Cases of interest: June 2022

A summary of interesting or topical employment cases.

TUV v Chief of New Zealand Defence Force [2022] NZSC 69

Supreme Court – Settlement agreements – Mental incapacity – Enforceability of settlement agreement where party affected by incapacity 

Supreme Court – Settlement agreements – Mental incapacity – Contract law – Test in O’Connor v Hart – Application of O’Connor v Hart in employment context 

Supreme Court – Settlement agreements – Mental incapacity – Protection of Personal and Property Rights Act 1988, s 108B – Application of s 108B to employment settlement agreements 

At issue was whether a settlement agreement was enforceable where:

  • One party was affected by mental incapacity when she entered the settlement agreement.
  • The other party had no knowledge of the incapacity.
  • The settlement agreement was signed off by a mediator under the Employment Relations Act 2000, s 149 (external link) . 

To resolve the issue, the Supreme Court considered whether relevant law outside of the employment jurisdiction applied to employment settlement agreements. The Supreme Court considered:

  1. Whether the contract law test in O’Connor v Hart [1985] 2 All ER 880, [1985] 1 NZLR 159 (PC) (O’Connor v Hart) applies to employment settlement agreements. (Under O’Connor v Hart, “a contract is not voidable for mental incapacity unless the other contracting party has actual or constructive knowledge of the incapacity, or equitable fraud is established” (see para 4)).
  2. Whether s 108B (external link) of the Protection of Personal and Property Rights Act 1988 (the PPPRA) applies instead. (Section 108B “requires a court to approve a settlement of claims for money or damages where one of the parties is not capable of managing his or her own affairs” (see para 5).) 

The Supreme Court majority held that (see para 69):

  • The test in O’Connor v Hart does apply to mediated settlement agreements in the employment jurisdiction.
  • The Employment Relations Act 2000 governs the enforceability of employment settlement agreements; not s 108B of the PPPRA. 

Applying the test in O’Connor v Hart, the majority found the settlement agreement was enforceable, because the employer did not have actual or constructive knowledge that the employee lacked capacity when entering into the agreement (see para 69). 

TUV v Chief of New Zealand Defence Force [2022] NZSC 69 (external link)  

JKL v Stirling Anderson Ltd [2022] NZEmpC 107

Employment Court – Non-publication orders – Application for a non-publication order after determination issued – Whether determination needs to be recalled 

At issue was:

  • whether the Employment Relations Authority (Authority) erred when it declined to recall a determination in order to attach a non-publication order to it
  • whether the Authority erred when it said that if it had recalled the determination, it would not have granted a non-publication order. 

The Authority issued a determination dismissing the employee’s claim for a personal grievance and for breach of her employment agreement. The employee wished to get the Authority to remove personal details from the determination. The employee applied to the Authority to recall the determination, so that the Authority could attach a non-publication order to the personal details. 

The Authority declined to recall the determination on the basis that there was no “special reason” requiring it to recall the determination (see para 8). The Authority found that even if it could have recalled the determination, there were no grounds to make a non-publication order (see para 2). The employee applied to the Employment Court (Court) challenging the Authority’s determination. 

The Court found the Authority wrongly assumed that it was necessary to recall the determination in order to make a non-publication order (see para 20). The Court held that cl 10 of sch 2 (external link) to the Employment Relations Act 2000 , which gives the Authority power to make non-publication orders, “does not indicate any temporal limit as to when the power can be exercised”. The Court considered that “this means that the Authority can exercise its power to prohibit publication at any time before or after proceedings have concluded” (see para 22). 

The Court found that grounds for non-publication were made out, as there was a material risk that publication of the employee’s name and identifying details would risk their safety or have a potentially negative impact on their mental health and employment prospects (see para 57). 

The Court made a permanent order preventing publication of the name and identifying details of the plaintiff (see para 58). 

JKL v Stirling Anderson Ltd [2022] NZEmpC 107 [PDF, 270KB] (external link)  

Labour Inspector v RBM Communication Ltd [2022] NZERA 229

Employment Relations Authority – Breaches of minimum employment standards – Quantum of penalties 

At issue was the quantum of penalties against the employer for breaches of minimum employment standards under the Employment Relations Act 2000 (ERA), the Minimum Wage Act 1983 (MWA), the Wages Protection Act 1983 (WPA) and the Holidays Act 2003 (HA). 

The employer ran several stores throughout New Zealand, offering services in beauty, cosmetic and personal care. Following an investigation, the Labour Inspector sought penalties against the company, its director, and the brother of the director (as a person involved), for several breaches of minimum employment standards at a Hamilton store, affecting three different employees. The employer paid all arrears to the relevant employees before the Authority investigation (see para 47). 

The employer accepted liability for the following breaches submitted by the Labour Inspector in relation to three employees: 

  • Failing to keep and provide compliant wage and time records and individual employment agreements in breach of s 64 (external link) , s 65 (external link) and s 130 (external link) of the ERA
  • Failing to pay minimum wage in breach of s 6 (external link) the MWA
  • One breach of the WPA for seeking the payment of a premium
  • Breaches of the HA (external link) , including:
    • failing to correctly pay annual holiday pay
    • failing to pay unworked holiday pay and time and a half
    • failing to provide alternative holidays
    • failing to provide sick leave entitlements
    • failing to maintain compliant holiday and leave records. 

