Cases of interest: August 2019

A summary of interesting or topical employment cases

GD (Tauranga) Ltd v Price [2019] NZEmpC 101

Employment Court – Calculation of remuneration for Public Holidays, Alternative Holidays, Sick Leave and Bereavement Leave – Holidays Act 2003 – Relevant Daily Pay – Average Daily Pay

The employer had previously used the Average Daily Pay (ADP) calculation when paying its employees for public holidays, alternative holidays, sick leave or bereavement leave (other leave). The company changed its methodology to Relevant Daily Pay (RDP) due to variable monthly commission payments paid to its employees. The employees disputed the company’s ability to do so. 

RDP is defined in s 9(1) of the Holidays Act 2003 (external link) as the amount of pay an employee would have received had they worked on the day concerned. ADP is defined in s 9A (external link) as the employee’s gross earnings over the previous 52 weeks divided by the number of days the employee worked over that period. The legislation sets out when the ADP calculation is to be used:

9A Average daily pay

(1) An employer may use an employee’s average daily pay for the purposes of calculating payment for a public holiday, an alternative holiday, sick leave, bereavement leave, or family violence leave if—

(a) it is not possible or practicable to determine an employee’s relevant daily pay under section 9(1); or

(b) the employee’s daily pay varies within the pay period when the holiday or leave falls.

The case centred on the meaning of “may” in s 9A(1) (as emphasised above). The employer’s position was that “may” created an option they could elect to use if they wished.  On the other hand, the employees considered that the wording created an obligation on the employer to use ADP if either of the conditions applied.

The Court looked to the history of the legislation, including a speech made by the then Minister of Labour (see paras 28–32).  It found that Parliament intended to provide employers with the discretion to pay either ADP or RDP in the specified circumstances (see para 33). If RDP can be calculated, then the employer is able to use it as their method of calculating other leave, even if the daily pay is variable (see para 34). The employees did not have a claim arising from the change in calculation (see para 42).

This was considered a test case with potentially wide ramifications in the workplace, although the Court reiterated that the factual circumstances in each case would need to be considered (see para 12).

NZEmpC 101 GD (Tauranga) Ltd v Price — Employment Court of New Zealand (external link)

A Labour Inspector v Gill Pizza Ltd [2019] NZEmpC 110

Employment Court – Jurisdiction of Employment Court or Employment Relations Authority to decide whether workers are employees or contractors when Labour Inspectorate pursuing a claim for unpaid wages

The Labour Inspector was pursuing a claim for unpaid wages on behalf of pizza delivery drivers. The company claimed the drivers were not employees, but were independent contractors. The Court was asked to decide:

  • whether the Labour Inspector could ask the Employment Relations Authority (Authority) to determine whether the drivers were employees or contractors as a preliminary matter;  or
  • whether the Labour Inspector needed to get a declaration from the Employment Court that the drivers were employees before commencing proceedings in the Authority when the status of the workers is in dispute.

The Court noted that the powers of Labour Inspectors are both conferred and limited by the Employment Relations Act 2000 (‘Act’) (external link) Section 228 of the Act (external link) stipulates that a Labour Inspector may commence an action on behalf of an employee to recover monies payable by an employer under the Minimum Wage Act 1983 (external link) or the Holidays Act 2003 (external link) . The meaning of “employee” is defined in Section 6 of the Act (external link) . Section 6(5) provides that the court may, on application, declare whether a person is an employee. However, the jurisdiction of the Authority is listed in Section 161 of the Act (external link) and stipulates that the Authority has exclusive jurisdiction to make determinations on “matters about whether a person is an employee (not being matters arising on an application under section 6(5))”.

The Labour Inspector argued that Parliament was unlikely to have intended that the Inspectorate would have to:

(a) bear the cost and complexity of  having to seek a declaratory judgment from the court each time the status of vulnerable employees was in dispute; and then

(b) return to the Authority for a substantive determination,

when pursuing the minimum entitlements of vulnerable employees (see para 10).

The Court applied statutory interpretation principles to the issue.  It found that the Act enables Labour Inspectors to commence an action on behalf of “an employee”, which presupposes that employee status is not in issue (see para 13).  The Court held that Parliament had expressly conferred on the Court the statutory power to make the determination as to whether a person was an employee, not the Authority (see para 11).  It decided that s 161 did not restrict that power to only matters arising from an application made under s 6(5) (see para 14).

The Court rejected the Labour Inspector’s contention that it would unduly complicate proceedings to go to the Court first for a declaratory judgment.  It suggested that the Authority could either stay the application in the meantime, or remove the entire matter to the Court (see para 20).  The Court acknowledged that this process may “give rise to unmeritorious strategic manoeuvring by a limited number of employers” but remarked that such manipulation would not be welcome in the Court and may result in orders of increased costs (see para 22).

NZEmpC 110 A Labour Inspector v Gill Pizza Limited — Employment Court of New Zealand (external link)

Iaon v Scott Technology NZ Ltd [2019] NZCA 386

Court of Appeal – 90-day trial – Paying wages in lieu of notice

The employer dismissed the employee during a valid 90-day trial period. The employment agreement included a notice period clause that allowed either party to terminate the employment relationship by giving four weeks’ written notice to the other party. It stipulated that the employer may elect to pay the remaining balance of the notice period and not require the employee to work it out.

After a meeting to discuss the employee’s work performance, the employer handed the employee a letter indicating they had decided to terminate the employment relationship in accordance with the 90-day trial period provision, effective immediately (see para 7):

Your notice period, as outlined in your employment agreement, is four weeks however we have decided you will be paid in lieu of working out your notice period. Therefore, your effective last day of work is today.

The employee sought to raise a personal grievance for unjustified dismissal on the grounds that the employer paid him in lieu of work for the notice period. He considered the Employment Court had incorrectly interpreted the phrase “notice of the termination” in Section 67B of the Employment Relations Act 2000 (external link) . The section stipulates:

67B Effect of trial provision under section 67A

(1) This section applies if … [an] … employer terminates an employment agreement containing a trial provision under section 67A (external link) by giving the employee notice of the termination before the end of the trial period, whether the termination takes effect before, at, or after the end of the trial period.

(2) An employee whose employment agreement is terminated in accordance with subsection (1) may not bring a personal grievance or legal proceedings in respect of the dismissal.

The employee argued that “notice” meant more than advice of dismissal. It required specification of a future date on which termination will take effect. His position was that if the employee did not work during the notice period, that would amount to a summary dismissal (see para 24).

The Court of Appeal agreed with the Employment Court that the purpose of 90-day trial periods is to enable employers to assess an employee’s suitability for permanent employment. However, s 67B does remove employee protections and must therefore be interpreted strictly (see para 26).

The Court held that they did not consider Parliament intended “notice of the termination” to have a different, more restrictive meaning than it does in general law (see para 28). If a payment is simply an alternative to the employee being required to work out their notice period, then that is a termination on notice (see para 29). The Court dismissed the appeal, deciding that s 67B(1) of the Act applied to the termination of the employee’s employment (see para 31).

Appellate judgments 2019 — Employment Court of New Zealand (external link)

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