bill binds the Crown. Clause 4 states the purpose of the Bill. Clause 5 defines certain terms for the purposes of this Part.
Part 2
Repeal of Disabled Persons Employment Promotion Act 1960
Clause 6 repeals the Disabled Persons Employment Promotion Act 1960 (the Act). Clauses 7 to 10 are transitional and savings provisions arising from the repeal of the Act. Clause 7 provides that sections 3 to 5 of the Act (which relate to applications for approval of organisations, the power to grant exemptions, and the requirement of the Minister to consult with unions) continue in force until 30 June 2007 in respect of applications for approval of organisations received by the Minister before the commencement of this Part. Clause 8 provides that an exemption granted to an organisation listed in Schedule 1 or Schedule 2 of the Disabled Persons Employment Promotion Order 2002 (which is made pursuant to section 4 of the Act), continues in force until the exemption becomes void under section 3(3) of the Act or until 30 June 2007, whichever is earlier. Clause 9 provides that any nominal amounts derived by a disabled person from therapeutic activities undertaken in a sheltered workshop must continue to be treated as exempt income for the purpose of the Income Tax Act 1994. Clause 10 relates to the meaning of disabled person and sheltered workshop in section 2 of the Act. It provides that these terms continue to have the same meanings as set out in the Act for the purpose of any other enactment. Clause 11 consequentially repeals section 10(1)(a) of the Protection of Personal and Property Rights Act 1988.
Part 3
Minimum Wage Act 1983
Clause 12 provides that in this Part, the Minimum Wage Act 1983 is called theprincipal Act. Clause 13 substitutes new section 8 into the principal Act, which relates to minimum wage exemption permits issued by a Labour Inspector. Clause 14 adds new section 15 to the principal Act, which revokes the Minimum Wage Regulations 1946.
Regulatory impact and business compliance cost statement
Background
The majority of providers are small, local community-based organisations. There are a number of medium-sized organisations and one large nationally based organisation. Some sheltered workshops have only 6 individuals, others haveover 100. Sheltered workshops undertake a range of commercial activities, suchas producing goods for sale (for example, craft and sewing); manufacturing work (for example, woodwork and light engineering); contracts (for example, packaging and assembly); and services (for example, gardening, lawn mowing, and recycling).
Statement of nature and magnitude of problem and need for government action The DPEP Act allows employers operating sheltered workshops (approved places in which disabled people are employed) to be exempt from the Minimum Wage Act 1983 and the Holidays Act 2003. This means employers do not have to provideminimum wages or statutory holidays to any of the individuals they employ. There are several significant problems with the DPEP Act. It is notsatisfactorily compliant with human rights legislation; it leads to non-compliance with general employment law; it embodies outdated and inappropriate concepts about people with disabilities; and it does not fit with government policies and strategies (particularly the New Zealand Disability Strategy). The DPEP Act denies people with disabilities who work in sheltered workshops access to the same employment conditions, rights,and entitlements that other workers have. The DPEP Act provides that approved employers who operate shelteredworkshops (providers), and who employ people with disabilities, may be exempted from employment legislation. Under current policy, exemptions are granted only from the requirements of the Minimum Wage Act 1983 and, in most cases, the Holidays Act 2003. This means that individuals in sheltered work are not entitled to minimum wages (or to other provisions of the Minimum Wage Act 1983), no matter how hard they work or what their personal productivity is. These blanket exemptions are not satisfactorily compliant with domestic or international human rights legislation. At present, it is estimatedthat there are up to 3 714 people in sheltered workshops throughout thecountry. This is an estimated figure of people attending organisations covered by the DPEP Act based on actual attendance numbers provided to the Ministry of Social Development and the Ministry of Health. It is difficult to quantify the proportion of people within this group who are in an employment relationship with these organisations as these organisations provide a mix of services to this group of people, including therapeutic activities. These sheltered workshops are operated by 43 providers. Most people in sheltered workshopsreceive an average of $17 pay per week.
Statement of public policy objectives
The objective is to ensure that people who currently work in sheltered workshops have the same employment conditions, rights, and entitlements as everyone else, including minimum wage provisions for work of comparable productivity, and access to statutory holidays. The proposed reform will help achieve the public policy objective (objective 4) set out in the New Zealand Disability Strategy. The Government agreed to this objective as part of the New Zealand Disability Strategy in May 2001.
Statement of feasible options (regulatory or non-regulatory)that may constitute viable means for achieving desired objectives. There are no non-regulatory options to achieve the desired objectives. As long as the DPEP Act continues in force, there is no legal requirement for people in sheltered workshops to receive the same employment entitlements as other workers. Under the DPEP Act, providers have a blanket exemption from the requirements of the Minimum Wage Act 1983 and, in most cases, the Holidays Act 2003. It is not appropriate to retain the status quo as it does not achieve the policy objectives already outlined in the statement of public policy objectives above.
