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Cases of interest: November 2021

A summary of interesting or topical employment cases.

Tourism Holdings Ltd v Labour Inspector of the Ministry of Business, Innovation and Employment [2021] NZSC 157

Supreme Court – Holidays Act 2003 – Commission – Ordinary Weekly Pay

At 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 (HA). 

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 HA; or
  • the employee’s average weekly earnings (AWE), being 1/52 of their gross earnings in the 12 months immediately before the holiday under s 14 (external link) of the HA.

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 stipulates that productively or incentive-based payments are only to be included if they are “a regular part of the employee’s pay”.

The Supreme Court found that in the statutory context “regular part” should be construed in relation to the time period in s 8(2), being four weeks. The Supreme Court held that the alternative timeframes for calculation suggested by the parties (being either one week or per trip) would result in a “lumpiness” in holiday pay inconsistent with the aims of the HA (see para 43). The Supreme Court decided (at para 54):

Payments are “a regular part of the employee’s pay” if they are of a kind made regularly when assessed against the standard of a four-week period.

Tourism Holdings Ltd v Labour Inspector of the Ministry of Business, Innovation and Employment [2021] NZSC 157 [PDF, 117KB] (external link)

Sandhu v Gate Gourmet New Zealand Ltd [2021] NZCA 591

Court of Appeal – Minimum Wage Act 1983, s 6 – Whether s 6 applies to employees who do not perform work – COVID-19

At issue was whether, in the absence of sickness, default, or accident, the minimum wage is payable for all of a worker’s agreed contracted hours of work; or whether it is lawful to make deductions from wages for lost time not worked at the employer’s direction.

The employer provided inflight catering services to passenger aircraft. The five applicants were full-time employees. Their employment agreements provided for a minimum 40-hour week. The employees’ rate of pay was the minimum wage at that time. When New Zealand entered an Alert Level 4 lockdown due to the COVID-19 pandemic in March 2020, the employer was deemed an essential service. However, there was a lot less demand for inflight catering. The employer partially closed down. The applicant employees were not required to work. The employer proposed to its employees that they would be paid 80 per cent of their normal pay, conditional upon the employer receiving the government wage subsidy. 

The parties disagreed over whether this arrangement breached the Minimum Wage Act 1983 (external link) (MWA). The relevant provisions were:

6 Payment of minimum wages

Notwithstanding anything to the contrary in any enactment, award, collective agreement, determination, or contract or service, but subject to sections 7 to 9, every worker who belongs to a class of workers in respect of whom a minimum rate of wages has been prescribed under this Act, shall be entitled to receive from his employer payment for his work at not less than that minimum rate.

7 Deductions for board or lodging or time lost

(2) No deduction in respect of time lost by any worker shall be made from the wages payable to the worker under this Act except for time lost—

(a) by reason of the default of the worker; or

(b) by reason of the worker’s illness or of any accident suffered by the worker.

The Court of Appeal found (at para 54):

It is not lawful to make deductions from wages for lost time not worked at the employer’s direction. The minimum wage is payable for the hours of work that a worker has agreed to perform, but does not perform because of such a direction.

The Court of Appeal held that the s 6 term “payment for his work”, if read in isolation, could either be a reference to work actually performed by the employee, or work the employee agreed to perform (whether or not it was actually performed). However, s 6 must be read in the context of the MWA as a whole. Section 7(2) would be superfluous if s 6 only applied to time actually worked. It is concerned with time lost, that being time that was agreed to be worked but for specific reasons was not worked (see paras 42–45).

The Court of Appeal decided that the “only logical” reading of s 6 is that the minimum wage must be paid for the whole of the time the parties agreed the employee would work (see para 46). The MWA is a basic protection that “sets a floor below which employers and employees cannot go” (see para 47).

The Court of Appeal observed that parties are able to agree that employees take leave without pay, and the MWA would not apply to that leave (see para 51). In this case, however, there was no agreement between the parties that would justify not paying the employees the minimum wage (see para 55).

Sandhu v Gate Gourmet New Zealand Ltd [2021] NZCA 591 [PDF, 251KB] (external link)

Restaurant Brands Ltd v Gill [2021] NZEmpC 186

Employment Court – Temporary migrant – Unjustified dismissal – Unjustified disadvantage

At issue was whether a migrant was unjustifiably dismissed and/or disadvantaged when his employment was terminated on the basis of the expiration of his visa.

The employee was an assistant restaurant manager. He was employed on a permanent basis. At the start of his employment the employer assisted him in gaining a two year Post-Study Work Visa. The employment agreement stipulated that the employment would terminate if the employee did not have the legal right to work in New Zealand. More than three months prior to the visa expiring, the employee emailed the human resources department seeking assistance with documentation to apply for a further visa. The employer was obligated to advertise the position to see if it was able to recruit a New Zealander before supporting the visa application. The employee applied for the position. He followed up a couple of times before his manager told him his application was unsuccessful. Two of the suitable applicants for the position were New Zealanders. One was selected for the role and began work shortly thereafter. The employee assumed at that stage that his employment was terminated. He worked until the expiration of his visa and then raised a personal grievance with the employer.

The Employment Court (Court) found the employee had been unjustifiably dismissed and disadvantaged by the actions of his employer for the following reasons:

  • The employer had not kept the employee informed of the process required in order to support his visa application, including the “New Zealanders first” labour market test (see para 84).
  • The employer did not discuss options with the employee, even when another assistant restaurant manager position became available, as a fair and reasonable employer would have done (see para 92).
  • The New Zealander who was appointed to the employee’s position resigned the day before the employee’s visa expired. The Court found the duty of good faith required the employer to discuss further options with the employee at that point (see para 99). By the date the employment was terminated the employer had in fact been unable to fill the position with a New Zealander (see para 103). 
  • The employer failed to communicate constructively with the employee (see para 121).
  • The employee was not given reasonable opportunity to respond to the circumstances which were known to the employer, but not to him (see para 132).

