Cases of interest: January 2021

A summary of interesting or topical employment cases.

Labour Inspector of the Ministry of Business, Innovation and Employment v Tourism Holdings Ltd [2021] NZCA 1

Court of Appeal – Holidays Act 2003 – Commission – Ordinary weekly pay

The issue was whether, as a question of law, productivity or incentive-based payments were a regular part of an employee’s pay for the purposes of calculating ordinary weekly pay under the Holidays Act 2003 (Act).

Tourism Holdings Ltd (THL) employed “driver guides” for their Kiwi Experience tours. The driver guides, among other tasks, sold additional tourist experiences to their clients whilst on tour. The driver guides earned commission for each tourist experience sold. The commission was not paid with their usual wages, but was paid in a lump sum after the end of that tour.

When an employee takes a portion of their paid annual leave, the employer must pay the employee at a rate that is based on the greater of:

  • the employee’s ordinary weekly pay (OWP) under s 8 (external link) of the Act; or
  • the employee’s average weekly earnings (AWE), being 1/52 of their gross earnings under s 14 (external link) of the Act.

Commission is always included in the AWE calculation. However, the Labour Inspector and THL disputed whether the driver guides’ commission should be included in the OWP. Section 8(1)(b)(i) (external link) stipulates that productivity or incentive-based payments are included “if those payments are a regular part the employee’s pay”. The Employment Court found that the commission payments were not a regular part of their pay, and therefore need not be included.

The Court of Appeal overturned the Employment Court’s decision, finding that the commission should be included in the OWP calculation (see para 40). In coming to its decision, the Court of Appeal noted the following:

  • Employees who earned commission should enjoy an equivalent benefit in their leave entitlement, which is consistent with the purpose of the Act (see para 35).
  • The word “regular” means both substantive and temporal regularity. In this case, both meanings applied to the commission earned by the driver guides. Their commission was both regular and habitual (see para 36–37).
  • The entitlement to commission arose when the driver guide booked an additional tourist experience for a client, rather than when they completed the documentation process (see para 38).

Labour Inspector of the Ministry of Business, Innovation and Employment v Tourism Holdings Ltd [2021] NZCA 1 [PDF 225KB] (external link)

De Sousa v Bayside Fine Food Ltd [2021] NZERA 27

Employment Relations Authority – Personal grievance – Unjustified dismissal – Unpaid wages

The issue was whether eight employees were justifiably dismissed in accordance with a business interruption clause in their employment agreements. 

The employees worked in a café. In March 2019 the employer proposed to introduce a clause into their employment agreements. The clause stipulated that if the employer’s business was interrupted by, among other things, a pandemic, the employer would not be required to provide the employees with work or pay. It stated the employer would consult with the employees before deciding if the employment could continue (see para 10). The clause was agreed to by all parties shortly before the employees were dismissed on 19 March 2020. The dismissal letter indicated they were dismissed due to the effects of COVID-19 in accordance with the business interruption clause (see para 12).

The employees raised personal grievances and proposed that the employer apply for the wage subsidy in the short term. The employer declined to do so. The employer later wrote to the employees, saying the café had been closed for financial reasons and it had not been motivated by the COVID-10 related lockdown (see para 14). 

The Employment Relations Authority (Authority) found that the employees had been unjustifiably dismissed (see para 20). The Authority found the test for frustration of contract is high, and at the time the employees were dismissed, gatherings of up to 100 people were still permitted. The circumstances at the time did not warrant invoking the business interruption clause (see para 17). Even if they had, the employers did not meet its obligation under the clause to consult with the employees before making a decision (see paras 18–19). The employees were awarded compensation and lost wages (see paras 21–32). 

De Sousa v Bayside Fine Foods Ltd [2021] NZERA 27 [PDF 85KB] (external link)

Ilin v Goodman Fielder New Zealand Ltd [2021] NZERA 12

Employment Relations Authority – Personal grievance – Dismissal – Misconduct

At issue was whether an employee was justifiably dismissed after objectionable behaviour.

The employee worked as an operator at a milk processing facility. Shortly after the Mosque shootings took place in Christchurch in March 2019, when asked what he thought, he drew a swastika and tally marks on his company overalls. A little later, he said “White Supremacy”. The employee’s actions made his colleagues uncomfortable. The employee said he had made an “ill-timed joke” (see para 15) and was not racist (see para 59). The employer, after conducting an investigation into the incident, summarily dismissed the employee.

The Authority found the employer had acted as a fair and reasonable employer would in all the circumstances, and it was open to them to dismiss the employee (see para 73). The Authority applied the test of justification in s 103A (external link) of the Employment Relations Act 2000 and found the employer had followed the correct process (see paras 34–49).  

The employee claimed that the person conducting the investigation should not have been involved because she told him she was offended by his actions. The Authority found that every person with authority to investigate was likely to have been offended (see para 64). 

Ilin v Goodman Fielder New Zealand Ltd [2021] NZERA 12 [PDF 55KB] (external link)

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Page last revised: 04 February 2021

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