The preferred option is to repeal the DPEP Act. The changes as a result of the proposed repeal of the DPEP Act are being implemented over a transition period that began in 2001 and will expire on 30 June 2007. From September 2001, when the Government’s intention to repeal the DPEP Act was announced, providers have been able to comply voluntarily with the changes that would result from such a repeal. Once the Bill is enacted, compliance will be compulsory. The transition period is designed to manage potential risk to service provision. Over the transition period, providers will undertake a process to determine whether they are in an employment relationship with all or some of the people in their sheltered workshop or, alternatively, whether they are better placed to provide services that support the inclusion of people with disabilities in their communities (community participation services). Officials from the Ministry of Social Development and the Department of Labour are working closely with providers to assist them over the transition period. In place of the DPEP Act, individuals in sheltered workplaces will have access to a range of legal and other support (where appropriate), including employment law, assistance from government agencies, and the revised minimum wage exemption permit system available under the Minimum Wage Act 1983.
Increasing the employment opportunities for people with disabilities is a key part of the Government’s response to the Vocational Services Review. Furthermore, there is increased funding from Vote Social Development to support this aim secured in Budget 2002 (and out-years) to assist providers to make the changes that will be necessary as a result of the repeal of the DPEP Act.
Statement of net benefit of the proposal, including total regulatory costs (administrative, compliance, and economic costs) and benefits (including non-quantifiable benefits) of proposal, and other feasible options. Addressing the matters set out in the problem definition will require the repeal of the DPEP Act. The proposed Bill provides for a transition period for the changes to be made, and will affect some of the estimated 3 714 individuals in sheltered workshops, some of the 43 providers, and various government agencies. There may also be potential flow-on effects to other providers and stakeholders. The proposal expected, in particular, to benefit participants in sheltered work, but there is also an expected net benefit for the community.
The benefits of repealing the DPEP Act are assessed as follows:
– people with disabilities employed in sheltered workshops would be
entitled to the same employment conditions, rights, and entitlements as other
people, including minimum wages for work of comparable productivity:
– individuals in sheltered workshops will receive fair remuneration for the
work they do, and have entitlement to statutory holiday provisions:
– legislation that is not satisfactorily compliant with the Human Rights
Act 1993 and the New Zealand Bill of Rights Act 1990 would be removed:
– there would be significant action towards achieving objective 4 of the
New Zealand Disability Strategy:
– there would be increased transparency, consistency, and fairness in the
application of wage legislation for all workers.
There are costs associated with repealing the DPEP Act. These fall on government agencies and providers. Broadly, the direct costs to Government are from transition and management costs, costs of administering minimum wage exemption permits, and possible decreased employment opportunities. The direct costs to providers are because they will have to comply with the Minimum Wage Act 1983 and the Holidays Act 2003. Providers will also face some compliance costs. These are set out in the business compliance cost statement below and will be minimised and managed through the transition period. In some situations, some providers may face adjustment costs if they are not already compliant with existing employment law. The DPEP Act exempts providers from requirements under the Minimum Wage Act 1983 and (in most cases) the Holidays Act 2003. However, under current policy the Act does not exempt providers from any other employment or legal obligations, such as the requirement to have written employment agreements under the ERA. In part, adjustment costs may be due to the lack of clarity about whether employment relationships exist in particular cases. It is difficult to quantify the number of providers that this may affect. Providers will receive direct and ongoing assistance from officials to move to the new arrangements for their businesses.This will include the provision of information and other professional support.
The direct costs to the Government and providers as a result of the repeal of the DPEP Act have been identified and broadly estimated. In Budget 2002, money was allocated in 2002/03 and out-years to meet the direct costs arising from the repeal of the DPEP Act. It is intended that this funding will assist providers affected by the repeal of the DPEP Act to make the transition to the new employment environment.
Statement of consultation undertaken
The following agencies were consulted in the preparation of this Bill:
Accident Compensation Corporation
Department of Prime Minister and Cabinet
Inland Revenue Department
Ministry of Education
Ministry of Health
Ministry of Justice
Ministry of Pacific Island Affairs
Ministry of Social Development
Ministry of Women’s Affairs
Ministry of Youth Development
Office for Disability Issues
State Services Commission
Te Puni Kokiri
The Treasury.
Wide consultation with providers, consumers, stakeholder groups, and other members of the community, which included the New Zealand Council of Trades Unions, Business New Zealand, and the Human Rights Commission was undertaken as part of the Vocational Services Review and the preparation of the New Zealand Disability Strategy. Some providers have indicated concern that the new arrangements may place at risk current provision and may lead to some sheltered workshop closures. The repeal of the DPEP Act is, however, widely expected within the disability services sector. The transition strategy and direct communications are proposed to help manage this risk. The Ministry of Social Development and the Department of Labour are working closely with providers and service users over the transition period. Budget 2002 committed significant new funding (approximately $44 million over 4 years) to improve the quantity and quality of vocational services. The combined effect of this new funding and the transition period is to ensure minimum disruption to people in sheltered employment and an appropriate level of service.
