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Cases of interest: December 2019

A summary of interesting or topical employment cases.

Chief Executive of the Department of Corrections v JCE [2019] NZEmpC 195

Employment Court – Application to strike out proceeding – Abuse of process – Whether challenge is moot – Non-de novo challenge – Declaration

At issue was whether a challenge proceeding can be struck out for having no practical effect on the parties.

The employee, a corrections officer, was assaulted in 2012 while working in a part of the Otago Corrections Facility called J wing. The employee successfully pursued a personal grievance for unjustified action causing him an unjustified disadvantage and claims for failing to meet an implied contractual duty and statutory duty to provide a safe workplace. The department was ordered to pay him lost remuneration and compensation for humiliation, loss of dignity and injury to feelings (see para 3). The Employment Relations Authority had concluded that the employer had not met the staffing ratios for corrections officers, and that the employee was alone when there should have been two officers available (see para 5).

The employer challenged the determination only on a discrete point about the Authority’s findings relating to staffing requirements and the Authority’s analysis regarding the employer’s departmental documents, collectively described as User Guides. The employee applied to strike out the employer’s challenge on the basis that: (see para 12)

(a) the challenge is moot because the outcome will have no practical effect on the parties before the Court; and

(b) there are no circumstances that would allow a challenge that is otherwise moot to be permitted to proceed.

The employer opposed the strike out application.

The Court struck out the proceeding on the basis that the proceeding was moot and that there were no grounds to exercise the discretion to allow it to continue and be heard (see para [40]). The Court considered that even if there were an issue of public importance, it should not put the employee a position where he is still interested in the proceeding.

Chief Executive of the Department of Corrections v JCE [2019] NZEmpC 195 — Employment Court of New Zealand (external link)

Labour Inspector v Newzealand Fusion International Ltd [2019] NZEmpC 181

Employment Court – Premium for employment paid overseas – Minimum Wage Act 1983 – Holidays Act 2003 – Penalty – Declaration of breach – Banning order

At issue were: whether the workers were employees, the payment of minimum wage, holiday pay, whether the director of the employer company was a person involved in the breaches, declaration, penalties, banning orders, and whether a premium for employment paid overseas can be taken into consideration in the apportionment of penalties.

Newzealand Fusion International Ltd (the employer) owned a holiday park in Reporoa, and used social media to attract two individuals living in China to work at the park. The individuals were asked to sign employment agreements in China. The employer also sought and received payment of CNY 200,000 (around NZD 45,000), as bonds for employment.

Upon arrival in Auckland, the individuals were transported to the holiday park in Reporoa and began working immediately. They worked seven days a week and received no pay over several months. Both returned to China in distressed states, but neither was repaid their bonds. A Chinese journalist working in New Zealand learned of the situation and made a complaint to the Labour Inspector. During the investigation, a third individual was discovered working in a similar position.

The Court found that the three individuals were employees and did not receive minimum employment entitlements. It also found that Shenshen Guan, director of the company was a person involved in the breaches, and that the breaches were serious.  The Court made declarations of breach against the Employer and Ms Guan (see para 31).

The Court commented on Mehta v Elliot [2003] 1 ERNZ 451 (EmpC) which stated that the payment of a premium for employment overseas is outside the jurisdiction of New Zealand employment legislation (see para 85). While the Court accepted Mehta, and the Labour Inspector did not seek repayment orders, it exercised its broad equity and good conscience jurisdiction under s 189 of the Employment Relations Act 2000 to reflect the amounts paid for the bond in the apportionment of penalties (see paras 86 and 88).

The Court found breaches of the minimum entitlement provisions in the Minimum Wage Act 1983, and the minimum entitlements and payments under the Holidays Act 2003. In respect of these breaches the following orders were made (see paras 109–115):

  • declarations of breach against both the employer and Ms Guan as a person involved in the breach; and
  • pecuniary penalties in the sum of $300,000 against the employer, and $150,000 against Ms Guan, a total of $450,000, of which $100,000 will be paid to each employee, and the remaining $150,000 paid to the Crown; and
  • compensation orders against the employer consisting of $69,500, $69,000, and $91,850, to the employees, which include unpaid wages, holiday pay and compensation for non-pecuniary loss; and
  • banning orders against the employer, and Ms Guan for 18 months; and
  • orders for interest on the compensation orders.

Labour Inspector v Newzealand Fusion International Ltd [2019] NZEmpC 181 — Employment Court of New Zealand (external link)

Johnston v The Fletcher Construction Company Ltd [2019] NZEmpC 178

Employment Court – Redundancy – Notice of redundancy – Unjustifiable dismissal – Contractual interpretation – Redundancy clause – Good faith – Constructive dismissal

At issue were whether the construction of a contractual redundancy clause bound the employer to pay redundancy compensation and whether a duty of good faith is an incorporated term.

