Cases of Interest: April 2020

A summary of interesting or topical employment cases.

Dillon v Tullycrine Ltd [2020] NZEmpC 52

Employment Court – Employment status – Family businesses – Whether family member helping with business is an employee 

The plaintiff helped out in an agistment business operating out of a farm property owned by his son and daughter-in-law. The parties all lived together on the property from which the agistment business was run.  The son and daughter-in-law worked professionally elsewhere, outside of the business. The son and daughter-in-law provided the plaintiff and his wife with free accommodation and other support, including a car, power and internet. The plaintiff was not explicitly paid for his work in the business. The business generated minimal income and was not economically successful. 

After the relationship between the plaintiff and his son and daughter-in-law broke down, the plaintiff raised a personal grievance in the Authority, claiming he should have been paid for his work in the agistment business. The Employment Relations Authority (the Authority) found he was not an employee and so had no standing to bring a claim; the Authority found the relationship between the plaintiff and his son and daughter-in-law was more in the nature of a family partnership. 

The Employment Court (the Court) affirmed the determination of the Authority that the plaintiff was not in an employee/employer relationship. In coming to this decision, the Court took into account the following factors:

  • the business arrangement was always based on their familial relationship (see para 39);
  • the business arrangement was beneficial to the lifestyle of all family members (see para 40);
  • the plaintiff’s son did not exercise control over the plaintiff in the way an employer would (see paras 44 and 45);
  • for the first seven years the business was in operation there was never a suggestion that the arrangement was anything other than a family arrangement (see para 47).

Dillon v Tullycrine Ltd [2020] NZEmpC 52 [PDF 280KB] (external link)  

Innovative Landscapes (2015) Ltd v Popkin [2020] NZEmpC 40

Employment Court – Unjustified dismissal – Redundancy – Compensation under s 123(1)(c)(i) – Assessing quantum – Whether financial circumstances of company relevant 

The employee was dismissed for redundancy. The Authority found the dismissal was substantively justified, but the employer had used an unjustified process to carry out the redundancy. The Authority awarded the employee $15,000 under s 123(1)(c)(i) (external link) of the Employment Relations Act 2000 (the Act) for distress caused by the redundancy process. The employer challenged the award of $15,000 on the basis the Authority wrongly disregarded the financial circumstances of the employer. 

The Court found that the financial circumstances of the employer should not be taken into account when assessing the amount of compensation to award under s 123(1)(c)(i) (external link) . In coming to that decision the Court took into account that s 123 (external link) provides a mechanism for an employer to pay in instalments if the employer’s financial situation requires it. The Court held that given the provision of a mechanism for paying by instalments, “a broader, unspecified mechanism should not be read into [the section]” (see paras 26–28).

The Court found this was reinforced by s 124 (external link) which expressly enables the Court to reduce an award where the employee has contributed to a personal grievance and s 133A (external link) which enables the Court to take an employer’s ability to pay into account in setting a penalty. The Court concluded if Parliament had intended the Court to take into account the financial circumstances of the employer in assessing the quantum of compensation “it likely would have said so” (see para 29). The Court also considered that allowing compensation to be reduced due to the financial circumstances of the employer would be contrary to the purpose of s 123 (external link) , which is to remedy a breach (see para 32). 

Innovative Landscapes (2015) Ltd v Popkin [2020] NZEmpC 40 [PDF 400KB] (external link)  

JCE v Department of Corrections [2020] NZEmpC 46

Employment Court – Failure to provide safe workplace – Remedies – Whether Authority should have awarded remedies for both breach of contract and unjustified disadvantage 

The employee took medical retirement from his job as a corrections officer, after he was assaulted at work and became unable to work. After leaving work, the employee was diagnosed as suffering from PTSD and depression due to the assault.  The employee claimed in the Authority that he was unjustifiably disadvantaged when his employer failed to take all reasonable steps to provide a safe workplace; and that he was unjustifiably dismissed when he took medical retirement. The employee also sought damages for breach of contract in relation to the same facts. 

