Cases of interest: March 2018

A summary of interesting or topical employment cases.

Labour Inspector v Victoria 88 Ltd t/a Watershed Bar and Restaurant [2018] NZEmpC 26 

Employment Court – Application of new penal provisions in Part 9A Employment Relations Act 2000 (ERA) – Declaration of breach – Banning order – Pecuniary penalties 

The proceedings arose as a result of the employer relying on an illegal forfeiture clause to refuse payment of holiday pay owed to employees. Reliance on the same clause by other companies owned and operated by the director of Victoria 88, Mr Freeman, had previously been subject to a number proceedings before the Employment Relations Authority and Employment Court (see paras 13 and 14). While the breaches that occurred before the enactment of Part 9A in April 2016 could not be subject to formal orders, it was accepted that they formed relevant background context when considering the seriousness of the breaches which occurred after 1 April 2016 (see paras 23 and 24).

The Court made a declaration of breach: see para 27

a) That Victoria 88 breached a minimum entitlement provision, being s 27(1)(b) of the HA by failing to pay final holiday pay.

b) That Mr Freeman was a person involved in a breach of a minimum entitlement provision, being s 27(1)(b) of the HA, in that he knowingly directed Victoria 88's failure to pay final holiday pay.

The Court imposed banning orders under s 142M(1)(a) ERA preventing both Victoria 88 Ltd and Mr Freeman from entering into any employment agreement as an employer or be involved in the hiring or employment of employees for a period of three years (see para 37). In addition, the Court ordered Mr Freeman and Victoria 88 to pay $20,000 in penalties (see para 52).

The Court noted that banning orders should only be made where there is a serious breach or breaches of minimum standards and, as a result, such orders are likely to be rare (see para 39). The Court further cautioned that the orders made were appropriate given that the parties had reached an agreed position and thereby avoided the need for a defended hearing.  However, the orders should not be regarded as setting any precedent for future applications (see para 7).

Link to case [PDF 483 KB] (external link)

Kumara Hotel Ltd v McSherry [2018] NZEmpC 19

Employment Court – Unjustified dismissal – Application of 90-day trial period provision – Whether prior work performed through recruiting agency made trial period unenforceable – Whether absence of trial period in initial agreement rendered trial period in later agreement unenforceable 

Having established that Mr McSherry had been dismissed, the Court was required to establish whether he was prevented from pursuing a personal grievance for unjustified dismissal because of a valid 90-day trial period.

The Court dismissed the first argument that the trial period could not be relied on due to unfair bargaining (see para 29). While the Court accepted that the employer had been wrong to advise that 90-day trial periods are compulsory in New Zealand, Mr McSherry was an experienced person not lacking intelligence or business nous (see paras 27 and 28). The interactions between the employer and employee were considered to have been conducted on relatively equal footing (see para 28).

The Court further dismissed the argument that a previous temp arrangement excluded the operation of the trial provisions on the basis that the requirements for a valid trial period under s 67A Employment Relations Act 2000 (ERA) only apply to “an employee who has not been previously employed by the employer” (see para 36). The Court considered the real nature of the temp relationship did not point to employment by Kumara Hotel Ltd under s 6 ERA (see para 33). The Court held Parliament deliberately chose to use a narrow definition of “employee” and “employer” under s 67A(3) ERA rather than the “loose and all-encompassing” construction argued on behalf of Mr McSherry (see para 34).

The trial period was ultimately held to be unenforceable as no mention of a trial period was made in the initial offer (see para 47). Offer and acceptance were found to have occurred when the key terms of agreement were settled by email correspondence. Once the parties have entered into a binding agreement, the employee is employed by the employer under s 67A ERA and the employer is precluded from relying on a trial provision contained in a subsequent agreement (see para 45).

The Court therefore held that Mr McSherry was unjustifiably dismissed and upheld the remedies ordered in the Employment Relations Authority (see para 60).

Link to case [PDF 333 KB] (external link)

Page last revised: 09 May 2018

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