The employee had worked for the employer from February 1988 until his resignation on 25 May 2017. The two reasons for his resignation formed the basis of his employment relationship problem:

  • that the company had not complied with the employment agreement, because it had not terminated his employment for redundancy; and
  • that he was compelled to resign because of what he said was the inappropriate handling by the company of certain financial information that risked compromising his professional standing as a chartered accountant.

The employment agreement contained the following redundancy clause (see para 29).

"REDUNDANCY

Redundancy is where a position or employee has become superfluous to the needs of the company.

If we terminate this agreement due to redundancy, as above, then you WILL be entitled to redundancy compensation. The amount of compensation will depend on your length of service with the Company at the time of your redundancy and will be calculated as a number of weeks of your base salary as follows; 6 weeks for your first year of service, plus 2 weeks for each additional year of service (pro rated), up to a maximum of 20 years service.

However, as in the Termination paragraph above we would give you one month’s written notice of termination."

The employee claimed that his position became surplus at the beginning of October 2016 when an enterprise resource planning system known as the JD Edwards (JDE) software system went live. He was offered another job with the title “Business Performance Manager – Construction Division”. He was unhappy about the employment agreement which came with this role because it did not contain the redundancy provision which his previous employment agreement had, nor did it recognise continuous service for the purposes of long service leave. The company responded by providing two alternatives: to accept an amended version of the new employment agreement, which had a redundancy compensation clause capped at 26 weeks and a further increase in salary; or to retain his current employment agreement with no changes, since the employer considered that the new role was essentially the same and did not really require a new employment agreement.

The employee expressed disappointment about not being dismissed for redundancy and paid compensation. He eventually responded through his lawyer rejecting both choices and raising a personal grievance. His response however stated that he would continue working “without prejudice” to his rights. The employer confirmed that the employee would have ongoing employment and his job title, terms and conditions of employment would remain unchanged. The employee resigned several months later.

The issues before the Court were (see para 27):

  • Was the employee’s original position redundant so that he was entitled to receive notice of termination of his employment and compensation for redundancy as provided for in the employment agreement?
    • If so, did the employer breach the employment agreement by not giving notice terminating his employment and paying compensation?
  • Was the employee constructively dismissed because:
    • The employer did not give notice to terminate the employment agreement and pay compensation; and/or
    • Of the way the company dealt with certain financial information?
  • Was there a breach of the duty of good faith?
  • Is a duty of good faith incorporated into the employment agreement?
  • Was the employee prevented from claiming his original position was redundant, or that he was constructively dismissed by continuing to work?

The Court also dealt with the issue of remedies, a claim of wage arrears, and penalties.

The employee claimed that the employer could not decline to end his employment just because another job was suitable and available for him (see para 32). He claimed that once it was established that the position was surplus to the employer’s needs, the employer’s only option was to comply with the employment agreement, and that when the offer of a new job was declined, the company had to dismiss him for redundancy (see para 33). The employee referred to the cases of Auckland Regional Council v Sanson [1999] 2 ERNZ 597 (CA) and Wills v Goodman Fielder New Zealand Ltd [2014] NZEmpC 233. In both of these cases, the respective courts upheld claims of constructive dismissals of employees in circumstances where the employers had dragged their feet in relation to decisions about redundancy.

The employer claimed that the employee’s employment had not come to an end by reason of redundancy, and that he had decided to resign (see para 40). The employer submitted that two conditions needed to be satisfied before the employer was required to pay compensation (see para 41):

  • The employer had to terminate the employment; and
  • The termination had to be due to redundancy as defined in the agreement.

The employer claimed that differences between the old and new roles were not such that the employee’s original position could be considered to no longer exist. It additionally said that the fact that the employee applied for the new position indicated his desire to remain employed and suggested that the new job was suitable.

The Court distinguished the cases of Sanson and Wills, because in those cases, the jobs had ceased to exist, which was not the case here (see para 53). The Court found that the employee’s original position had not ceased to exist by way of redundancy at the time the employee resigned (see para 53–54).

The Court held strong reservations against the argument that the significance of the duty of good faith in the Act means that the duty becomes an incorporated term into employment agreements, giving rise to damages for breach (see para 110). It held that Parliament was not likely to have intended to create a situation where contractual damages for breach of an incorporate term of good faith would be available alongside personal grievance claims, compliance orders and penalties (see para 110).

The Court further held that even if the employer did breach the employment agreement, the employee affirmed his employment agreement by continuing to work and therefore lost the right to rely on the claimed breaches (see para 112). Sending a letter from a lawyer saying that he will continue to work without prejudice to his rights was of no effect, because the employee had to make an election under s37 of the Contract and Commercial Law Act 2017 (external link) to cancel or affirm the employment agreement. By continuing to work, he affirms the employment agreement, a decision “fatal to his claim” under s38 of the Contract and Commercial Law Act 2017 (see para 113 and 115).

Apart from a claim for unpaid holiday pay, all of the employee’s claims were unsuccessful (see para 130).

Johnston v The Fletcher Construction Company Ltd [2019] NZEmpC 178 (external link) — Employment Court of New Zealand

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