Cases of interest: June 2021

A summary of interesting or topical employment cases.

A1 Communication Ltd v Labour Inspector of Ministry of Business, Innovation and Employment [2021] NZEmpC 91

Employment Court – De novo challenge to Employment Relations Authority determination – Penalties – Record-keeping breaches – Failure to provide records promptly to Labour Inspector

At issue was whether the Employment Court (the Court) should impose penalties on the employer and the director of the employer for:

  • breaching employment-related record-keeping requirements
  • failing to provide records promptly to the Labour Inspectorate.

Also at issue was the amount of penalties the Court should order.

The employer provided subcontractor services to the Chorus ultra-fast broadband project. A Labour Inspector approached the employer as part of a proactive investigation into such subcontractors. The Labour Inspector made a number of attempts to obtain from the employer a list of employees and the employees’ time and wage, holiday and leave records. After around nine months of delays, the employer finally provided some records but not others.

The Labour Inspector sought penalties against the employer and director in the Employment Relations Authority (the Authority) for failures to keep and provide employment records. The employer provided time and wage records for two employees to the Authority, but records for three employees were still outstanding. The Labour Inspector considered that holiday and leave records the employer provided were not compliant with s 81 (external link) of the Holidays Act 2003.

The Authority imposed penalties of $19,200 on the employer and penalties of $8,000 on the director of the employer for failing to keep and produce employment records. The employer sought to challenge the determination in the Court on a de novo basis.

The Court found the employer’s responses to the Labour Inspector for the first nearly nine months of the Labour Inspector’s investigation were “woeful”. The Court held the employer failed to provide employment records to the Labour Inspector “forthwith” as required under s 229(2) (external link) of the Employment Relations Act 2000 (the Act) (see para 32). The Court held the information the employer did provide was incomplete (see paras 33, 35–38).

The Court held the director was not liable for a penalty for the breaches as a person-involved. The Court found the director did not intentionally fail to keep compliant records. The Court set aside the penalty awarded against the director by the Authority (see paras 46–48).

The Court reduced the penalty against the employer to $12,000. In coming to that decision the Court took into account:

  • There was no evidence of any loss to any person as a result of the breaches (see paras 57–58).
  • The employer had not come to the attention of the Labour Inspectorate before or been before the Authority (see para 58).
  • The breaches were negligent rather than deliberate (see para 59).
  • The director was “extremely remorseful” (see para 62).
  • The financial position of the employer and the director was not good (the employer had ceased trading and the director had been without work for four months) (see para 65).

A1 Communication Ltd v Labour Inspector of Ministry of Business, Innovation and Employment [2021] NZEmpC 91 [PDF, 265KB] (external link)

Barry v C I Builders Ltd [2021] NZERA 82

Employment Court – Employee status – Employee or independent contractor

The issue was whether the Employment Court (the Court) should make a declaration under s 6 (external link) of the Employment Relations Act 2000 that a builder was an employee. 

The applicant worked for a building company (the respondent) as a builder for around three years. The respondent originally engaged the applicant in a “hand-shake” arrangement as an independent contractor, without a written contract. The applicant claimed the actual relationship became an employer/employee relationship. The applicant sought a declaration that he was an employee of the respondent.

The Court found that while the initial intention was for the parties to have a hirer/independent contractor relationship, overall the factual context pointed more firmly to the applicant being an employee; he was not in reality operating a business on his own account (see paras 64–65). 

In coming to that decision, the Court took into account that:

  • The applicant worked under close control and direction of the respondent, to suit the respondent’s business needs (see paras 25–26).
  • The applicant worked relatively consistent hours for the respondent over an extended period of time and did not work for anyone else (see paras 27–29).
  • The applicant was integrated into the respondent’s business: from time to time he drove a company vehicle; to an outsider there was nothing to distinguish him from any other workers on site (see paras 30–33).
  • While the applicant was not required to wear a uniform or identify with the respondent in other ways, there was no evidence employees were required to wear a uniform (see para 35).
  • While the applicant was not prohibited from working elsewhere it would have been unrealistic for him to do so, as he was working for the respondent an average of 40 hours a week and spending three hours a day travelling to and from work (see paras 36–39).
  • There was no evidence the applicant could subcontract or delegate his work (see para 40).
  • The applicant did not invoice the respondent for his work but simply provided a screenshot of his hours (see para 44).
  • The respondent applied for and was granted a wage subsidy for the applicant (see paras 48–49).
  • The applicant did not provide his own tools for work, except for a tool-belt with some small tools (see paras 50–51).
  • The respondent paid the applicant by the hour rather than for completion of tasks (see paras 52–54).
  • The applicant had no opportunity to make a profit from his work and any goodwill from his work accrued to the respondent (see paras 56–57).

