Cases of interest: August 2021

A summary of interesting or topical employment cases.

FMV v TZB [2021] NZSC 102

Supreme Court – Employment-related tort actions – Jurisdiction of the High Court – Operation of Employment Relations Act 2000, s 161(1)(r) 

At issue was whether the High Court had jurisdiction to hear an employee’s negligence action against an employer. The case concerned the interpretation of the “tort exception” in the Employment Relations Act 2000, s 161(1)(r) (external link) . This case is of interest because it changes the law on jurisdiction as stated by the Court of Appeal in JP Morgan Chase Bank NA v Lewis (JP Morgan): 

JP Morgan Chase Bank NA v Lewis [2015] NZCA 255 [PDF, 275KB] (external link)

The employee resigned after working for the employer for a year. Almost seven years later, the employee filed dual proceedings against the employer in the High Court and in the Employment Relations Authority (the Authority). In the High Court the employee claimed the employer negligently failed to protect her from harm. In the Authority the employee raised a personal grievance in relation to the same fact situation.

Initially the employee progressed only the claim in the Authority. However, after the Authority investigation was stayed, the employee sought to progress the High Court action.

The employer applied to strike out the High Court proceedings on the basis (see para 19):

  1. The Authority had exclusive jurisdiction in relation to the dispute between the parties.
  2. The claim was an abuse of process because it duplicated the employee’s personal grievance.

The High Court granted the strike out application. On appeal the Court of Appeal upheld the decision to strike out. The employee then appealed the Court of Appeal decision to the Supreme Court.

The appeal to the Supreme Court raised two questions (see para 25):

  1. Were the employee’s High Court claims “employment relationship problems”?
  2. If so, were they nevertheless excluded from the Authority’s jurisdiction by the tort exception in s 161(1)(r)?

In the Supreme Court, Winkelmann CJ and O’Regan and Williams JJ (the majority), in a joint judgment, dismissed the appeal. The majority held that if a claim “reflects a problem that relates to or arises from an employment relationship” it comes within the exclusive jurisdiction of the Authority, even if it could be framed another way. If a claim could be framed in terms of one or more of the examples in s 161(1)(a)–(qd), it must be brought before the Authority. If not, it is then a question of “whether the problem nevertheless relates to or arises out of an employment relationship” (see paras 94, 95, 127). In this case, as the employee’s tort action could be framed as a personal grievance it did not fall within the tort exception in s 161(1)(r) and came within the exclusive jurisdiction of the Authority (see para 134).

In taking the approach it did, the majority overturned the approach to jurisdiction under s 161(1) taken by the Court of Appeal in JP Morgan. JP Morgan held that whether a problem was an “employment relationship problem” and so under the exclusive jurisdiction of the Authority, depended on whether the problem “directly and essentially” concerned the employment relationship. According to JP Morgan, if the “essence” of a claim was not employment related the claim should not be regarded as within the Authority’s jurisdiction (see JP Morgan paras 95–97).

The majority rejected the “essence” approach in JP Morgan. The majority held the “essence” approach:

  • was too arbitrary (see paras 87, 91)
  • allowed parties to frame their pleadings so as to “plead their way out of the Authority’s distinctive jurisdiction” (see paras 90, 91)
  • was not consistent with the legislature’s choice “not to ground the Authority’s jurisdiction in the way claims might be pleaded or traditionally categorised” (see para 92)
  • invited “an inappropriately narrow inquiry in light of the broad language of the section” (see para 93).

Williams Young JJ in a minority judgment would have also dismissed the appeal, but for differing reasons (see paras 166–172). Glazebrook J, in dissent, would have allowed the appeal based on a “plain reading” of s 161(1)(r) (see paras 218–221).

FMV v TZB [2021] NZSC 102 [PDF, 390KB] (external link)  

20 District Health Boards v New Zealand Nurses Organisation [2021] NZEmpC 138

Employment Court –Employment Relations Act 2000, sch 1B – Code of good faith for public health sector – Industrial action by public sector health workers – Obligation to provide “life preserving services” – Operation of cl 12 of the Code 

The New Zealand Nurses Organisation (the union) proposed to take strike action while bargaining for a multi-employer collective agreement with 20 DHBs. Under the Code of good faith for public health sector (external link) (the Code), District Health Boards (DHBs) had an obligation to provide “life preserving services” (LPS) during any industrial action (cl 11 of the Code). Under cl 12 of the Code, if the DHBs were unable to provide LPS during the industrial action using only non-union members, the DHBs were obligated to request the agreement of the union and its members to help with providing LPS. The parties were required to negotiate in good faith and “make every reasonable effort” to agree on arrangements for LPS. 

