Cases of interest: May 2019

A summary of interesting or topical employment cases.

Kazemi v Rightway Ltd [2019] NZEmpC 59

Employment Court – Partnership “buy-in” fee – Premium in respect of employment – Wages Protection Act, s 12A – Penalties 

The key issue in this case was whether a $125,000 fee to buy into an employer’s “Regional Partner Programme” was a premium, contrary to s 12A of the Wages Protection Act 1983, in circumstances where:

  • Under the employment agreement, commencement of employment was subject to payment of the fee.
  • The fee allegedly purchased a property interest in a client register.
  • The employee could potentially benefit from the programme by:
    • earning commissions from clients in their register;
    • growing the value of their client register;
    • selling their interest for a profit when they left the firm.
  • There was no guarantee the employee would get the buy-in fee back if they left the firm or get a return on their interest in the client register.
  • The employee was also paid a salary.
  • At the time the client bought into the client register, her share in the register had no clients.
  • The buy-in fee was paid into an account where it was coded as income and used for operational expenses

The Employment Court was satisfied the buy-in fee was a premium in terms of s 12A (see para [73]):

  1. The employee’s employment was conditional on her paying the buy-in fee;
  2. The employee derived no on-going benefit from payment of the fee.

The employee’s employment agreement expressly provided that her employment was conditional on the payment of the buy-in fee; the recruitment manager reiterated the requirement by email; and there was no evidence the employee could start employment without paying the fee (see para [76]).

There was no legal proprietary interest that arose from the partnership with the Regional Partners. The employee did not legally become a partner or become a shareholder. Importantly, at the time the employee paid the buy-in fee the Client Register was worth nothing (see para [80]). Commission payments payable under the Regional Partners Programme were “simply another element of [the employee’s] reward for her work … bringing in clients for [the employer]” (see para [79]).

There was no ongoing benefit to the employee once the employment ended. This was in contrast to Holman v CTC Aviation Training (NZ) Ltd [2017] NZEmpC 60, where the employee gained a qualification. Leaving employment with the employer triggered buy-back provisions. The employee had no ongoing right to use the register and was restrained from working with clients in the register (see paras [81], [82]).

The Employment Court found the employee was entitled to recover the buy-in fee under s 12A(2) of the Wages Protection Act as a debt due, with interest (see paras [85], [86]).

The Employment Court ordered the employer to pay a penalty of $8,000 for breach of s 12A of the Wages and Protection Act (see paras [113]–[122]).

Link to case [PDF 445 KB] (external link)  

Postal Workers Union of Aotearoa Inc v New Zealand Post Ltd [2019] NZEmpC 47

Employment Court – Application of Employment Relations Act, s 67D Availability provision – Whether s 67D applies to requirement to work overtime – Whether employer required to compensate employees for availability for overtime 

At issue was whether postal delivery agents could be required to work overtime hours in addition to their standard hours when the employer did not expressly compensate the employees for making themselves available. 

The employees had a clause in their employment agreement (cl 20) stating:

Delivery Agents may be required to work reasonable overtime in excess of their standard hours (subject to safe operating procedures), provided that work is voluntary on days which are otherwise non-rostered days for an individual employee. 

The Court made a declaration that the relevant clause in the collective agreement was an availability provision and did not comply with s 67E of the Employment Relations Act (see para [59]). 

The Employment Court held that if an employer wishes to be able to require an employee to work overtime, as opposed to giving the employee a choice, it needs to provide reasonable compensation for the availability as required by law (see para [30]). If not, the employee can decline to work (see para [31]). 

In coming to that judgment the Employment Court found:

  • Section 67D was not intended to apply only to “zero-hour” contracts (ie contracts where employees were required to make themselves available but had no guaranteed hours) (see paras [12]–[18], [21]).
  • A clause requiring an employee to work overtime was an availability provision; to be an availability provision it was not necessary that the provision required an employee to stand-by and wait for work (see paras [23], [26], [27]).
  • The submission that employees could not decline work under s 67E because they did not have “guaranteed hours” did not hold. The fact that under the collective agreement employees could sometimes be allowed to leave early and sometime work later did not mean they did not have “agreed hours” (see paras [41]–[44], [52]).
  • Compensation was not “agreed” as being part of the employees’ salaries under s 67D. The employees were not on salaries under the ordinary meaning of the term. Employees had not agreed that compensation was included in their pay (see para [56]). 

Link to case [PDF 348 KB] (external link)  

Morgan v Transit Coachlines Wairarapa Ltd [2019] NZ EmpC 66 

Employment Court – Fixed-term employment agreements — Whether fixed-term agreement in breach of Employment Relations Act 2000, s 66 – Whether expiry of fixed-term effective

The employee was employed as a bus driver for the employer on successive fixed-term employment agreements over a period of 18 years. 

At issue was whether the expiry of two of the fixed-term agreements was effective. In both cases the employer informed the employee the fixed-term would expire at the end of the school year because the employer’s contract with the Ministry of Education would expire at that time. 