The Authority found the employee was unjustifiably disadvantaged by the failure to provide a safe workplace, but was not unjustifiably dismissed. The Authority awarded the employee $30,000 for humiliation, loss of dignity and injury to his feelings under the s 123(1)(c)(i) (external link) of the Act for the disadvantage claim, but did not make a separate assessment of damages for breach of contract. 

The Court found the Authority erred at law “by not separately calculating and quantifying the amount of damages for breach of contract and the personal grievance claim” (see paras 63 and 89). The Court found the Authority could have followed the approach in Davis v Portage Licensing Trust (external link) [2006] ERNZ 268 (EmpC) (Davis), in which the Court assessed damages for breach of contract; then assessed compensation for a personal grievance in relation to the same facts; and then finally made an overall judgment as to the amount of compensation warranted (see para 63).

Applying the approach in Davis, the Court assessed damages for breach of contract at $65,000. It then considered an award of $30,000 would be justified for the personal grievance arising from the same conduct. The Court held that, making an overall judgment, an award for the personal grievance was not required, “because [the $30,000] is effectively subsumed into the contractual damages” (see paras 68 and 90). The Court ordered the employer to pay the employee $65,000 damages for breach of contract (see para 90).  

JCE v Department of Corrections [2020] NZEmpC 46 [PDF 320KB] (external link)  

Labour Inspector v Matangi Berry Farm Ltd [2020] NZEmpC 43

Employment Court – Assessment of penalties – Minimum wage, Holiday pay and record keeping breaches – Personal liability of director 

An issue in this case was the extent to which the sole director of a company should be liable for breaches of minimum employment standards as a person involved in the breaches. In an earlier proceeding, the Court found the employer owed employees over $40,000 in wages and holiday pay; had breached the Minimum Wage Act 1983 (external link) ; failed to keep wages, time and holiday and leave records in respect of 207 workers; and failed to provide employment agreements to the same workers. By the time of this proceeding the arrears owing to workers had been paid. 

The Court found the sole director personally liable for $40,800 in penalties (in addition to the company having to pay $86,400 in penalties) (see para 93). In arriving at these penalties, the Court took into account that the breaches were not intentional and were based on ignorance arising from the director’s inability to speak English; the amount of arrears owing to each employee was small; liability and arrears issues were resolved at mediation; the defendants paid the arrears and had no previous history of breaches; and the defendants were in difficult financial circumstances. 

Labour Inspector v Matangi Berry Farm Ltd [2020] NZEmpC 43 [PDF 420KB] (external link)  

Maritime Union of New Zealand Inc v ISO Ltd [2020] NZEmpC 49

Employment Court – Standing of union to represent non-members — Standing of union to seek compliance order on behalf of non-members 

The union wished to seek a compliance order against the employer, requiring the employer to make the terms of an employee’s individual employment agreement comply with ss 67D (external link) , 67E (external link) and 67F (external link) of the Act.  The union had an interest in the issue because of problems it was having negotiating a collective agreement in the workplace, after a competing union accepted terms that did not comply with ss 67D–67F. The employer sought to strike out the application on the basis the union had no standing to represent an employee on an individual employment agreement. 

The Court agreed to strike out the union as a party.  The Court found the union could not apply for a compliance order because it had not “been affected by non-observance or non-compliance” as required under s 137(4)(a) (external link) of the Act. The Court found having an interest in the case as a tool to assist in collective bargaining was not sufficient (see paras 26–31).   

Maritime Union of New Zealand Inc v ISO Ltd [2020] NZEmpC 49 [PDF 280KB] (external link)

Metropolitan Glass & Glazing Ltd [2020] NZEmpC 39

Employment Court – Holidays Act 2003, s 14 – Meaning of “gross earnings” – Whether discretionary bonuses part of “gross earnings” for purposes of calculating holiday pay

Employment Court – Compulsory closedown periods – Employees not entitled to annual leave – Application of Holidays Act 2003, ss 34 and 35 

This case addressed the follow issues relating to the calculation of holiday pay:

i) whether payments under a “short-term incentive scheme” (STI scheme) operated by the employer should be included in gross earnings, for the purpose of calculating holiday pay under s 14 (external link) of the Holidays Act 2003 (the HA);

ii) in relation to closedown periods:

a) the correct calculation of holiday pay under s 34 (external link) of the HA for an employee not entitled to annual holidays; and

b) when the period of 12 months service under s 35 (external link) begins for an employee not entitled to annual holidays .

