Cases of interest 2018

Employment Court - Good faith in collective bargaining - Union representation during individual bargaining

The union claimed the employer breached the duty of good faith during collective bargaining and duties relating to the right of representation set out in s 236 of the Employment Relations Act 2000.

During restructuring, union members had authorised the union to represent them. Despite this, the employer sent letters offering redeployment directly to union members and indicated a willingness to deal directly with the members. These letters were sent prior to the initiation of collective bargaining.

The Employment Court held that it could not be said that the initiating of bargaining placed all the issues relating to the employment relationship on the bargaining table (see para 99). The beginning of bargaining did not automatically veto the employer’s management prerogative (see para 100). The offers of redeployment were covered by the provisions relating to individual bargaining and operated in parallel to the collective bargaining provisions (see para 110).

The Court held that, on the facts, the employees did not have a realistic option to respond via the union (see para 164). It concluded that s 236 had been breached when the employer dealt directly with union members regarding the redeployment offers (see para 174).

Link to case [PDF 518KB](external link)

Employment Court - Special leave to remove to Employment Court - Sections 178 and 179 of Employment Relations Act 2000

The Employment Relations Authority had dismissed the employee’s application to remove the matter to the Employment Court. The employee sought special leave to remove proceedings to the Court under s 178(3). Alternatively, it sought leave to extend the time to challenge the Authority’s decision not to remove under s 179.

At issue was the inter-relationship between ss 178(3) and 179 and whether a party is entitled to pursue both options.  The Court applied the maxim generalia specialibus non derogant (the specific overrides the general). In this case, s 178(3) was the specific section overriding the more general s 179. It held in making a specific provision for an application for special leave when the Authority declines leave, Parliament clearly indicated that this was process that must be followed in such circumstances (see para 48).

The Court held that even where one or more grounds for removal are made out it still had residual discretion under s 178(3) to decide not to remove a matter (see para 33). In exercising this discretion the Court should have regard to the economic advantages of having the matter dealt with in one hearing rather than an investigation meeting and subsequent challenge (see para 36).

On the facts, the Court held that a number of questions of law did arise and special leave was granted. The Court noted that that the issues involved a mixed question of law but that this was not determinative in deciding whether there was an important question of law. The reality is that most cases involved issues of both law and fact and s 178(2)(a) is not restricted to cases which are devoid of factual dispute (see para 26).

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Employment Court – Determining entitlement to costs award

At issue was who was to be determined the successful party and therefore entitled to an award of costs. The Employment Relations Authority had found the employer to be the successful party as the majority of the investigation was taken up with the unsuccessful constructive dismissal claim (see para 20).

The Court considered that while the employee’s success was limited to a finding of unjustified disadvantage, this could not have been achieved without lodging a claim. Consequently, the Court considered the employee to be the successful party and entitled to an award of costs (see para 44).

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Employment Court – Application to strikeout claim – Whether claim frivolous and vexatious, an abuse of the court process or outside the jurisdiction of the Employment Relations Authority and Employment Court

The Court was required to consider whether to grant an application to strikeout an appeal relating to claims an employee had received monies to which she was not entitled and had breached the fiduciary and good faith obligations owed to her employer.

The Court noted that, given the clear findings of the Authority, the employer’s claim might be an ambitious claim to establish. However, it was not possible to conclude from affidavit evidence that the claim was incapable of success (see para 54). Furthermore, whether the circumstances of proceedings are to be characterised as an abuse of process is a question of fact and degree (see para 59).

The Court was not satisfied that the evidence was sufficiently persuasive to establish that the proceedings were brought for the ulterior purpose of harassing the employee following the breakdown of the de facto relationship (see para 61). Consequently, the application for strikeout on the first two grounds was dismissed.

The Court granted the application for strikeout for want of jurisdiction (see para 105). The Court considered the substance of each claim to be that the employee knowingly engaged in wrongful conduct and took advantage of her position to the point of acting dishonestly (see para 88). Consequently, each action was to be properly regarded as a claim in equity or tort (see para 91).

Adopting the language of BDM Grange Ltd v Parker [2006] 1 NZLR 353 (HC), the Court held that the claims were not particular to the employment relationship which instead “merely provides the factual setting for the cause of action” (see para 90). As the essence of the claims was not employment-related, they were not within the Authority or Court’s jurisdiction (see para 92). The Court rejected the employer’s submission that, because the Authority had proceeded to investigate the claim, jurisdiction was bestowed by consent or by failure to raise an objection (see paras 93 and 94).

The Court refused to allow the employer an opportunity to amend their claims. The employer was given the opportunity to provide further and better particulars but did not indicate what amendments might be made. The Court concluded it was not appropriate for the Court to speculate (see para 103). The Court considered it unlikely that any amendments would overcome the jurisdictional issue (see para 103). Furthermore, where dishonesty is alleged, a plaintiff must be able to show a prima facie case at the time of filing and not simply hope something might turn up in discovery or cross-examination (see para 104).

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Employment Court – Costs award for multiple judgments – Distributing liability for costs when third party controls and finances vexatious claim 
The employee had brought a personal grievance against her former employer (LSG). The employee’s claim was financed by another former employer (PRI). LSG and PGI were competitors in the same industry and PGI’s support of the claim was part of a broader strategy to disadvantage LSG. Mr Hay, a former director closely associated with PRI, coordinated the claim. 

The claim was tenaciously advanced in a manner disproportionate to the modest issues at stake. As a result, the matter involved two preliminary judgments, 19 interlocutory judgments, the substantive judgment and five judgements concerning various aspects of costs. 