The Court made a declaration that the applicant was an employee (see 68).

Barry v C I Builders Ltd [2021] NZERA 82 [PDF, 279 KB] (external link)

Concrete Structures (NZ) Ltd v Rottier [2021] NZEmpC 95

Employment Court – De novo challenge to Authority determination – Workplace drug testing – Personal grievance – Unjustified disadvantage – Unjustified dismissal 

At issue in the case was: 

  • Whether the way the employer required the employee to take a workplace drug test was justified.
  • Whether the employer unjustifiably dismissed the employee when it assumed the employee had abandoned his employment, without seeking clarification of the situation from the employee.

The employee was a concrete finisher. The employee had worked for the employer in the past. The employer asked the employee if he would come back to work for the employer again. The employee agreed.

The employee’s application for work required him to agree to pre-employment and periodic random drug and alcohol testing. The employee’s employment agreement contained a clause providing for in-work drug testing on reasonable grounds:

Where the Employer has reasonable grounds for suspecting that the Employee is under the influence of illegal drugs while at work, the Employer may require the Employee to undergo a non-intrusive drug test (a urine test) which will be conducted by a registered medical professional. Upon receipt of a positive test the Employer shall discuss the results with the Employee and, whilst the failure of a drugs test is prima facie serious misconduct and justification for instant dismissal, the Employer may take into consideration any explanation received before any outcome is decided upon. 

The employer at the time also had a “Just Cause” drug testing policy, equivalent to that below.

CSL also reserves the right to conduct “Just Cause” testing. Where behaviour is observed that causes concern that an individual could be a potential or actual safety hazard to himself or others due to the effects or after effects of drugs and/or alcohol the manager will be informed and the individual then interviewed to determine whether testing is required. It is the responsibility of all employees to identify concerns about any individual’s immediate ability to perform their work and report such concerns promptly to management. 

On the employee’s first day back working for the employer, the employee got into an argument with a manager. The manager claimed he suspected the employee was on drugs because during the argument the employee quickly became agitated and started sweating. 

The manager asked the employee if he would take a drug test. The manager said he would take the employee for a test nearby. The manager claimed the employee replied straight away that there was no point because he would fail. The manager assumed that meant the employee was under the influence of drugs. The manager then sent the employee away. The manager said he was suspending the employee until he returned a clean drug test. The employee believed he had been dismissed. When the employee did not return to work the employer considered he had abandoned his employment. 

The Court found that the manner in which the employer required the employee to have a drug test was not justified (see para 83). In coming to that conclusion, the Court took into account that: 

  • The employer breached the employment agreement by requiring the employee to have a drug test when there were no reasonable grounds for a test. The employee had worked in the morning prior to the argument without evidence of behaviour consistent with an immediate inability to perform work (see paras 77–80).
  • The employer breached the “Just Cause” drug-testing policy by not conducting an interview with the employee before requiring him to take a drug test (see para 81).
  • The employer also breached good faith by discussing the requirement for a drug test during the argument with the employee. The Court found a reasonable employer in the circumstances would have had a discussion on drug testing after allowing time for cooling down, rather than in the middle of an altercation (see para 82).

The Court held that a reasonable employer in the circumstances would not have sent the employee away to have a drug test as a knee-jerk response to an argument without adequately investigating the need for a test (see para 83). The Court found the employer also unjustifiably dismissed the employee, when it assumed he had abandoned his employment without seeking further clarification from the employee (see paras 104–107). The Court awarded the employee: 

  • $12,000 compensation reduced by 10 per cent for contribution to $10,800
  • Four months lost wages, also reduced by 10 per cent for contribution.

Concrete Structures (NZ) Ltd v Rottier [2021] NZEmpC 95 [PDF, 365KB] (external link)  

Labour Inspector of the Ministry of Business Innovation and Employment v Jeet Holdings Ltd [2021] NZEmpC 84

Employment Court – Minimum employment standards – Systematic underpayment of wages – Unlawful premium – Remedies – Penalties – Declarations of breach – Banning order against director 

A key issue was what remedies the Court should award against a group of companies and the common director of the companies, for the following: 

  • systematically making employees under-record hours
  • systematically under paying wages
  • failing to keep accurate time and wage records for the employees
  • not complying with the Holidays Act 2003 (external link)
  • requiring an employee to pay a premium as a condition for getting work.

