Cases of Interest: September 2024

Al Bustanji v Corrections Assoc of New Zealand Inc [2024] NZEmpC 186

Employment Court – Jurisdiction – Counterclaim – Jurisdiction over counterclaim issue not previously raised in the Employment Relations Authority

An issue was whether the union could raise a counterclaim in an Employment Court (Court) proceeding when the counterclaim concerned a new issue that the union had not raised in the Employment Relations Authority (the Authority).

The applicants sought to judicially review actions of the respondent union in the Court. The union tried to bring a counterclaim against the applicants, seeking a declaration that the applicants were in breach of union rules. The applicants sought to strike out the counterclaim on the basis of lack of jurisdiction, as the respondents had not first brought the matter before the Authority.

The Court agreed to strike out the respondent’s counterclaim (see paragraph 22). It accepted it had no jurisdiction over a matter that had not been first brought to the Authority. It said (see paragraph 12):

Section 187 of the Employment Relations Act 2000 outlines the extent of the Court’s jurisdiction. That jurisdiction is narrow and typically arises out of proceedings first filed in the Authority. It can hear judicial review claims in relation to actions of a union, or that union’s representative. However, the Court does not have originating jurisdiction to hear and determine actions relating to alleged breaches of a union’s rules by its members.

The Court said that if the union wished to pursue its claim it would need to consider filing proceedings in the Authority or seeking removal to the Court (see paragraph 23).

Al Bustanji v Corrections Assoc of New Zealand Inc [2024] NZEmpC 186 (PDF, 169 KB](external link)

Auckland Trotting Club Inc v Payne [2024] NZEmpC 183

Employment Court – Estoppel – Calculation of bonus by means other than that in the employment agreement – Estoppel based on silence

An issue was whether the employee was estopped from insisting that his bonus should be calculated strictly according to his employment agreement.

The employee worked as the manager a TAB New Zealand (TAB) outlet run by the employer. The employee’s remuneration consisted of:

• a base salary and
• a quarterly bonus calculated as a percentage of the fee the employer received from the TAB for running the outlet (the agency fee). 

The employer received an increase in the agency fee after it renegotiated the way the TAB calculated the fee; however, the employer did not take the increase into account when calculating the employee’s bonus, contrary to his employment agreement. The employee claimed this meant that for approximately 7 years the employer underpaid his bonus. The employer claimed it did not need to take the increase into account because either:

• the employee agreed for the increase not to be taken into account; or
• the employee was estopped from or waived his contractual rights to have the increase apply to the calculation of his bonus, because, by his conduct or silence, he represented that he would not insist on the increase being taken into account.

The facts the employer pointed to in support of their position included that:

• The employee did not raise a dispute about the bonus calculation until 2021, when the agency fee increase took place in 2015. 
• When the employer sent an email to the finance department in 2017 saying that the employee said he wished to stay with his bonus payment as it was being paid then; the employee did not respond to the email to disagree with the employer’s statement.

The employment agreement provided that variations to the agreement needed to be recorded in writing. The employer was not able to point to an agreement in writing showing the employee agreed for the increase not to be taken into account.

No express agreement

The Employment Court (Court) found the employee did not expressly agree to the employer disregarding the agency fee increase when calculating his bonus (see paragraph 37). The Court said that, while the employer told the employee it was not taking the agency fee increase into account, a “unilateral statement of intention by one party does not amount to a mutual agreement with the other party” (see paragraph 36). 

Agreement by silence

The Court found that when the employee failed to correct the employer’s email to the finance department, which said he had agreed to the current way his bonus was being paid, the employee made a representation by his silence that he was not insisting on having the agency fee increase taken into account. The Court said while that “[s]ilence, for the purposes of a claim of equitable estoppel, cannot be a representation unless there is an obligation to respond”, in this case the duty of good faith obliged the employee to tell the employer if he thought the email was incorrect (see paragraphs 98, 99, 151). 

