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September 2017

Interesting or topical employment cases.

AFFCO New Zealand Ltd v New Zealand Meat Workers and Related Trades Union Inc [2017] NZSC 135

Supreme Court – Whether seasonal workers presenting themselves for work at the beginning of a new season were employees for the purpose of the lockout provisions in the Employment Relations Act 2000 (ERA)

The dispute arose from a claim that AFFCO had unlawfully locked out workers when they presented themselves for work at the beginning of the new season by requiring them to sign new individual employment agreements with substantially less favourable terms than those of the former collective agreement. At issue was whether the workers were “employees” for the purposes of a lockout under s 82 ERA (external link) .

The Supreme Court concluded that employment was discontinuous meaning employees were not employed during the off season (see para 47). Consequently, the workers that presented themselves at the beginning of the season did not fit within the definition of “employee” under s 6 (external link) of the Act (see para 7).  However, it was held that in the context of s 82(1)(b),  “employees” should be interpreted as having a wider meaning thereby covering the workers in issue (see para 7).  The Supreme Court therefore agreed with the lower courts that AFFCO locked the workers out unlawfully.

The Court noted that, where there is a defined meaning of a statutory term that is subject to a context qualification, strong contextual reasons will be required to depart from the defined meaning (see para 65). Departure was justified in this case for three reasons. Firstly, in the context of s 82(1)(a)(iv) “refusing or failing to engage employees” the word “employees” was considered to cover persons who are not employees but rather are seeking employment (see para 67).  Secondly, s 82(1)(a)(iii) refers to the act of an employer “in breaking some or all of the employer’s agreements”. Terms of employment in seasonal arrangements can carry over beyond termination, as occurred in this case. If a continuing obligation owed by the employer is breached with the intention of compelling the worker to accept new and less advantageous terms of employment, s 82(1)(b) should apply (see para 76).  Finally, it was considered influential that a strike may involve persons who are no longer employees (see para 77). It was held that there was no reason the lockout provisions should not apply to acts committed by an employer for the purpose of making a person accept particular terms of employment, in circumstances where the person is owed employment obligations by the employer, although they may not be employed at the time (see para 77).

The Court expressly limited the application of its findings by highlighting the ongoing obligations owed by the parties in this case arising from earlier employment. An employer who refuses to hire a new employee because the two are unable to agree on terms of employment will not, for that reason alone, have locked out the potential employee (see para 78).

Link to case (external link)

Brown v New Zealand Basing Ltd [2017] NZSC 139

Supreme Court – Whether rights protected by New Zealand law apply to employment agreements governed by foreign law

Two pilots challenged the legality of their employer’s attempt to exercise a clause under their employment agreement requiring them to retire at the age of 55. While their working activities took place largely outside of New Zealand, both pilots started and finished their tours of duty from Auckland where they lived. The employment agreement between the parties stated the employment relationship was governed by the law of Hong Kong, which does not prohibit discrimination by reason of age. At issue was whether the protection from discrimination under the under s 103(1)(c) (external link) Employment Relations Act 2000 (ERA) applied.

The Supreme Court rejected the approach of the Court of Appeal that the right invoked was contractual and not applicable (see para 50). The ERA is founded on the view that employment involves a relationship and not just a contract (see para 56). It held that the right not to be discriminated against by reason of age cannot be excluded even by a bona fide choice of another system of law as the proper law of the employment agreement(see para 68). Instead, the right to bring a personal grievance for discrimination under s 103(1)(c) (external link) ERA applied to any conduct which occurs within New Zealand (see para 69). It was noted that ss 24 (external link) and 26 (external link) of the Human Rights Act 1993 (HRA) explicitly deal with the application of the HRA in circumstances such as those of this case but do not provide an exclusion (see para 70). A person who works both in and outside of New Zealand is protected by the right to not be discriminated against, at least on the grounds of age (see para 72).  The pilots could not be required to retire by reason of attaining the age of 55.

Link to case (external link)  

Schollum v Corporate Consumables Ltd [2017] NZEmpC 115

Employment Court – Whether commission should be included when calculating holiday pay entitlements

The employees sought to recover holiday pay considered not have been properly paid. The employment agreements provided for a base salary with additional commission paid as a percentage of the gross margin on sales under the employees “rep code” at the end of each month. Despite the commission forming a significant part of their remuneration, the employee’s holiday pay was calculated using only their base salary.  In determining the employees gross earnings for the purposes of calculating holiday pay under s 21 (external link) of the Holidays Act 2003 (HA), it was considered that a plain reading of the reference to “all payments” under s 14(a) (external link) HA meant that the combined total of salary and commission was to be used (see para 32). However, Corporate Consumables argued that the qualifier “unless the context otherwise requires” under s 14 was applicable and meant that in the present case it was appropriate for gross earnings to exclude commission when calculating holiday pay (see para 33). Corporate Consumables submitted that it was Parliament’s intention that employees be paid holiday pay at a rate equivalent to what they would normally have received had they worked instead of taking holidays. Furthermore, without excluding commission in the present case the employees would receive a windfall benefit by receiving the value of commission twice (see para 36).

The Employment Court held Corporate Consumables interpretation of gross earnings to be inconsistent with s 6(3) (external link) HA because it would exclude, restrict or reduce an employee’s entitlement under the Act (see para 82).  The method of payment under s 21 (external link) does not restrict holiday pay to what an employee may have earned instead of taking a holiday (see para 33).  The employment agreements made no allowance for adjustment to the commission paid for any period when the employee was on annual leave and required holiday pay to be paid taking into account commission (see para 84). The same findings were made in relation to underpaid holiday pay for the earlier period of employment governed by the Holidays Act 1981 (external link) .

The Employment Court found the employer agreed to back pay underpaid holiday entitlements beyond the statutory limitation and this agreement to be enforceable on the basis that the employer received consideration in the form of not being required to find new workers (see paras 103, 152 and 165).

Link to case (external link)

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