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Cases of interest: October 2021

A summary of interesting or topical employment cases.

Metropolitan Glass & Glazing Ltd v Labour Inspector, Ministry of Business and Innovation and Employment [2021] NZCA 560

Court of Appeal – Holidays Act 2003, s 14 – Bonus payments – Meaning of "gross earnings"

At issue was the following question of law:

Did the Employment Court err in law by concluding that payments made by the appellant from its short term incentive bonus schemes were “payments that the employer is required to pay to the employee under the employee’s employment agreement” and therefore fell within the definition of “gross earnings” under s 14 (external link) of the Holidays Act 2003? 

The employer implemented a discretionary bonus scheme for some senior employees. The circumstances of the scheme were (see paras 11–13):

  • Employees were invited to join the scheme by letter.
  • The letter described the scheme as a discretionary bonus scheme.
  • The letter outlined various conditions and targets that would be factored into the bonus scheme.
  • The letter stated that any payments under the scheme were “totally at the discretion of [the employer]” and there was “no guarantee of any payment” even if the relevant criteria were achieved.
  • The letter explicitly stated that “any bonus payments made under this Scheme will not come within the definition of ‘total gross earnings’ for the purposes of holiday pay calculations under the Holidays Act 2003”.
  • When accepting the offer to join the scheme, employees had to acknowledge that the scheme was discretionary and the employer could decide not to make a payment under the scheme and could “amend, revoke or discontinue this Scheme at any time”. 

The employer considered it did not need to take the bonus payments into account when calculating the amount of holiday pay it was obliged to pay, because the payments made under the scheme were discretionary payments for the purposes of s 14 (external link) of the Holidays Act 2003 (the HA). 

The Labour Inspector disagreed. The Labour Inspector consider the payments were a part of gross earnings, not discretionary payments. The Employment Court (the Court) found in favour of the Labour Inspector. The employer appealed the decision to the Court of Appeal (CoA). 

The CoA held the meaning of s 14 (external link) of the HA was clear. If an employer was not contractually bound to make a payment it was discretionary; if the employer was contractually bound to make a payment then the payment was gross earnings. The CoA found that the source of the contractual obligation, whether in the employment agreement or otherwise, was “irrelevant” (see paras 29, 33, 39). 

The CoA held the employer did not need to take the bonus payments into account when calculating the amount of holiday pay it was obliged to pay, as the payments were discretionary (see paras 40, 41). The CoA held the Court erred in finding the payments were payments the employer was obliged to pay under the employees’ employment agreement (see para 46). 

Metropolitan Glass & Glazing Ltd v Labour Inspector, Ministry of Business and Innovation and Employment [2021] NZCA 560 [PDF, 250KB] (external link)

Nekita Enterprises Ltd v Christchurch City Council Alcohol Licensing Inspector [2021] NZHC 2598

High Court – Alcohol licencing – Impact of employment law breaches on licence applications 

At issue was whether the High Court (HC) should grant a stay of a decision by the Alcohol Regulatory and Licensing Authority (the ARLA) to cancel or suspend:

  • the first applicant’s off-licences for five bottle stores
  • the second and third applicants’ managers’ certificates for the bottle stores.

The ARLA found that over a period of four years the first applicant (the employer) had “failed to pay four employees minimum wage entitlements, failed to pay employees holiday pay, and failed to keep time and wage records and holiday and leave records for 59 employees” (see paras 11–13). The ARLA found the employment standards breaches were evidence of improper conduct under s 280(3)(a) (external link) of the Sale and Supply of Alcohol Act 2012. The ARLA took the breaches into account when it found the first applicant was not suitable to hold off-licences for its bottle stores; and the second and third applicants (the directors of the employer) were not suitable to hold managers’ certificates.

The applicants claimed the ARLA erred in concluding the employment standards breaches were evidence of improper conduct under s 280(3)(a) (external link) . The applicants sought a stay of the cancellations and suspensions pending an appeal against the ARLA decision.

The HC dismissed the application for a stay. The HC found the issues around the suitability of the applicants and the “ongoing operation concerns” were “real” and the applicants had failed to convince the HC that they no longer existed (see para 175). 

Nekita Enterprises Ltd v Christchurch City Council Alcohol Licensing Inspector [2021] NZHC 2598 [PDF, 230KB] (external link)  

UXK v Talent Propeller Ltd [2021] NZEmpC 167

Employment Court – Judicial review – Employment Relations Authority directions – Directions concerning District Court judgment that was subject to suppression orders 

At issue was whether the Employment Relations Authority (the Authority) should have made the following directions in relation to a District Court judgment that was subject to name suppression orders:

  • directions requiring the employee to produce an unredacted copy of the judgment
  • directions that the Authority would produce an unredacted copy of the judgment on its own motion, using a copy the employee filed in another proceeding, involving a third party. 