Test for estoppel

The Court said that for the representation the employee made by his silence to be grounds for estoppel (see paragraph 142):

• The employer needed to have reasonably relied on the representation, to its detriment (see also paragraphs 146 to 148).
• The circumstances must be such that it would be unconscionable for the employee to now depart from the belief they created or encouraged on the part of the employer (see also paragraph 149, 150). 

Reasonable reliance

The Court found it was not reasonable for the employer to rely on the employee’s silence and not comply with his employment agreement, in circumstances where it did not know what his silence meant and whether the silence was indefinite or temporary (see paragraphs 152 to 159). The Court held that the employer had a duty of good faith to be responsive and communicative and it should have varied the written employment agreement to formalise any agreement that it considered had been reached (see paragraphs 160 to 163).

Detriment and unconscionability

The Court accepted the employer suffered a detriment by relying on the employee’s representation by silence (see paragraph 170), however, it found in the circumstances it was not unconscionable for the employee to still insist on his strict contractual rights. The Court took into account that the employer had also sat on its hands and failed to “be communicative and to follow statutory procedures” when it should have acted to formalise the bonus arrangement (see paragraphs 175 to 185). 

Conclusion

The Court found the test for estoppel was not met. The employee was not estopped from insisting on his rights under the employment agreement (see paragraph 187). 

Auckland Trotting Club Inc v Payne [2024] NZEmpC 183 (PDF, 344 KB)(external link)

FDE v UWV [2024] NZEmpC 179

Employment Court – Non-publication orders – Request for non-publication years after judgment issued

At issue was whether the Employment Court (Court) should issue a non-publication order in relation to a former employee’s name, nearly 3 years after the relevant judgment was issued.

The Court agreed to issue a non-publication order (see paragraph 33). It took into account that:

• The applicant’s claim that having her name published in a judgment was affecting her ability to find work was a specific adverse consequence that could be reasonably expected to occur (see paragraph 16).
• It was more likely than not such a specific adverse consequence had occurred (see paragraph 17).
• The adverse consequences could reasonably justify a departure from open justice because the applicant had a “demonstrable interest in being able to seek alternative employment and to have any application … dealt with on its merits, rather than being blacklisted” (see paragraph 21).
• There was a broader public interest in employees being able to bring personal grievances against their employer without their future job prospects being compromised by the mere fact of doing so (see paragraph 24).
• There was also a public interest in supporting the rights of individuals to privacy and access to the labour market (see paragraph 25).

The Court noted that prior publication generally weighs against an application for non-publications for reasons of futility; however, it agreed that an order was not futile if it protected from future harm (see paragraph 30).

FDE v UWV [2024] NZEmpC 179 (PDF, 574 KB)(external link)

Ford v Henry Brown and Co Ltd [2024] NZEmpC 181

Employment Court – Contractual interpretation – Interpretation of pre-employment disclosure requirement

An issue was how the Employment Court (Court) should interpret a provision in the employee’s employment agreement.

The employer appointed the employee based on a “glowing” reference from a person at his previous place of employment. Within a few weeks of starting work, the employee raised 2 personal grievances and the employer found there were issues with how he interacted with staff, subcontractors and clients.

The employer tried to contact the referee at the employee’s former workplace to see if they could shed light on the situation but found the referee no longer worked there. Another person at the former workplace told them the employee had been fired and they would be “better off without him” (see paragraph 12).

The employer subsequently dismissed the employee for not disclosing that he had been fired. In dismissing the employee, the employer relied on the “Representations” provision in the employment agreement (clause 16), which required the employee to disclose “everything” material to the decision to employ him:

Representations:
In appointing you we have relied on your representations as to your qualifications and experience. You confirm that those representations are true and correct and that you have disclosed everything, which if disclosed, may have been material to our decision to employ you. You also acknowledge that we may take disciplinary action against you, including dismissal, if your representations were misleading or incorrect.