Business compliance cost statement
Increased compliance costs for providers will include time spent understanding the proposed changes and training for staff so that they can implement employment standards for individual employees. Compliance costs will also include the setting up of new administrative procedures in relation to the Minimum Wage Act 1983 and Holidays Act 2003 requirements for those providers who were exempt under the DPEP Act. It is, however, difficult to quantify this cost, given that the reform will occur gradually over the transition period, and in most cases providers already have the administrative and other procedures necessary to support employment through their business operations.
A transition period is under way to mitigate and manage compliance costs forproviders. Mitigation strategies include providers retaining their current legislative exemptions until 1 July 2007. Providers will receive direct and ongoing assistance from government officials to develop their businesses to support employment, with specialist advisers and resources providing information, and other professional support. As part of this, Labour Inspectors and Ministry of Social Development officials will assist providers to minimise compliance costs.
Hon Ruth Dyson
Disabled Persons Employment Promotion (Repeal and Related Matters) Bill
Government Bill
Contents
1 Title
Part 1
Preliminary provisions
2 Commencement
3 Act binds the Crown
4 Purpose
5 Interpretation
Part 2
Repeal of Disabled Persons Employment Promotion Act 1960
6 Repeal
Transitional and savings provisions
7 Approval of organisations
8 Exempt organisations
9 Exemption from income tax
10 Meaning of disabled person and sheltered workshop
11 Consequential repeal
Part 3
Minimum Wage Act 1983
12 Minimum Wage Act 1983 called principal Act
13 New section 8 substituted
8 Minimum wage exemption permit
14 New section 15 added
15 Revocation
The Parliament of New Zealand enacts as follows:
1 Title
This Act is the Disabled Persons Employment Promotion (Repeal and Related
Matters) Act 2004.
Part 1
Preliminary provisions
2 Commencement
This Act comes into force on the day after the date on which it receives
the Royal assent.
3 Act binds the Crown
This Act binds the Crown.
4 Purpose
The purpose of this Act is to—
(a) repeal the Disabled Persons Employment Promotion Act 1960 (the Act);
and
(b) provide for matters arising from the repeal of the Act until the
expiry of the transitional period on 30 June 2007; and
(c) make related amendments to the Minimum Wage Act 1983.
5 Interpretation
In this Act,—
Act means the Disabled Persons Employment Promotion Act 1960
application for approval means an application by an organisation for
approval under section 3 of the Act
disabled person has the same meaning as in section 2 of the Act
sheltered workshop has the same meaning as in section 2 of the Act.
Part 2
Repeal of Disabled Persons Employment Promotion Act 1960
6 Repeal
The Disabled Persons Employment Promotion Act 1960 (1960 No 42) is
repealed.
Transitional and savings provisions
7 Approval of organisations
Despite the repeal of the Act, sections 3 to 5 of the Act continue in
force until 30 June 2007 in respect of applications for approval
received by the Minister before the commencement of this Act.
8 Exempt organisations
Despite the repeal of the Act, an exemption granted to an organisation
listed in Schedule 1 or Schedule 2 of the Disabled Persons Employment Promotion
Order 2002 continues in force until the earlier of—
(a) the exemption becoming void and of no effect under section 3(3) of
the Act; or
(b) 30 June 2007.
9 Exemption from income tax
Despite the repeal of the Act, any nominal amounts derived by a disabled
person from therapeutic activities undertaken in a sheltered workshop must
continue to be treated as exempt income for the purpose of section CB 6(a)(i)
of the Income Tax Act 1994.
10 Meaning of disabled person and sheltered workshop
(1) Despite the repeal of the Act, the terms disabled person and sheltered
workshop continue, for the purposes of any other enactment, to have the same
meanings as in section 2 of the Act.
(2) This section applies to avoid doubt.
11 Consequential repeal
Section 10(1)(a) of the Protection of Personal and Property Rights Act 1988
(1988 No 4) is consequentially repealed.
Part 3
Minimum Wage Act 1983
12 Minimum Wage Act 1983 called principal Act
In this Part, the Minimum Wage Act 1983
1983 No 115
is called “the principal Act”.
13 New section 8 substituted
The principal Act is amended by repealing section 8, and substituting the
following section:
“8 Minimum wage exemption permit
“(1) A Labour Inspector may issue a minimum wage exemption permit to a
worker if the Inspector is satisfied that—
“(a) the worker is significantly and demonstrably impaired by a disability
from carrying out the requirements of his or her work; and
“(b) any reasonable accommodations that could have been made to facilitate
carrying out the requirements of the work have been considered by the employer
and the worker; and
“(c) it is reasonable and appropriate to grant the permit.
“(2) A permit remains in force for the period stated in the permit.
“(3) While a permit remains in force, the rate of wages stated in the
permit is taken to be the minimum rate of wages prescribed under this Act for
the worker.
“(4) In this section, disability has the same meaning as in
section 21(1)(h) of the Human Rights Act 1993.”
14 New section 15 added
The principal Act is amended by adding the following section:
“15 Revocation
The Minimum Wage Regulations 1946 (SR 1946/36) are revoked.”