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Unfair bargaining

Unfair bargaining is when an employee is significantly disadvantaged when they are negotiating an individual employment agreement.

When negotiating a new individual employment agreement or a change to an existing agreement an employer must make sure that unfair bargaining does not take place.

The best way to avoid unfair bargaining is to ensure employees receive independent advice before signing an employment agreement.

Unfair bargaining happens when:

  • the employee is at a significant disadvantage
  • the employer knew, or ought to have known, about the circumstances leading to the disadvantage.

Significant disadvantage

An employee is significantly disadvantaged when:

  • the employee can’t understand the agreement or its implications properly because of their reduced ability due to:
    • age
    • sickness
    • mental or educational disability
    • a language barrier
    • emotional distress,

(these disadvantages may be cancelled out if the employee receives independent advice)

or

  • the employee reasonably relied on the incorrect advice of the employer, for example, when:
    • an employer tells the employee wrong information about the legal effect of the terms of the agreement. However, an employee cannot rely on the incorrect advice of the employer if they were experienced with contracts and had an opportunity to access legal advice.

or

  • was convinced to enter into the agreement by unfair means. Generally, this is when there’s an improper threat or pressure to such an extent that the employee’s free will and judgement is affected.

or

  • did not have the information or opportunity to ask for further advice about the agreement. For example, this might be when an employer demands that an employee signs the agreement shortly after reading it for the first time.

Making a claim for unfair bargaining

An employee can make a claim for unfair bargaining against an employer if they believe that they were significantly disadvantaged during negotiation.

Both parties should keep good records of:

  • the offer of employment
  • the employee’s acceptance of the terms of the agreement
  • any draft agreements
  • any correspondence surrounding the negotiations.

This will help an employee bring an unfair bargaining claim and help an employer to respond to it.

The parties should try first to resolve the problem through mediation. If this does not fix the problem, they can go to the Employment Relations Authority (ERA).

If the ERA find that unfair bargaining has happened, it can:

  • award financial compensation
  • cancel the employment agreement
  • vary the terms of the employment agreement.

If the parties have tried mediation and if the Employment Relations Authority (ERA) finds that unfair bargaining has happened, the ERA can award a penalty.

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