On the quantum of penalties, the Authority took into account:

  • The employer’s conduct fell short of good faith behaviour expected under the ERA and was exacerbated by the vulnerable immigration status of two of the affected employees (see paras 24, 25).
  • There was a total of 24 breaches of minimum employment standards affecting three employees (see para 33).
  • The breaches were of a systemic and deliberate nature spanning over a period of nearly four years (see para 28).
  • The presence of a ‘cash back scheme’, which required an employee to pay back certain amounts of their wages in cash, demonstrated particular intent (see paras 3943).
  • The fact that the employers paid the arrears in response to the Labour Inspector’s investigation did not reduce the potential penalties (see paras 4952).
  • The employers took advantage of the vulnerability of the employees (as non-New Zealand nationals or residents) due to their unfamiliarity with New Zealand employment law and their entitlements (see para 59).
  • There was a need for deterrence, particularly against the exploitation of migrant workers (see paras 62, 63).
  • The breaches against the three different employees should be treated separately, as each employee was affected by the breaches in their own way (see para 73). 

The Authority concluded that (see para 85):

  • The employer was to pay $54,000 for the breaches of minimum employment standards.
  • The director was to pay an additional $20,000 individually.
  • The brother of the director was to pay $9,000 individually for his level of involvement in the breaches.

Labour Inspector v RBM Communication Ltd [2022] NZERA 229 [PDF, 55KB] (external link)  

Labour Inspector v Star Moving Ltd [2022] NZERA 252

Employment Relations Authority – Failure to provide records to Labour Inspector – Compliance orders – Penalty 

The key issue for the Authority to determine was whether two companies (the employers) failed to comply with the Labour Inspector’s request for records and employment agreements for their employees according to s 229 (external link) of the Employment Relations Act 2000 (ERA). If so, whether the Authority should impose a penalty, and for what amount. 

The employers operated in the business of freight and furniture removal, located in Nelson. The Labour Inspector received several complaints from current and former employees of the employers concerning minimum employment entitlements. The Labour Inspector contacted the employers requesting wage and time records, holiday and leave records, and employment agreements for all of their employees. After a series of correspondence between 27 November 2020 and 15 June 2021 the employers failed to produce the records by the date requested. The Labour Inspector sought an order from the Authority that the employers comply with s 229 and produce the information, including a penalty for failing to comply. 

The Authority found a continuing failure to comply with s 229 notices issued by the Labour Inspector on 10 February 2021 (see para 37). The Authority decided that a penalty was necessary, reflecting the need to punish those who breach statutory obligations and hinder the Labour Inspector’s investigation (see para 44). 

On the quantum of penalties, the Authority considered that:

  • The failure to comply with the Labour Inspector’s requests for records and employment agreements was a serious and continuing breach (see para 62).
  • As a result of the employers’ actions, the Labour Inspector was unable to assess whether the employers had been compliant with minimum employment standards, and the extent of any breaches (see para 46).
  • Despite initial confusion, the email correspondence between the Labour Inspector and the employers clearly stated the records they were required to produce, so the failure to take appropriate steps to produce records was intentional (see para 49). 

The Authority ordered that the employers:

  • Comply with s 229 and produce wage and time, holiday and leave records, and employment agreements for all employees for the period of three years from 10 February 2018 to 10 February 2021 (see para 65).
  • Pay a penalty of $7,500 per company for breaching s 229 of the ERA (see para 66).

Labour Inspector v Star Moving Ltd [2022] NZERA 252 [PDF, 45KB] (external link)  

LYE v ISO Ltd [2022] NZERA 258

Employment Relations Authority – Availability Provisions – Breach of Employment Relations Act 2000, s 67D – Unjustified Disadvantage – Compliance order 

At issue was whether the employee was disadvantaged by his employment agreement which contained an availability provision in breach of s 67D (external link) of the Employment Relations Act 2000 (ERA). 

The employee was a stevedore at a port. In 2018, the Authority determined that the provisions in his and other employee’s individual employment agreements were unlawful availability provisions, and not compliant with s 67D of the ERA. On appeal, the Employment Court confirmed this, and ordered the employer to cease including availability provisions that:

  • did not specify guaranteed hours of work
  • did not specify the period which employees are required to be available above those guaranteed hours. 

The employee raised a personal grievance against the employer.  He claimed that his employment agreement, which required him to be available for work 24/7 without reasonable compensation, disadvantaged him. He sought remedies in the form of compensation for a loss of benefit had the provision been compliant, and compensation for distress. 

The Authority found that the employee’s grievance of disadvantage was established for the following reasons:

  • The employee’s working arrangement caused a real intrusion into his private life (see para 83). He did not have any certainty in terms of the agreed hours of work, and the days and times in which they would fall (see para 68). Lack of certainty about shifts in advance meant that he could not make commitments, like booking appointments or picking his son up from school (see para 53).
  • The employee was not reasonably compensated for his availability as required under the ERA (see para 61).
  • Even though the employee had access to Planned Time Off (PTOs), using a PTO would mean he could not be offered an additional shift that fortnight and would be paid less than the guaranteed retainer (see para 68). PTOs could also be cancelled by the company and there were a limited number of PTO days which could be sought (see para 68). 

The Authority awarded the employee:

  • $22,500 in compensation, for a loss of benefit (based on the amount of compensation he should have received under the availability provisions of the ERA).
  • $15,000 compensation for humiliation, loss of dignity and injury to feelings. 

LYE v ISO Ltd [2022] NZERA 258 [PDF, 60KB] (external link)

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Page last revised: 26 July 2022

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