The employee took an unjustified dismissal case to the Employment Relations Authority which found the dismissal was open to a fair and reasonable employer. The employee challenged the dismissal in the Court.

The Court found the interpretation of clause 16 was central to the decision. The Court outlined the principles applying to the interpretation of employment agreements as follows:

[19] The approach to the interpretation of employment agreements is objective. The aim is to ascertain the meaning which the agreement would convey to a reasonable person having all the background knowledge that would reasonably have been available to the parties in the situation in which they were at the time of the agreement. This objective meaning is taken to be that which the parties intended. While the meaning of a clause in an agreement may appear clear, meaning is informed by context. A provisional conclusion as to meaning is to be cross-checked against the context provided by the agreement as a whole, and any relevant background.

The Court found that based on its ordinary, natural meaning, clause 16 did not require the employee to disclose his dismissal (see paragraph 16). In coming to that decision, the Court relied on the following:

• The requirement to disclose “everything” material to the decision to employ needed to be interpreted in the context of the “Representations” provision as a whole (see paragraphs 20 to 23).
• Based on its ordinary and natural meaning the provision was about representations as to qualifications and experience (see paragraphs 20 to 22).
• Interpreting the reference to “qualifications and experience” as including any disciplinary action and any grievances the employee may have raised was not “how a fair and reasonably informed objective observer would likely read cl 16” (see paragraph 24).
• The description of the role and the technical duties associated with it, outlined in schedule 2, showed the expertise required in the role; this context reinforced the interpretation of clause 16 as being about the qualifications and experience required to do a technical job (see paragraph 26).
• The employer drafted the agreement, meaning any ambiguity should be construed against its interests (see paragraph 27).

The Court found the employer was not justified in relying on clause 16 to dismiss the employee.

Ford v Henry Brown and Co Ltd [2024] NZEmpC 181 (PDF, 234 KB)(external link)

Zhou v Peach Cars Ltd [2024] NZERA 547

Employment Relations Authority – Personal grievance – Constructive dismissal – Failure to pay wages 

Employment Relations Authority – Employer in liquidation – Migrant worker – Wage arrears – Unlawful Premium – Leave to recover amount owing from director

At issue was:

• whether the employee was constructively dismissed when she stopped working due to the employer not paying her wages
• whether the employee could recover unpaid wages and an unlawful premium for employment from the employer’s director, after the employer went into liquidation.

The employee came to New Zealand on a student visa. After completing her studies, she was able to work on an open work visa. She took up a position with the employer as an assistant manager in its car sales business and was later promoted to retail manager.

When the employee’s open visa was due to expire, the employer agreed to support the employee in her visa application provided she paid him approximately $4,600. The employee paid the sum and agreed to go on unpaid leave until the visa was confirmed.

Once the visa was confirmed she sought to go back to work. For a period of approximately 6 weeks, the employer gave her work to do remotely but did not pay her. She then sought and secured another job. Subsequently, the original employer went into liquidation.

The employee sought:

• compensation from the employer for hurt and humiliation arising from her unjustified constructive dismissal
• wage arrears and a refund of the unlawful premium from the employer’s director as a person-involved in breaches of her minimum entitlements.

The Employment Relations Authority (the Authority) accepted the employee was constructively dismissed. It awarded her $10,000 compensation under s 123(1)(c)(i) of the Employment Relations Act 2000 (see paragraph 38). The Authority took into account that she was a vulnerable person who suffered anxiety and distress, continuing to work without pay while living off her savings (see paragraph 36).

The Authority also accepted that the money the employee paid the employer to support her continued employment was an unlawful premium under the Wages Protection Act 1983, s 12A, even though she did not pay the money to get the job in the first instance. It found it was equitable to order the company director to pay both the premium and close to $15,000 in unpaid wages and holiday pay personally (see paragraph 43).

Zhou v Peach Cars Ltd [2024] NZERA 547 (PDF, 248 KB)(external link)