The employee was pursuing various employment relationship problems in the Authority. Prior to the Authority proceedings, the employee was also the subject of proceedings in the District Court. The employer believed the District Court  judgment relating to the employee (the judgment) was relevant to the Authority proceedings. The employer sought to have access to the judgment on a “counsel to counsel basis”. 

The Authority made multiple directions requiring the employee to produce an unredacted copy of the judgment, so that the Authority could determine the judgment’s relevance. The Authority did not make any specific directions to safeguard the judgment if the employee were to provide it. 

The employee failed to provide an unredacted copy. The Authority directed that it would produce the judgment on its own motion, using the unredacted copy the employee had filed for the other proceeding involving a third party. 

The Authority made all the relevant directions in the form of minutes. The employee sought judicial review of the minutes. 

The Court first considered whether judicial review of the minutes was within the Court’s jurisdiction. The Court held it could judicially review the minutes because:

  • The minutes were determinations for the purpose of s 179(1) (external link) of the Employment Relations Act 2000 (see paras 110–114).
  • The directions in the minutes were not merely procedural and so barred from review; the directions related to important rights held by the employee as a result of the District Court suppression order (see paras 120–125).

The Court allowed the first directions (that the employee should provide the unredacted judgment) but with extra safeguards. The Court imposed the following conditions:

  • The unredacted copy of the judgment should be used only for an investigation meeting to consider the judgment’s relevance (the relevance meeting).
  • The relevance meeting should be attended only by an Authority member and the parties’ representatives.
  • The employer’s representative should sign a written undertaking to the Authority and to the employee’s representative as to confidentiality.
  • The Authority member conducting the relevance meeting should be a member other than the one who had conducted the investigation so far (see paras 137–144 and 165, 166).

The Court set aside the Authority direction that it would produce the judgment on its own motion, using the unredacted copy of the judgment the employee had filed in another proceeding. In coming to that decision, the Court took into account the following:

  • Using information or evidence on one file for the purposes of another could lead to misunderstandings and procedural error (see para 149).
  • Natural justice problems may arise if parties are not fully heard as to whether information disclosed for one matter should be introduced as evidence in another (see paras 150–152, 158).
  • If Parliament had intended the Authority’s powers of investigation to override fundamental rights, it would have adopted unequivocal statutory language to that effect (see para 154).
  • The broad power given to the Authority to “take into account such evidence and information ‘as in equity and good conscience it thinks fit, whether strictly legal or not’…must be guided by settled principles of common law” (see para 155). 

The Court observed that it was regrettable the Authority had not fully evaluated either of the following options:

  • having the Authority Member-alone inspect the judgment for relevance
  • having another “judicial officer not connected with the case” inspect the judgment.

The Court noted it was “well-established” that these options were available to the Authority (see paras 127–131). 

UXK v Talent Propeller Ltd [2021] NZEmpC 167 [PDF, 320KB] (external link)  

Senty v S & J Property Maintenance Ltd [2021] NZERA 428 

Employment Relations Authority – Employment status – Fencer – Property maintenance business 

At issue was whether the applicant was an employee or a contractor. 

The applicant worked for a property maintenance company doing fencing work. The applicant claimed he did the work as an employee rather than a contractor. The applicant claimed he was entitled to payment of outstanding statutory entitlements including annual leave, sick leave, statutory holidays and payment of KiwiSaver contributions. The employer claimed no payments were owing as the applicant was a contractor. 

The Authority determined that the real nature of the relationship between the parties was one of employment (see para 98). In coming to that decision the Authority took into account the following:

  • There was no common intention that it was to be a contractual relationship (the respondent intended a contractual relationship, but the applicant did not) (see paras 53–54).
  • The respondent exerted control of the worksite (see paras 59–63).
  • While the applicant had a pattern in the latter months of working for the employer of taking absences from work, this was driven by health issues and not by the applicant exercising autonomy or choice about when to work (see paras 64–68).
  • The applicant had only done two jobs outside of his work for the respondent (see para 69).
  • There was only evidence of one occasion where the applicant had turned down working at a site the respondent asked him to go to (see para 70).
  • The respondent supplied the applicant with a work van with the applicant’s name on the door and a company fuel card, eftpos card and Bunnings card (see paras 73–80).
  • The applicant never provided quotes for jobs (see para 81).
  • The applicant had no input into his pay or bonuses (see para 84).
  • The applicant bore no risk from the business or chance of making a profit (see para 85).
  • There was no evidence the applicant was operating a business on his own account (see paras 92, 94). 