The Court awarded the employee $25,000 in compensation and $19,950 in lost wages (see paras 154 and 181)

Restaurant Brands Ltd v Gill [2021] NZEmpC 186 [PDF, 350KB] (external link)

WXN v Auckland International Airport Ltd [2021] NZEmpC 205

Employment Court – Interim reinstatement – COVID-19 – Border worker – Vaccinations Order

At issue was whether the Court would reinstate the employee on an interim basis after he declined to be vaccinated against COVID-19, contrary to a vaccine mandate.

The employee worked at the Auckland International Airport (Airport) for 15 years. His role was covered by the COVID-19 Public Health Response (Vaccinations) Order 2021 (external link) (Vaccinations Order). The employee said he was terrified at the prospect of the vaccine, which he described as “experimental mRNA gene altering therapy” (see para 51). He proposed to the Airport that his role be changed to accommodate him not working “airside” so that his role would not be covered by the Vaccinations Order. The employer declined his proposal, on the basis that it was not feasible and would unfairly place more responsibilities on the employee’s colleagues. The employment was terminated. The employee sought interim reinstatement in the Court until his substantive grievance for unjustified dismissal could be heard by the Authority.

The Court granted his application. The Court found:

  • The employee’s argument that the Vaccinations Order could be interpreted narrowly to exclude his role was only weakly arguable. Although s 6 (external link) of the New Zealand Bill of Rights Act 1990 stipulates that an enactment should be given a meaning that is consistent with the rights contained (such as the right to refuse medical treatment) where possible, the words of the Vaccinations Order are clear and precise (see paras 136143). Therefore, the employee’s permanent reinstatement claim is only weakly arguable (see para 171).
  • However, the process elements of the employee’s dismissal grievance were arguable (see para 172).
  • The employer had not adequately responded to the employee’s proposal that his role be changed (see paras 145153).
  • The employee had sought support from his GP in obtaining a medical exemption to vaccination due to a medical condition, but was not successful. Irrespective of this, the Court found there was an “active obligation on the employer to constructively consider and consult on alternatives where there is an objectively justifiable reason not to be vaccinated” (see para 165).
  • Reinstatement is a primary remedy under s 125 (external link) of the Employment Relations Act 2000. It would reinstate good faith obligations on the parties (see para 193). The topic of the safety of the vaccine needed “reliable information to facilitate constructive dialogue between the parties” (see para 177).

The Court ordered the employee be reinstated until the Authority’s substantive hearing and determination. The employee was unable to physically return to the workplace, which had since introduced a vaccination policy requiring all employees be vaccinated, whether or not they were covered by the Vaccinations Order. The Court ordered the employee be placed on two months of paid leave and thereafter unpaid leave until further order of the Authority (see para 207). The Court also ordered the parties attend mediation.

WXN v Auckland International Airport Ltd [2021] NZEmpC 205 [PDF, 455KB] (external link)

Montgomery v Crombie Lockwood (NZ) Ltd [2021] NZERA 520

Employment Relations Authority – Redundancy – Unjustified dismissal – Unjustified disadvantage

At issue was whether the employee was unjustifiably dismissed when her role was disestablished due to redundancy soon after an investigation was conducted on the basis of a complaint made by the employee.

The employee held a senior executive role with an insurance broker. She had worked for the employer for over nine years and had significant responsibilities. The employee had enjoyed her employment until the relationship between the employee and her manager deteriorated. The employee made a complaint to the employer, raising a personal grievance on the basis of actions of the manager that she considered had caused her disadvantage. The complaint was in time investigated. However, the investigation found the complaints of harmful behaviour were not established.

Shortly after the investigation was completed the employer announced the organisation would be restructured. The employer proposed the employee’s role would be disestablished but set out options for redeployment. The employee applied for two roles but was not successful. Her employment was terminated on the basis of redundancy. 

The Employment Relations Authority (Authority) found the employee had been unjustifiably dismissed and disadvantaged on the following grounds:

  • The Authority found the employer had genuine business reasons to restructure (see para 128). Other employees were directly affected.
  • However, the Authority found there was evidence the employer’s process “was not wholly objective” (see para 129):
    • The employer had held a meeting encouraging a colleague of the employee to apply for an alternative role but did not do the same for the employee.
    • It had not met with the employee to receive her feedback on the restructure in person despite saying it would.
    • The employer removed the employee’s IT access before her applications for alternative roles had been determined.
  • The employer had used an external recruitment company to assess the applications for the alternative roles. The recruitment company had said the employee was capable of performing a role. Even though the employee was not the recruiter’s first choice within a group including external applicants, the employer had an obligation to the employee to explore redeployment options (see para 134).
  • The employer could not fairly say they had exhausted redeployment options (see para 135). The employee’s dismissal was therefore unjustified (see para 136).
  • The employee claimed ten unjustifiable actions by the employer caused her disadvantage. The Authority found two of those grounds established a personal grievance. The employer failed to investigate further concerns raised by the employee during the course of the investigation. Also, the employer reversed a bonus payment without explanation (see paras 119–120).

The Authority declined to reinstate the employee to a position with the employer, finding it could not be satisfied the employment relationship could be successfully re-established (see para 145). The Authority awarded the employee $40,000 in compensation and eight months’ lost remuneration as well as $10,000 for a vehicle allowance and an incentive payment (see para 164).

Montgomery v Crombie Lockwood (NZ) Ltd [2021] NZERA 520 [PDF, 133KB] (external link)

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Page last revised: 25 November 2021

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