The Court held that the interlocutory bombardment had become vexatious and when the claim advanced to the substantive stage it became evident the claim was based on a sham (see para 318).The employee was unsuccessful on all pleaded causes of action. The employee had unreasonably rejected a number of Calderbank offers from LSG. In total, the Employment Court awarded LSG $195,926 in costs and disbursements. At issue was how these costs should be apportioned between the employee, PRI and Mr Hay. 

The Court held that the employee was vulnerable and had not controlled the claim. Rather, it was probable that a strategy was conceived for her which she was asked to approve (see para 261). When assessing the employee’s liability it was necessary to take into account her limited ability to pay and the possibility of imposing costs against PRI and Mr Hay (see para 273). 

The Court held that PRI had shielded Mr Hay involvement in litigation to allow him to avoid personal liability (see para 316). In addition, it actively supported the claim. Accordingly, PRI was liable for LSG’s costs (see para 323). Mr Hay was not protected by the corporate veil since it did not apply when making costs awards against third parties (see para 338). Mr Hay was instrumentally involved in arranging PRI funds to be used for the employees claim and he was the only person who provided the relevant instructions for litigation (see para 344). Accordingly, Mr Hay was also liable for costs. 

The Court ordered the employee to pay $10,000 in costs. Mr Hay was to pay costs in respect of the final two interlocutory judgments which amounted to $19,164. The remaining costs of $166,784 were to be paid by PRI and Mr Hay who were jointly and severally liable.

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Employment Court – Application of new penal provisions in Part 9A Employment Relations Act 2000 (ERA) – Declaration of breach – Banning order – Pecuniary penalties 

The proceedings arose as a result of the employer relying on an illegal forfeiture clause to refuse payment of holiday pay owed to employees. Reliance on the same clause by other companies owned and operated by the director of Victoria 88, Mr Freeman, had previously been subject to a number proceedings before the Employment Relations Authority and Employment Court (see paras 13 and 14). While the breaches that occurred before the enactment of Part 9A in April 2016 could not be subject to formal orders, it was accepted that they formed relevant background context when considering the seriousness of the breaches which occurred after 1 April 2016 (see paras 23 and 24).

The Court made a declaration of breach: see para 27

a) That Victoria 88 breached a minimum entitlement provision, being s 27(1)(b) of the HA by failing to pay final holiday pay.

b) That Mr Freeman was a person involved in a breach of a minimum entitlement provision, being s 27(1)(b) of the HA, in that he knowingly directed Victoria 88's failure to pay final holiday pay.

The Court imposed banning orders under s 142M(1)(a) ERA preventing both Victoria 88 Ltd and Mr Freeman from entering into any employment agreement as an employer or be involved in the hiring or employment of employees for a period of three years (see para 37). In addition, the Court ordered Mr Freeman and Victoria 88 to pay $20,000 in penalties (see para 52).

The Court noted that banning orders should only be made where there is a serious breach or breaches of minimum standards and, as a result, such orders are likely to be rare (see para 39). The Court further cautioned that the orders made were appropriate given that the parties had reached an agreed position and thereby avoided the need for a defended hearing.  However, the orders should not be regarded as setting any precedent for future applications (see para 7).

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Employment Court – Unjustified dismissal – Application of 90-day trial period provision – Whether prior work performed through recruiting agency made trial period unenforceable – Whether absence of trial period in initial agreement rendered trial period in later agreement unenforceable

Having established that Mr McSherry had been dismissed, the Court was required to establish whether he was prevented from pursuing a personal grievance for unjustified dismissal because of a valid 90-day trial period.

The Court dismissed the first argument that the trial period could not be relied on due to unfair bargaining (see para 29). While the Court accepted that the employer had been wrong to advise that 90-day trial periods are compulsory in New Zealand, Mr McSherry was an experienced person not lacking intelligence or business nous (see paras 27 and 28). The interactions between the employer and employee were considered to have been conducted on relatively equal footing (see para 28).

The Court further dismissed the argument that a previous temp arrangement excluded the operation of the trial provisions on the basis that the requirements for a valid trial period under s 67A Employment Relations Act 2000 (ERA) only apply to “an employee who has not been previously employed by the employer” (see para 36). The Court considered the real nature of the temp relationship did not point to employment by Kumara Hotel Ltd under s 6 ERA (see para 33). The Court held Parliament deliberately chose to use a narrow definition of “employee” and “employer” under s 67A(3) ERA rather than the “loose and all-encompassing” construction argued on behalf of Mr McSherry (see para 34).

The trial period was ultimately held to be unenforceable as no mention of a trial period was made in the initial offer (see para 47). Offer and acceptance were found to have occurred when the key terms of agreement were settled by email correspondence. Once the parties have entered into a binding agreement, the employee is employed by the employer under s 67A ERA and the employer is precluded from relying on a trial provision contained in a subsequent agreement (see para 45).

The Court therefore held that Mr McSherry was unjustifiably dismissed and upheld the remedies ordered in the Employment Relations Authority (see para 60).

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Employment Court - Costs on costs judgement

The employer, LSG, had successfully defended a personal grievance claim brought by a former employee. The employee’s claim had been financed by PRI, one of LSG’s competitors, and co-ordinated by Mr Hay, a former director of PRI. 

The employee’s claim had been advanced aggressively and involved many interlocutory applications to the point the Employment Court described it as vexatious. In a costs judgement, the Court awarded substantial costs in favour of LSG. The responsibility for the costs was split between the employee, PRI and Mr Hay. LSG sought a contribution to costs incurred in relation to the costs judgment. 

The Employment Court noted that it had the ability to award costs on costs. This was to be done in accordance with the costs principles which normally apply to interlocutory applications: para [13]-[17]. The Court found it was appropriate to award costs in this case. The successful party had gone to extraordinary lengths to pursue costs and a three day hearing had to be devoted to the issue: para [18]. 