The Labour Inspectorate investigated complaints from eight employees working at various locations in a chain of six restaurants. The restaurants in the chain were operated by six different companies, all with the same director.

A Labour Inspector claimed the director told the eight employees to systematically record many fewer hours than they actually worked. The Labour Inspector claimed the employer then systematically underpaid the employees. The Labour Inspector calculated that the employer owed the eight employees over $286,000 in arrears. 

The Labour Inspectorate claimed that in relation to all eight employee the employers had: 

The Labour Inspector claimed one of the defendant companies had also sought $10,000 payment from a prospective employee, as a condition of offering the employee a job, in breach of the Wages Protection Act 1983, s 12A (external link) . The employee had paid $7,500 of the $10,000 demanded. 

The Court upheld the claims of the Labour inspector (see paras 63–66). The Court held that the director of the defendant companies was involved in the breaches of the companies, as he was “the driving force behind the employees not being paid properly” and the person who demanded a premium from an employee (see paras 70–71). 

The Court found the breaches were serious enough for the Court to make declarations of breach against three of the defendant companies and against the director as a person-involved under s 142B (external link) of the Act (see paras 85–88). The Court also:

  • imposed a total of $195,200 in penalties against three of the defendant companies (see para 130)
  • imposed a penalty of $112,800 against the director (see para 130)
  • ordered three defendant companies to pay the employees compensation totalling close to $272,000, with interest (see paras 133 and 145)
  • made a banning order against the director under s 142M (external link)  of the Employment Relations Act 2000 (see paras 142–144).

The banning order banned the employer for two years from:

  • entering into an employment agreement as an employer
  • being an officer of an employer
  • being involved in the hiring or employment of employees.

Labour Inspector of the Ministry of Business Innovation and Employment v Jeet Holdings Ltd [2021] NZEmpC 84 [PDF, 555KB] (external link)

GF v OO [2021] NZERA 251

Employment Relations Authority – Interim reinstatement – Removal of claim to Employment Court – Questions of law – Whether questions about mandatory vaccination important questions of law warranting removal 

At issue was whether the Authority should order removal of an interim reinstatement claim to the Court, on the basis important questions of law were likely to arise. The questions of law concerned the employee’s dismissal for declining to be vaccinated against COVID-19. 

The employee was a temporary border worker at a port. The Government issued an Order requiring “front-line” workers to be vaccinated in order to continue being employed at border facilities. The employee chose not to be vaccinated. The employer consequently terminated the employee’s employment with notice. 

The employee sought interim reinstatement pending an investigation into a claim for unjustified dismissal. The employee sought to have the interim reinstatement claim removed to the Court on the basis the dismissal claim would raise important questions of law. The employee’s representative claimed the dismissal claim raised questions including:

  • Can an employer change an employee’s terms and conditions to include mandatory vaccination?
  • If changes to conditions are imposed by a mandatory vaccination does this create a redundancy situation?
  • If a vaccination is mandatory is such consistent with provisions of the New Zealand Bill of Rights?

The employer did not agree the claim raised the questions put forward by the employee, but supported the application for removal. The employer supported removal on the basis that it was the first time an employee was challenging an employer’s decision to dismiss an employee for not getting vaccinated (see para 20). 

The Authority dismissed the application for removal (see para 29). In coming to that decision the Authority determined that:

  • It was arguable that the terms and conditions of employment had not changed, in the sense that the job location, tasks and duties remained the same and the employee was not compelled to take the vaccine (see para 24).
  • Neither the Authority not the Court had jurisdiction or discretion to question the actions of the New Zealand Government or agencies, outside of any employment relationship. The appropriate forum for challenging a government decision was in the High Court by way of judicial review (see para 25).
  • Any public interest was overstated, as the public interest involved a narrow contextual setting; and there was a need to be cautious about making a “cause celebre” for the relatively few border workers declining to be vaccinated (see para 26).
  • The circumstances under consideration were not so novel that there were not any legal precedents and analogous cases (see para 27).
  • Referring the matter to the Court would not necessarily expedite matters or contain costs (see para 27).

GF v OO [2021] NZERA 251 [PDF, 3MB] (external link)

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Page last revised: 29 July 2021

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