Senty v S & J Property Maintenance Ltd [2021] NZERA 428 [PDF, 220KB] (external link)  

Robertson v Stevryn Holdings Ltd [2021] NZERA 452 

Employment Relations Authority – Prolonged failure to pay wages – Claim for constructive dismissal 

Employment Relations Authority – Breach of employment agreement – Requirement to pay agreed wages – Requirement to reimburse work expenses – Arrears – Penalties 

At  issue was:

  • whether the employee was constructively dismissed when he left his employment after not being paid properly and not being reimbursed for work expenses for more than a year
  • what amount of arrears the employer should pay
  • what penalties for breaches of the employment agreement should apply. 

The employee worked for the employer as a truck driver for a period of around 14 months. There was no written employment agreement. Over the 14 months, the employer frequently either did not pay the employee at all, or underpaid him. The employer also often did not reimburse the employee for money he spent on fuel for the truck. 

The employee said he raised the fact he was not being paid four or five times.  The employer made some part-payments to the employee, but did not fully resolve the arrears. Finally the employee told the employer he could not continue to work without being paid and would not come back until he was paid properly. The employee claimed he was constructively dismissed. 

The Authority dismissed the claim for constructive dismissal. The Authority found the 14-month period from the time the employee first raised a complaint about his wages until the time he left the company was so long that the employee’s resignation could not be said to have been caused by the breaches; the causal chain was broken because of the choice by the employee not to resign at earlier relevant times (see paras 33–37). 

The Authority awarded the employee $53,093.75 in unpaid wages; $9,952.04 as reimbursement of work expenses; and a $12,000 penalty against the employer for breach of the employment agreement (see para 76). 

Robertson v Stevryn Holdings Ltd [2021] NZERA 452 [PDF, 190KB] (external link)  

Labour Inspector v K Contracting Ltd [2021] NZERA 421 

Employment Relations Authority – Failure to keep and produce wage and time records – Compliance order – Penalties – Liability of director 

At issue was whether the Authority should award a compliance order and penalties against the employer and the director of the employer for:

  • failing to keep wage, time and holiday records
  • failing to provide wage, time and holiday records to a Labour Inspector. 

The employer provided labour hire services to the local horticulture industry. A Labour Inspector carried out an inspection at an orchard in the area. The Labour Inspector found several immigrant workers working in the orchard without the necessary visas to allow them to work. The immigrant workers said they were employed by the employer in question. 

Following the inspection of the orchard, the Labour Inspector began an investigation into the employer. The Labour Inspector asked the employer to provide wage, time and holiday records for employees, along with other supporting documents. 

Eighteen months after the initial request from the Labour Inspector, the employer had still not provided the necessary records. Inland Revenue Department figures showed that in the relevant period the employer had engaged at least 79 employees. 

The Authority accepted that the employer failed to provide records when required to do so (see para 42). The Authority awarded penalties of $17,000 against the employer and $8,500 against the director as a person-involved in the breaches (see para 43). The Authority ordered the employer to provide the Labour Inspector with the required records within one month. 

In determining the quantum of penalties, the Authority took into account that there was no evidence of any attempt to remedy or mitigate the breaches; the respondents responded to warnings and reminders about the failures and then failed to honour subsequent undertakings (see paras 27, 30). 

Labour Inspector v K Contracting Ltd [2021] NZERA 421 [PDF, 280KB] (external link)  

Labour Inspector v Doma [2021] NZERA 469 

Employment Relations Authority – Breaches of minimum employment standards – Penalties – Costs – Liability of director 

At issue was whether the Authority should award penalties and costs against a director, as a person-involved in breaches of minimum employment standards. 

A Labour Inspector found an employer was responsible for 11 breaches of minimum employment standards against two employees. The breaches involved:

  • failing to pay for annual holidays, public holiday entitlements, time-and-a-half, alternative holidays and days that would otherwise be working days
  • failing to keep required records of wages, time, holidays and leave.

The employer had also failed to pay sick pay to one of the employees. The employer owed each employee more than $16,000. 

By the time of the investigation, payment of arrears had been resolved. The Labour Inspector sought only penalties against the director, as a person-involved in the breaches (penalties against the employer were not possible as the employer had been placed into liquidation). 

The Authority determined the director should pay a penalty of $28,000 and costs of $2,071.76. In determining the quantum of penalties, the Authority took into account:

  • The director took advantage of the relative inequality of power, particularly as both affected workers were migrants whose work status was dependent on their employment (see paras 13, 21).
  • The breaches spanning two years were part of how the director organised and administered his company’s affairs (see para 14).
  • Though the director submitted the breaches were not intentional, objectively observed, they were known and intended (see para 16).
  • The employer benefitted financially by not paying the arrears when they were due (see para 17).
  • The fact the director eventually paid the arrears should not be given weight, otherwise it would create a perverse incentive for employers to “sit on their hands” until forced to pay (see para 18).
  • The director sought to denigrate the employees and showed no remorse (see para 19). 

Labour Inspector v Doma [2021] NZERA 469 [PDF, 230KB] (external link)

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Page last revised: 25 November 2021

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