The Court went on to apply the established principles relating to costs. The employer had made a Calderbank offer which included an amount for costs in the Court and Authority. The consequences of the employee’s unreasonable refusal of the Calderbank offer were held to extend to PRI and Mr Hay given their integral involvement in the litigation: para [26]. A scale approach was not appropriate given the complexity of the case: para [34]. LSG reported that it incurred a total of $47,315 in legal fees for the matter of costs. The Court held this amount was a fair and reasonable starting point for assessing costs: para [35]. 

In many respects, the case advanced for PRI was different from that advanced for Mr Hay. Accordingly, it was not appropriate to make a joint and several order: para [52]. Due to the unusual circumstances of the case it was appropriate to depart from the usual approach of modest orders for costs on costs. PRI and Mr Hay were liable for 80 per cent of costs for which they were responsible. In light of the employee’s impecuniosity, a nominal amount of $1,000 costs was awarded against her: para [48]. 

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Court of Appeal – Application for leave to appeal on questions of law

The Employment Court previously held that anaesthetic technicians were working for the purposes of the Minimum Wage Act 1983 while they were on call. The employer sought leave to appeal this decision on the grounds that there were important questions of law. 

The Court of Appeal held that three of the five the questions posed by the employer were simply matters of factual evaluation undertaken in the course of applying the relevant legal test: para [8]. 

The employer argued that the Employment Court erred in failing to consider the effects of s 56 of the Holidays Act 2003 or s 67D of the Employment Relations Act 2000 when applying s 6 of the Minimum Wage Act 1983. The Court held that the interplay between different statutory provisions could potentially constitute a question of law.

However, the significance of other provisions depends of the degree of relatedness: para [9]. It concluded that the Holidays Act 2003 is quite different legislation form the Minimum Wage Act 1983 and was not intended to impact the interpretation or application of s 6: para [9]. Similarly, it was not apparent why s 67D of the Employment Relations Act 2000 was significant in the context of the intensely practical inquiry that is required when deciding whether a person is working for the purposes of s 6 of the Minimum Wage Act 1986: para [10]. 

Leave to appeal was declined. 

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Employment Court – Whether daily unpaid morning meetings constitute work – How compliance with the Minimum Wage Act 1983 should be assessed

Every morning, before opening the store, Smiths City Group Limited conducts a short meeting with sales staff. Attendance at these meetings is expected, but no wage and time records are kept. The sales staff who attend are not paid for their time. The Court was required to consider whether these meetings constituted work for the purposes of s 6 of the Minimum Wage Act 1983 and, if so, whether commission and incentive payments should be taken into account in assessing compliance with the Act. 

Section 6 of the Minimum Wage Act requires payment for work at not less than the minimum rate but does not define what “work” means. The Court noted that an interpretation of “work” that would have confined its application to “… physical and mental exertion in the performance of one’s duties” was rejected by the Court of Appeal in Dea Services v Dickson [2011] NZCA 14 (see para [38]). The Court adopted the three factual inquiries established in Idea Services to conclude that the morning meetings were “work” (see para [69]). 

Firstly, when considering the level of constraints placed on the employees, the Court held that informality of the meetings is not material (see para [60]). Although staff had some limited freedom during the meetings, they were not entitled to be disruptive and had to listen (see para [66]). Constraint is not to be equated with compulsion (see paras [64] and [65]). The expectation to attend, and pressure placed on staff to do so, was direct and forceful. That expectation involved an exercise of power in a relationship with an imbalance of power. The practical reality was that sales staff had to attend in order to satisfy their employer’s expectations and not be seen as poor performers. The Court held this to be a sufficient constraint on the time of an employee, in the sense used in Idea Services (see para [65]). 

Dealing with the responsibility placed on employees, the Court accepted that most of the time the employees attending the meetings had no “active” responsibilities to discharge. However, they were obliged to sit and listen to the information that was being imparted and to absorb it (see para [48]). 

Finally, the meetings were held to be solely for the benefit of the employer (see para [59]). Any possible benefit to staff by enhancing their opportunity to earn commission or incentive payments was considered immaterial (see para [60]). Smiths City enjoyed the exclusive benefit of the meetings because it had a cost-free opportunity to prepare its staff for the working day (see para [68]). 

The Court held that the way Smiths City calculated and paid commission and/or discretionary incentives was indistinguishable from the method of payment, described as averaging, that was rejected in Idea Services (see para [76]). In Idea Services the Court of Appeal held that the key expression in s 6 is the phrase “rate of wages” meaning each unit of time (see para [73]). The employees to whom the improvement notice was directed were paid by the hour. Their entitlements under the Minimum Wage Act and Minimum Wage Orders must be calculated using the same unit of time. Commissions and incentive payments were additional income earned over and above the contractual hourly rate not in substitution for it (see para [77]). 

Consequently, Smiths City Group Limited was found not to have complied with the requirements of the Minimum Wage Act (see para [81]). 

Link to case [PDF 503 KB](external link) 

Employment Court – Determining entitlement to retirement gratuity – Interpretation of “retiring”

At issue was the interpretation of a clause in the collective agreement which provides that WDHB “may pay a retiring gratuity to staff retiring from the organisation who have had not less than 10years’ service with the employer…”  The parties debated whether “retirement” was to be construed as “moving on” from WDHB or ceasing all gainful employment. 

The Court noted that earlier collective employment agreements between the parties, from which the provision in issue was grand parented, made a clear distinction between “retirement” and “resignation” (see para [62]). The parties intended distinction between the two concepts remained unaltered (see paras [62], [72], [81] and [83]).