The DHBs sought declarations to clarify:

  • the obligations that applied to the union and its members under cl 12 of the Code
  • the enforceability of LPS agreements made under cl 12.

The DHBs sought the following specific declarations (see para 26):

  1. An agreement entered into pursuant to cl 12(5) of the Code for the provision of an LPS agreement is legally binding and enforceable by way of a compliance order;
  2. A refusal to comzply with an LPS agreement entered into in accordance with cl 12(5) of the Code would amount to a breach of the Code, and of the duty of good faith under s 4 (external link) of the Employment Relations Act 2000 (the Act), in accordance with s 100D(4) (external link) of the Act; and
  3. The defendant’s refusal to enter into LPS agreements unless they contain a “best endeavours” qualification would be in breach of its obligation under cl 12(5) of the Code to “meet and negotiate in good faith and make every reasonable effort to agree on” (the matters provided for in cl 12(5)(a) to (c) of the Code). 

The Employment Court made instead the following declarations (see para 134):

  1. An agreement entered into pursuant to cl 12(5) of the Code for the provision of LPS is not enforceable as a contract.
  2. Refusal to comply with an LPS agreement entered into in accordance with cl 12(5) of the Code would not amount to a breach of the Code so that s 100D(4) of the Act would apply; it may fall for assessment as a breach of a s 4 duty via s 100D(2)(a) of the Act.
  3. A compliance order may be issued by the Authority under s 137(2) (external link) if there has been a non-observance of, or non-compliance with, the requirements of s 4, and if the Authority considers it appropriate to exercise its discretion under s 137(2) of the Act.
  4. A Union decision not to enter into an LPS agreement unless there is a “best endeavours” qualification in respect of the provision of LPS support by members, on the grounds that the Union could not properly determine for a member whether that person should participate in a legal strike, where the Union did not hold an authority from members to do so, could not amount to a breach of the Union’s obligation under cl 12(5) of the Code to meet and negotiate in good faith. 

20 District Health Boards v New Zealand Nurses Organisation [2021] NZEmpC 138 [PDF, 380KB] (external link)  

Labour Inspector v BF7 Trading Ltd [2021] NZERA 371

Employment Relations Authority – Penalties – Breach of Improvement Notice – Employment record-keeping breaches – Failure to provide compliant employment agreements 

At issue was what penalty the Authority should impose on the employer for breaching an Improvement Notice issued by a Labour Inspector. 

The employer was a recruitment agency specialising in the construction and engineering sectors. A Labour Inspector found the employer had:

  • breached employment record-keeping requirements
  • used employment agreements that contained unlawful deduction provisions and omitted some lawfully necessary information.

The Labour Inspector issued the employer with an Improvement Notice.

The Improvement Notice required the employer to rectify the breaches before the end of the next month. The Labour Inspector subsequently agreed to four extensions to the deadline. A year after the Labour Inspector issued the Improvement Notice the employer had still not provided evidence of compliance. The Labour Inspector sought a penalty against the employer under the Employment Relations Act 2000, s 223F (external link) and a compliance order to enforce the Improvement Notice.

The Authority issued a compliance order but reserved determining penalties (see Labour Inspector v BF7 Trading Ltd [2021] NZERA 275, para 10). The employer failed to meet the deadline for compliance set in the compliance order. This case determined the amount of penalties the Authority should award.

Labour Inspector v BF7 Trading Ltd [2021] NZERA 275 [PDF, 20KB] (external link)

The Authority considered the starting point for the penalty against the employer should be 40 per cent of the maximum penalty ($8,000). The starting penalty took into account that the failures identified in the Improvement Notice were “short comings in record keeping and documentation rather than specific instances of loss to identified workers”. It also took into account that the failures took place over a protracted period and the employer’s actions were deliberate (see paras 12–15).

The Authority determined the starting penalty of $8,000 should be uplifted to a final penalty of $10,000. The Authority considered an uplift to the starting penalty was warranted because the employer had been found liable for employment breaches by the Authority on eight previous occasions (see paras 19, 21). 

Labour Inspector v BF7 Trading Ltd [2021] NZERA 371 [PDF, 20KB] (external link)

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Page last revised: 16 September 2021

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