The Employment Court held the two fixed-term agreements were in breach of s 66 of the Employment Relations Act 2000. 

The Employment Court found:

  • There was no “bright-line test” to determine how many fixed-term roll-overs were enough for a fixed-term agreement to breach s 66. While successive fixed-term agreements might raise a flag, whether the expiry of the fixed term was effective depended on the reasons for the fixed-term (see para [26]).
  • In determining whether a fixed-term was entered into for genuine reasons on reasonable grounds it is relevant to consider:
    • whether the stated reasons were sincerely held; and
    • whether the stated reasons were for proper purposes.

(See para [27]).

Financial uncertainty related to ordinary business risk was not a genuine reason based on reasonable grounds for entering the fixed-term agreements (see paras [17], [18], [20]–[23], [28]). Even if financial insecurity was a genuine reason for entering the agreements, it was not based on reasonable grounds (see para [21]).

  • The employee was entitled to:
    • treat the expiry of the fixed-term agreements as ineffective (see para [29]); and
    • compensation for lost entitlements (see paras [30], [31]). 

Link to case [PDF 261 KB] (external link)

Raynor v Director-general of Health [2019] NZEmpC 65 

Employment Court – Unjustified dismissal – Remedies – Reinstatement 

Key issues were whether the employee should be reinstated; the extent to which she should be compensated for lost remuneration; and the extent to which the employee should be compensated for humiliation, loss of dignity and injury to feelings. 

The employer investigated the employee in relation to allegations her qualifications for her position were fraudulent. Though the employer did not find the qualifications were fraudulent, it dismissed the employee due to loss of trust and confidence, after the employee allegedly acted to hinder the investigation. 

The Employment Relations Authority found the employer unjustifiably dismissed the employee but did not award reinstatement. The Authority accepted the employer had lost trust and confidence in her. The Authority awarded the employee three months’ lost remuneration and $20,000 compensation for humiliation, loss of dignity and injury to feelings, with 15 per cent reduction for contributory behaviour. 

The Employment Court affirmed that the dismissal was unjustified (see paras [231], [237], [238], [264], [266], [269], [270]). The Employment Court ordered reinstatement and increased all monetary awards to the employee. Specifically, the Employment Court:

  • found it was reasonable and practicable to reinstate the employee, but to a different position in a different team, at the same remuneration (see paras [309], [311], [312]–[326]).
  • awarded six months lost remuneration (see paras [336]–[338]);
  • awarded compensation for humiliation, loss of dignity and injury to feelings of $42,500 (see paras [339]–[354]) (The Employment Court arrived at this figure independently as no figure was specified in the statement of claim) (see paras [352], [353]);
  • rejected the finding of the Employment Relations Authority that the employee had contributed to her dismissal by obstructing the employer’s investigation (see paras [355]–[361]).

Link to case [PDF 794 KB] (external link)

Hong v Auckland Transport [2019] NZEmpC 54 

Employment Court – Unjustified dismissal – Reinstatement 

A key issue was whether the employee should be reinstated after being unjustifiably dismissed. 

The employee was a parking officer. The employer suspended the employee three times, and then dismissed him, over concerns about the employee’s interaction with a trainer and with the public. Of chief concern was the employee telling members of the public who were abusive they were not allowed to be offensive in public and that swearing in public was a criminal offence. In a training session, the employee “aggressively” defended how he talked to members of the public who were abusive.  After the training session the employer told the employee to stay away from work for a day to “reflect” on how he had behaved. 

Soon afterwards, the employee was involved in an incident with members of the public where he feared for his safety. In that incident, the employee followed the employer’s instructions and did not talk to the people concerned once they became abusive. Instead he left the situation and called for assistance. The employer suspended the employee following the incident. Following an investigation, the employer dismissed the employee.

The employer later conceded the dismissal was unjustified (see para [46]), because:

  • The investigation was procedurally flawed.
  • The employer had not addressed concerns about the employee’s behaviour earlier.

The Employment Court ordered that the employee should be reinstated. The Employment Court held while the employer claimed it had lost trust and confidence in the employee, a mere assertion was not enough. The employer’s position was difficult to maintain when it accepted the dismissal was unjustified, partly because the employer had failed to take formal steps to address the employee’s perceived unsatisfactory conduct (see para [68]). The Employment Court found in the most recent incident the employee was involved in he had followed the employer’s instructions. The employee had also agreed to change his behaviour in interacting with the public. The level of safety risk the employer claimed the employee posed was not demonstrated by the evidence (see paras [73]–[83]). 

The fact that the employer’s supervisor found the employee challenging to manage did not disqualify him from reinstatement. In any event, the employee would have a different supervisor and the employee would be clearer about the employer’s expectations. There was no evidence the employee had difficulties with other parking officers (see paras [84]–[90]). 

Link to case [PDF 436 KB] (external link)

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