The Court rejected the argument that requiring the employee to be withdrawing from work on a permanent basis in order to receive the gratuity would operate as an unreasonable restraint of trade. The employee would not be deprived of the right to work; they would merely be precluded from receiving the gratuity if they chose to do so (see para [98]). 

Ultimately, an employee will be held to be retiring from WDHB for the purposes of the retiring gratuity clause if the employee will not be, and has no intention of, taking up further regular paid work in any capacity (see para [108]). 

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Employment Court – Jurisdiction to awards costs where no jurisdiction exists to determine the claim

While determining two costs issues, the Court was required to determine a preliminary issue as to the Employment Relations Authority’s jurisdiction to determine costs. An earlier judgement of the Court found that the Authority did not have jurisdiction to consider the employer’s claim (see para [8]). Consequently, the employer submitted that there was no basis for the Authority to have made a costs order against it (see para [11]). 

Under cl 15 of the second schedule of the Employment Relations Act 2000 (ERA) the Authority may order costs against “any party to a matter.” The Act does not define the word “matter.” However, the Court rejected the employer’s argument that it could be conflated with the term “employment relationship problem” in s 161 ERA.

The employer’s submission would have effectively meant that “parties to a matter” was to be interpreted as “parties to an employment relationship problem which is within jurisdiction.” The Court considered this to be a substantial gloss on the language that Parliament chose to use (see para [16]). Furthermore, if the employer’s approach were to be adopted, the Authority would be unable to make any order as to costs for a successful party where the Authority investigates an issue as to jurisdiction and determines that there is a want of jurisdiction (at para [17]). Finally, the same approach would apply to the other provisions of the second schedule referring to “matters which are before the Authority”. The Court noted that it is inherently unlikely that Parliament intended that all these procedural provisions would not apply if the Authority determined there was a lack of jurisdiction (at para [18]).

 Where the Authority has a relationship problem before it, it is properly described as having a matter before it so that itis able to exercise the powers described in the second schedule of the Act (see para [23]). 

The Authority had jurisdiction to consider the costs issues notwithstanding the subsequent conclusion reached by the Court on the topic of jurisdiction (see para [24]). 

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Employment Court – Jurisdiction to direct parties to private mediation 

The employer applied to the Court for a direction to private mediation. At issue was whether the Court’s power to direct mediation under s 188(2) of the Employment Relations Act 2000 is limited to mediation provided by the Ministry of Business, Innovation and Employment mediation services (MBIE mediation services). 

The Court determined that it was likely Parliament intended that court-directed mediation would be undertaken, at no cost, by specialist MBIE mediators appointed by the chief executive under s 144(1), and in accordance with the detailed processes and procedures set out in ss 144A-149A. Had Parliament intended to confer a broad discretion to direct mediation both within and outside of the mediation services provided for under the Act, it would have included an express ability to impose conditions on any such direction (see para [11]). 

While the definition of mediation under s 5 of the Act refers to mediation services provided by the chief executive or “any other person,” the definition of mediation services itself is confined to mediation services provided under s 144, namely by the Chief Executive and not by anyone else (see para [13]). 

The Court declined the application for a direction to private mediation and directed the parties to attend mediation provided by MBIE mediation services (see para [18]). 

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Employment Court – Whether notification to professional regulatory body breached record of settlement

 The employee argued that the DHB breached the terms of a confidential record of settlement by notifying the Nursing Council of New Zealand that she had resigned before the conclusion of an investigation into complaints about her. 

The Court noted that, if the DHB considered the employees resignation to be “… for reasons relating to competence,” the DHB was under a statutory duty to notify under s 34(4) of the Health Practitioners Competence Assurance Act 2003 (HPCAA). Section 34 requires a causal connection between a dismissal or resignation and the giving of notice. However, the threshold is that that the subject of competence was raised or played some part in the decision to end a nurse’s employment. It was not necessary for the DHB to establish a competence issue, to attempt to take into account the employee’s views about the complaints against her, or to try to ascertain why she had resigned before notifying (see para [41]). 

The settlement agreement qualified the requirement of confidentiality so that it only applied “so far as the law allows.” Consequently, the DHB did not breach the record of settlement by notifying the Nursing Council (see para [46]). 

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Employment Court – Whether to grant interim injunction restraining union from picketing on employer’s property – Section 99 of the Employment Relations Act 2000

At issue was whether an interim order should be issued restraining the union from picketing or threatening to picket on the employer’s property.

The Court considered it was arguable that s 99(3) of the ERA 2000 did not apply to tort actions involving picketing, even if related to a strike or lockout (see para 51). Accordingly, the Court was satisfied that jurisdiction was established on an arguable basis (see para 53). It was reasonable for the employer to consider itself under a threat of picketing (see para 62). There was evidence that people had stood in the drive-through at the restaurant and were on the employer’s property (see para 66-68). The Court concluded the employer had an arguable case for interim relief on the basis of the tort of trespass (see para 71).

There were significant health and safety issues regarding the picketing around drive-through and car park areas (see para 72). An unspecified incident had required the police to attend (see para 74). There was a risk of altercation with customers being delayed by picketers (see para 78). A health and safety incident would never be compensated adequately with damages, particularly considering the statutory bar for seeking damages under the Accident Compensation Act 2001 (see para 79). The Court held there was not an alternative satisfactory remedy.

The union’s right to free speech and peaceful assembly could be exercised beyond the employer’s property (see para 81). Consequently, the balance of convenience strongly favoured the granting of interim relief (see para 82). Relatively short notice of strikes had been given and the pickets had been difficult to manage. The employer had specifically requested that the picketing did not take place on its private property.  The union did not provide any undertakings or assurances regarding future pickets (see para 85). The Court held overall justice favoured the employer (see para 86).