Under the STI scheme, if employees met certain objectives, they could be paid bonuses, at the discretion of the employer — there was no guarantee a bonus would be paid, even if employees did meet the objectives. The employees were invited to join the scheme via a letter. The letter explicitly stated that the STI scheme was not a term and condition of the employees’ employment agreements. In exchange for entering the scheme, employees agree to extend their restraint of trade. 

The employer claimed that as any payments under the STI scheme were discretionary and the employer was not bound to pay them under the employees’ employment agreements, the payments did not come under the definition of “gross earnings” under s 14 (external link) of the HA; as such, the payments did not have to be taken into account when calculating holiday pay. 

The Court held the payments under the STI scheme did come under the definition of “gross earnings” in s 14 (external link) (see para 39). The Court held the STI scheme was included in the reference to “productivity or incentive-based payments” in subpara (a)(iv) of the definition of “gross earnings” (see para 26). The Court held the STI scheme did not come under the exception for “discretionary payments” in s 14(b)(i). The Court found the legislative history of the definition of “discretionary payments” in s 5 (external link) indicated the definition was not intended to capture bonus systems such as the STI (see paras 27–38). 

The Court also rejected restricting the meaning of “employment agreement” to include only the written employment agreement (see para 23). The Court held that a policy or scheme could also be inferred into the employment agreement, where the circumstances indicated the parties must have intended the policy or scheme to have contractual force. In this case, the fact that the employees agreed to extend their restraint of trade as a condition of entering the scheme showed the STI scheme was intended to have contractual force (see paras 23–25). 

In relation to the interpretation of s 34 (external link) and s 35 (external link) , with respect to compulsory closedowns and employees not entitled to annual holidays, the Court held the interpretation should be as follows (see para 67):

a) employees who, at the beginning of a closedown period, are not entitled to annual holidays must be paid the eight per cent of gross earnings required by s 34(2);

b) their service is then treated as starting on the date on which the closedown begins (s 35(1));

c) to the extent the employer and employee agree, leave also can be taken in advance for some or all of the closedown period (s 34(4)). 

Metropolitan Glass & Glazing Ltd [2020] NZEmpC 39 [PDF 280KB] (external link)  

O’Boyle v McCue [2020] NZEmpC 51

Employment Court – Evidence – Medical records – Whether disclosure of medical records “injurious to public interest” 

The employee was successful in a claim in the Authority for remedies for unjustified disadvantage and unjustified constructive dismissal. The employer sought a de novo challenge of the proceedings in the Court. In anticipation of the de novo challenge the employer served a notice on the employee requiring her to provide medical records concerning treatment for mental health conditions in the 12 month period prior to the employee’s resignation. The defendant objected to disclosing the relevant documents, under reg 44(3)(c) (external link) of the Employment Court Regulations 2000, on the basis it would be “injurious to the public interest for disclosure to occur” (see para 14). 

The Court held that although the Court was not subject to the Evidence Act 2006 (the EA), when considering whether to allow disclosure of confidential information it was appropriate to apply a balancing act similar to that spelled out in s 69 (external link) of the EA (see para 33). The Court held that any assessment must necessarily be fact specific (see para 42). 

The Court upheld the employee’s objection to the disclosure of medical records (see para 61). The Court held that in this case, the tenuous link between the employee’s medical information and her dismissal had to be weighed against the public interest in doctor/patient confidentiality (see paras 54). The Court found that the public interest in maintaining the confidentiality of the patient/doctor relationship “far outweighed” any public interest in disclosure of the information (see para 57). The Court was not satisfied that any information disclosed would be relevant to the circumstances of the employee’s resignation (see paras 58–60).  

O’Boyle v McCue [2020] NZEmpC 51 [PDF 300KB] (external link)

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