An interim injunction was granted preventing the union from picketing on the employer’s property. Where there was a lack of clarity as to the boundary of its property, the employer was to provide an accurate description of its properties (see para 89).   

The Court was careful to note that the finding made for this interlocutory application should not be regarded as creating a precedent of general application (see para 76).

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Employment Court – Appropriation of penalty for breach of employment standards between employer and any person involved in breach – Section 75 of the Holidays Act 2003

The Court was required to consider how the Authority should exercise its discretion when assigning liability for a breach of employment standards between an employer and a person involved in the same breach.

The Court noted that the respective liability of the employer and the person involved in the breach does not arise from the same actions (see para 17). The employer is liable for the breach of the employment standard itself. The actions for which the person involved becomes liable to a penalty, as set out in s 142W(1), are collateral to the breach. This would imply that the imposition of a penalty needs to be assessed independently against each to reflect the differentiation in their actions (see para 21). 

The Court assessed the position in comparison with penalties or fines imposed under other legislation. Ultimately, the Court held that simply dividing what is regarded as an appropriate penalty for the breach between the employer and individual is not the correct approach (see para 45). Deterrence is a major factor in imposing penalties for a breach of employment standards (see para 46). The Authority must assess the respective liabilities of the employer and the person involved by reference to their own separate level of culpability (see para 48). Nevertheless, consideration may be given to the liability of the other. Penalties should not be imposed in a formulaic way. Instead, the Authority is to exercise its discretion having regard to proportionality, fairness and justice (see para 48).

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Employment Court – Interpretation of collective agreement – Whether all work performed on weekend to be paid at time and a half or just non-normal shifts

At issue was whether the phrase “All work by an employee on Saturdays and Sundays” in the collective agreement was to be given its plain meaning or interpreted to exclude work which begins on a Friday and ends in the early hours of Saturday.

The Court held that the use of the word “all” made it clear that any work performed on a Saturday or Sunday by an employee at a Monday-to-Friday-plant is to receive the higher remuneration rate. It was incorrect to limit remuneration only to the start of the roster period (see para 14). Instead, pay is to be calculated with reference to what day each part of the rostered hours falls into (see para 15).

The Court rejected the influence of background material that raised the possibility that the higher pay rate was intended to only apply to non-normal working hours (see para 21). Furthermore, the Court rejected an argument that the union was estopped from asserting a different interpretation of the contract as a result of the union’s silence (see para 34).

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Court of Appeal – Variations to collective agreement – Abolishing role 

During a restructure, the employer disestablished the role of senior case manager. The current senior case managers retained their current terms and conditions, but their job title was changed to case manager. The union contended that this amounted to a unilateral variation to the collective agreement. The collective agreement provided the employer with a right to manage and carry out organisational change. The Employment Court held that the employer was entitled to make the change without the union’s agreement. The union appealed. 

The Court of Appeal held that a clause requiring changes to collective agreement to be negotiated did not apply. This was because the collective agreement did not contain any references to senior case manager or case manager (para 31-32). Career progression between case managers and senior case mangers was not automatic and there was not entitlement to be promoted. The case managers had simply lost an opportunity to apply for a particular position (para 35). 

The appeal was dismissed. 

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Employment Court – Stay of Execution – Jurisdiction when Employment Relations Authority determination certified by District Court 

The Authority found the employee breached his employment agreement and ordered him to pay damages, indemnity costs and disbursements to the employer. The employee filed a challenge in the Employment Court disputing the amount he was ordered to pay. The employer took steps to enforce the determination by having it certified as a judgement of the District Court. 

This case concerned the employee’s application for a stay of execution of the determination. A preliminary issue was whether the District Court had jurisdiction because of the certified judgment. The Employment Court held that the determination had not been transformed into a District Court judgment and it still had jurisdiction over the stay application (para 29-32). 

To determine the stay application, the Employment Court considered the factors in Assured Financial Peace Ltd v Pais [2010] NZEmpC 50 (para 33-54). The Court dismissed the application. 

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Employment Court – Disclosure of evidence – Whether legal privilege applies to lay advocates 

The parties were engaged in collective bargaining. The employer refused to bargain about wages and the union initiated proceedings against the employer for a breach of good faith. During proceedings, the union served notices requiring disclosure of all documents relating to or dealing with the bargaining. The employer objected to disclosure on two grounds. First, it asserted that it should not have to disclose its bargaining strategy. Second, the employer claimed that its communications with its employment advocate were subject to legal professional privilege. The employment advocate was not a lawyer.

The Employment Court held that some protection should be afforded to documents that might disclose the employer’s bargaining strategy. The Court ordered the employer was excused from disclosing documents which directly or indirectly described its bargaining strategy (para 46). 

However, the Court held that the experience and role played by employment advocates does not automatically create the type of confidence which would excuse the disclosure of relevant documents. There needs to be something particular about the relationship which would excuse the employer from giving evidence (para 44). Parliament did not intend to create blanket privilege for communications with lay advocates (para 46). 

Link to case [PDF 900 KB]

Employment Court – Jurisdiction – What type of claims can Labour Inspector bring on behalf of employee 

The Labour Inspector brought a claim against the plaintiff company and its director on the basis that an employee had not been paid minimum wage. The Employment Relations Authority dismissed all of the Labour Inspectors claims. However, it did find that the employee was owed wages and holiday arrears for work undertaken for another company, Connecting Ltd, during his time with the employer. 

The plaintiff argued that the Employment Relations Authority had no jurisdiction to address the work the employee undertook for Connecting Ltd. The Employment Court held that the fact the claim was brought in relation to minimum wage entitlements did not prevent a parallel recovery of wages or breach of employment agreement claim. 

However, the only person entitled to bring such claims was the employee (para 13). The Authority could not unilaterally investigate and determine the Connecting Ltd wage and holiday pay arrears issue (paras 14-20). The Court did not that if the claims related to a minimum entitlement breach, then the Authority may have had jurisdiction, although this point was not raised on the facts (para 18).

The challenge succeeded and the Court set aside the part of the Authority’s determination concerning the Connecting Ltd arrears.  

Link to case [PDF 285 KB]

The employee, a bus driver, was dismissed after an altercation with a passenger. The employee’s claim of unjustified dismissal was dismissed by the Employment Relations Authority and the Employment Court. The employee applied for leave to appeal to the Court of Appeal on questions of law.

The passenger had recorded the altercation. The recording was only provided to the employee after he had given his initial written response to the allegations. The Court of Appeal held there was a possible issue over whether the employer had appropriately raised its concerns before dismissing the employee: para [29]. However, this issue was confined to the parties and was not of general importance to the public: para [30]. The Court of Appeal also held that issues of law did not arise over the employee’s allegations of predetermination and a failure to adequately investigate: paras [31]-[35].

Leave to appeal was declined.

Link to case [PDF 279KB]

The employee, a police officer, raised a series separate personal grievances. First, the employee raised a grievance when he was not appointed to a vacant position. The Employment Court upheld this grievance. Later, the employee resigned and claimed constructive dismissal. The Employment Court dismissed the constructive dismissal claim. The employee appealed to the Court of Appeal on two questions of law.

First, the employee argued that the Employment Court erred when it dismissed the unjustified dismissal claim by failing to take into account as a relevant consideration, and treating as merely background, the non-appointment events.

The Court of Appeal held that the non-appointment events did not form part of the constructive dismissal’s statement of claim: para [23]-[28]. This meant that the employer was not fully informed of the case against them: para [29]. Further, the evidence suggested that what drove the employee out was not the non-appointment but the way he was treated in rehabilitation: para [33]. The Court concluded that this argument was a thinly disguised attempt to challenge factual findings relating to a different grievance: para [37]. The Employment Court had not erred.

Second, the employee argued the applicable test for deciding whether the dismissal was justified was that used before the Employment Relations Amendment Act 2010. This test asks what the employer “should” have done rather than what it “could” have done. Some events which lead to the constructive dismissal had occurred before 1 April 2011, when the Employment Relations Amendment Act 2010 came into force.

The Court of Appeal held that termination of employment is an essential element of constructive dismissal and until this occurred the employee did not have an existing right: para [53]. Where a grievance relies on actions that occurred both before and after 1 April 2011, the correct approach is to consider the time at which the majority of the key actions occurred: para [56]. The Employment Court was correct to use the “could” test.

The appeal was dismissed.

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Employment Court – Effect of foreseeability of harm to employee with pre-existing mental health condition on remedies for hurt and humiliation – Effect of employer’s post termination conduct on personal grievance awards

The Employment Court upheld the Employment Relations Authority determination that the employee had been unjustifiably constructively dismissed.

An issue was raised as to the relevance of an employee’s pre-existing condition to the amount awarded as compensation for hurt and humiliation. The employee suffered a dramatic decline in her mental and physical health when the employment relationship broke down culminating in a suicide attempt and medical intervention (para [42]).The employer was aware that the employee suffered from depression and anxiety, had left her previous employment under unhappy circumstances and was apprehensive about re-joining the workforce.  The directors were described as having “made it plain that they would take her under their wing” (para [7]).

The Court accepted that, in cases involving a pre-existing condition, liability for harm must be assessed on a case by case basis. It is necessary to assess whether a sufficient causal connection exists between the loss suffered and the employer’s breach. However, such issues did not arise in the present case (para [43]).The severity of the harm suffered by employee was no doubt compounded by her pre-existing condition. However, her vulnerabilities were well known by the employer. It would have been readily apparent that the actions taken would have a serious negative impact on the employee (para [43]).

A further issue arose as to the relevance of an employer’s post termination conduct when assessing compensation to be awarded. The employee suffered further distress following her dismissal when the employer posted derogatory comments about her to the Rotorua Chinese Community of Commerce online chat group. The Court held that, although there was a clear link between the comments and the employment relationship, the harm caused by the posts was distinct from the harm caused by the dismissal (para [47]). Compensation for a personal grievance under s 123 of the Employment Relations Act 2000 is for loss sustained as a result of the grievance. Any loss caused by separate actions of the employer may give rise to a separate action for relief but should not affect the amount awarded under s 123(1)(c)(i) (para [51]). In the circumstances of this case, the point was irrelevant to the compensation awarded as the employee had only sought $20,000 compensation (para [50]).

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Employment Court – Conduct outside of workplace leading to dismissal – Consequences of harassment following breakdown of private relationship with colleague

The employee was dismissed as a result of a series of incidents that arose from the break-down of his romantic relationships with two other employees. Such incidents included telephone calls, text messages, emails, “face-to-face contact”, the content of a Facebook post, being issued with a trespass notice, a harassment warning letter, a police safety order and being arrested for breaching that order. The Department concluded that its Code of Conduct for its employees had been breached. The employee challenged the validity of his dismissal.

A significant part of the employee’s case was that the conduct that resulted in his dismissal was a private matter. The Court accepted that there is a limit to the extent an employer can intrude on the private life of an employee. However, in this case the employer did not go beyond what was appropriate. Instead, the employer was drawn into the employee’s private life through his behaviour (para [69]). A neutral, objective, fair-minded and independent observer would conclude that the employee’s behaviour risked bringing the employer into disrepute.

The Court further held the employer was entitled to investigate and reach a conclusion about the employee’s behaviour because of its concerns about compliance with its social media policy. The policy warned of disciplinary action if an employee published any material that was harassing or could create a hostile work environment online. The Facebook post made personal comments about both of the female employees. The employee must have known that his Facebook friends included other employees and that the post was capable of being distributed more widely. The Facebook post was held to be inconsistent with the employer’s social media policy (para [76]).

Ultimately, the employer was entitled to investigate the complaint even though it related to events which occurred outside the workplace (para [76]). The fact that an employee is in a relationship with a colleague whom he harasses outside of work does not exempt that harasser from the consequences of his action in a workplace setting.

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Employment Court – Principles applying to calculation of penalties for a company breaching minimum employment standards – Relevance of an employee’s involvement in deceiving Immigration New Zealand

The employer admitted breaching minimum employment standards by breaching the Minimum Wage Act 1983 and Holidays Act 2003 in relation to three employees. However, the employer denied the alleged vulnerability of the employees.

At some point during the employment of each of the three employees their job description was changed from shop assistant to assistant store manager or store manager. This was done because all three came to New Zealand to study business management. For their visa applications to be successful they had to be in employment commensurate with their qualifications. Two of the employees admitted that they did not perform management duties. The employer submitted that the employees’ involvement in deceiving Immigration New Zealand was relevant to the calculation of penalties against the employer.

The Court held that the employees’ attempts to improve their immigration status were collateral to the main issue and did not absolve the employer from the “appalling way the employees were treated” (para [10]). To an extent, the breaches were aggravated by the employer taking advantage of the employees’ vulnerability over immigration status (para [10]).

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Employment Court – Definition of employee – Whether a trial period in a second employment agreement was enforceable

The employee bought a personal grievance following his dismissal from his position as General Manager. The employee alleged that the trial provision in his employment agreement was invalid and the notice period given to him did not comply with the employment agreement. The facts of the case were unusual.  The employee had been offered and accepted a position with the employer as a Business Manager. However, before commencing work, the employer offered the employee the superior position of General Manager. Both employment agreements were to start on the same date and both contained a 90-day trial period.

Under s 67A(3) of the Employment Relations Act 2000 (ERA), a trial period will not be valid where an employee has been previously employed by an employer. At issue was how “employee” under this section was to be defined.

Section 6(1)(b)(ii) ERA extends the definition of employee to include “a person intending to work”, which is defined in s 5 ERA. However, the Court noted that the purpose of s 67A(3) ERA can be ascertained from s 67A(2)(a) ERA (para [45]). The Court adopted the approach advocated in Blackmore v Honick Properties Ltd [2011] NZEmpC 152. What is referred to by an employee having been “previously employed” is that there has already been an opportunity to assess the employee’s suitability for the work (para [45]). Consequently, an employer cannot impose a trial period on an employee who has already started work, or who has previously worked for the employer (para [45]).

Immediately before signing the General Manager’s agreement the employee was an employee only for a limited purpose (para [46]). The Court accepted that the employee had not been previously employed for the purposes of s 67A(3) (para [47]). Therefore the employer was entitled to offer the employee an employment agreement as General Manager containing a trial period to commence from the date the employee commenced work (para [47]).

The employer failed to comply with the notice requirements set out in the employment agreement when dismissing the employee.  The schedule to the employment agreement stated that the trial period could be terminated by giving one week’s notice. The Court held that the employee did not receive his contractual notice. Instead, the employer decided to end the relationship immediately and acted accordingly. The Court held that the agreement required notice to be given and, while this could be followed by garden leave, it did not authorise cessation of employment and payment in lieu (para [60]).  Consequently, the Court held that the employer’s failure to comply with the employment agreement meant that it could not rely on the notice period to protect it from the employee raising a personal grievance (para [62]). Ultimately, the Court held the employee was unjustifiably dismissed (para [67]).

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Employment Court – Whether the character of proceedings warrants a different approach to costs – Costs against a party discharging a statutory function

An issue arose as to whether the nature of the proceedings, namely the Labour Inspector discharging its statutory function to enforce employment standards, should be taken into account when determining any costs that were to be awarded.

The Court noted that the power to award costs is discretionary and a broad range of factors may be taken into account. These factors may include issues relating to broader public interest. Consequently, there may be cases where it is appropriate not to award costs, or to reduce costs, against a Labour Inspector discharging a statutory function. However, the legislation does not provide for a degree of immunity to the Labour Inspectorate from the usual cost consequences of pursuing litigation. Ultimately, each case must be assessed on the specific merits of that case (para [9]).

The Court held that it was not appropriate, or in the public interest, for the plaintiff to have to shoulder the significant burden of the problems with the Labour Inspector’s case (para [10])

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EMPLOYMENT COURT – Standing to bring judicial review – Whether breach of natural justice grounds for judicial review

The applicant was an employment law advocate who represented an employee in the Employment Relations Authority. The employee’s personal grievance claim was successful and costs were sought. When awarding costs, the Authority commented that the applicant was an unregulated advocate and therefore did not have the expenses and obligations of his “qualified and registered” counterparts.

The applicant claimed that this implied he was unqualified and therefore had the potential to cause harm to his reputation and impact on his business interests. The applicant said he had no opportunity to address the statements on his qualification. The applicant sought to bring a judicial review on the grounds that natural justice had been breached. At issue was whether the applicant had grounds to bring judicial review proceedings.

The Employment Court held that s 184 of the Employment Relations Act 2000 did not exclude judicial review on the grounds of natural justice (see para 28). The Authority’s determination was challengeable by the employee, but the employee did not want to challenge. The applicant was not a party to the original proceedings and could not challenge the determination (see para 41). Therefore, s 184(1A)(b) did not apply. Because other avenues were closed to the applicant, a judicial review could be brought for the alleged breach of natural justice.

The applicant had standing to bring judicial review.

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Court of Appeal – Whether wages payable to unlawfully locked out seasonal workers – Whether wages covered by Wages Protection Act 1983

The union represented seasonal workers who had not been re-engaged at the start of a new meat processing season. Previous litigation had determined that the employer had a continuing obligation to re-engage the workers and that they had been unlawfully unlocked out prior to re-engagement. At issue was whether the workers had an entitlement to wages and whether these entitlements were protected by the Wages Protection 1983 (WPA). The employer argued that the worker’s claim was limited to damages rather than wage arrears.

The Court of Appeal held that the seasonal workers occupied a special category and had an entitlement to be re-engaged and, therefore, an entitlement to employment (see para 31). This status was reflected in the collective agreement (see paras 32-36). In light of this special category, the appropriate remedy to compensate for the unlawful lockout was wage arrears (see para 38). The Court held that the reference to ‘wages’ in the WPA applied to the wages payable to workers (see para 48). The purpose of the WPA did not only relate to permanent employees but also contemplated protection for the seasonal workers (see para 52).

The Court concluded that the wages were payable to the unlawfully locked out seasonal workers and that these wages were protected by the WPA. Consequently, the employer had breached s 4 of the WPA by making unlawful deductions.

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Employment Court – Whether lawful to incorporate payments for rest breaks in piece rates – Whether putting on and removing protective equipment is ‘work’ for purpose of Minimum Wage Act 1983

The union represented ed at three meat processimployees who workeng plants. The case addressed two main issues.

The first issue was whether piece rates incorporated payments for rest breaks and whether this was lawful.  The Employment Court examined the surrounding legislation and case law and concluded that Parliament did not stipulate the means by which payment for rest breaks would be made. Consequently, parties were free to agree that payments for rest breaks were to be included within the employees’ piece wage. Such a payment must be paid at the same rate for which an employee would have been paid at the time of the break (see paras 63-65). However, on the facts, the Court found that the piece workers at the three plants had not been provided with paid rest breaks (see para 194).

The second issue was whether time spent putting on or removing protective equipment at the beginning and ending of each shift, and at rest and meal breaks, was ‘work’ for the purposes of the Minimum Wage Act 1983 (MWA). The Court noted that the putting on and removing of equipment occurred while walking between areas and the time spent doing this was relevant (see paras 258-260). The time spent on putting on or removing equipment was to be assessed cumulatively rather than in each individual step (see para 262).

The Court applied Idea Services Ltd v Dickson [2011] NZCA 14,[2011] 2 NZLR 522. The Court held putting on or removing equipment imposed significant responsibilities and constraints on the freedom of the employees (see paras 266-270). The employer benefited from such actions as it was an essential part of the business (see para 271). Ultimately, the Court concluded that putting on or removing equipment could be considered work for which the employees were not paid (see para 280).

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Employment Court – Whether settlement agreement signed by mediator can be set aside for mental incapacity

The parties reached a settlement agreement privately and asked an MBIE mediator to sign the agreement. The mediator spoke to the employee over the phone and later signed the agreement. The employee subsequently obtained a medical opinion that she had been mentally incapacitated at the time she signed the settlement and when she spoke to the mediator. At issue was whether a settlement agreement signed by a mediator could be set aside for mental incapacity.

The Employment Court held that a mediator’s signature to a privately reached settlement agreement cannot be taken as certification that the contract was validity entered into (see paras 34-38). The Court noted the significant hurdles to proving incapacity would prevent any possible floodgate effect when allowing settlement agreements to be set aside for incapacity (see para 40). Section 149(3) did not prevent a party from challenging the validity of the agreement itself. If one party lacked mental capacity then the fundamentals of contract formation would not be made out and s 149(3) would not be engaged (see paras 45-46).

The Court held, based on medical evidence, that the employee was more likely than not mentally incapacitated when she signed the settlement agreement and had lacked capacity to instruct her lawyer (see para 54). However,the Court found that the employer did not subjectively know that the employee lacked the mental capacity to enter into the settlement agreement (see para 57). Further, the employer could not reasonably have been expected to have objectively known that the employee was mentally incapacitated (see paras 61-64).

The settlement agreement was not set aside.

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Employment Court – Whether breach of good faith to refuse to include remuneration in collective agreement – Whether protests during bargaining breached good faith

The parties were in the early stages of collective bargaining. The union claimed that the employer breached good faith by refusing to collectively bargain about wages. The Employment Court held that remuneration is a fundamental aspect of the employment relationship but that does not mean a collective agreement must include remuneration. No legislation requires for remuneration to be provided for in a collective agreement (see para 42). The duty of good faith does not go so far as to require remuneration to be included in a collective agreement (see paras 43-45). The employer had bargained about the proposed pay in the agreement and rejected it with reasons which satisfied the requirements of good faith (see para 49 and 54).

When the bargaining stalled, the union held a protest to garner public support. During this protest, the union displayed a large inflatable rat with a sign reading “Don’t be a rat Mr DOBSON”, a reference to a director and shareholder. A sign was also displayed which misnamed the business as ‘Pak’nSlave’. The employer claimed these actions were in breach of good faith.

The Employment Court held that good faith does not require bargaining to be undertaken in a courteous way or to avoid a combative style (see para 63). The union and its members enjoyed the right of free speech which they were entitled to exercise (see para 64). The rat and the sign did not cross the threshold where it could be said to be so offensive or undermining that a breach occurred. No reasonable person in Mr Dobson’s position would have been insulted by the rat and sign (see para 66). The ‘Pak’nSlave’ sign was also not a breach of good faith and simply represented an attempt to exert legitimate pressure on the employer (see para 68).

Neither party breached the duty of good faith.

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