International Newsletter

New Zealand: Employment Case Law Update

October 30, 2019
New Zealand

Three recent decisions cover a variety of interesting matters in the employment sphere, including requirements for fixed-term employment agreements, “availability provisions,” and the circumstances in which the Employment Relations Authority or Employment Court may unilaterally fix the provisions of a collective employment agreement.

Requirements of fixed-term employment agreements

In Morgan v Tranzit Coachlines Wairarapa Ltd [2019] NZEmpC 66, the Employment Court revisited the statutory requirements for fixed-term agreements. It ruled that the reasons for using a fixed-term employment agreement are not genuine if they do not reflect the specific circumstances of the employer and that uncertainty over funding arrangements is generally not a genuine reason for entering into a fixed-term employment agreement.

Generally, an employer seeking to rely on a fixed-term employment agreement to terminate an employment relationship must have genuine reasons based on reasonable grounds for doing so.

In this case, the employer contracted with the Ministry of Education to provide buses and drivers during the school year. This funding agreement expired every three years and had been renewed each time. The former employee (bus driver) had been employed pursuant to a series of fixed-term employment agreements spanning 18 years, which were tied to the expiration date of the ministry’s funding agreement.

The court held that the employer’s reasons for using the fixed-term agreements were neither genuine nor reasonable, noting that the risk that its funding agreement with the ministry would not be renewed was speculative, particularly in light of the 18 years of uninterrupted renewals. Financial insecurity (something that all businesses must at times endure) alone is not a sufficient reason for entering into and relying upon a fixed-term employment agreement. However, financial risks or insecurity that are specific to the employer may meet this statutory requirement.

Statutory obligations regarding availability provisions

Postal Workers Union of Aotearoa Inc v New Zealand Post Ltd [2019] NZEmpC 47 is a case about postal workers and overtime. In summary, the Employment Court held that if an employer requires an employee to work overtime, the employment agreement must contain a compliant “availability provision.”

Under the New Zealand Employment Relations Act 2000 (ERA), an “availability provision” is a clause that allows the employer to require an employee to be available to accept work, provided the employee has been guaranteed hours of work. The concept of an “availability provision” was introduced in response to the abuse of zero-hour contracts, in which workers had no guaranteed hours of work and were paid only for the work they actually carried out. Under the ERA, an availability provision may be included in an employment agreement only when:

  1. the agreement contains both agreed and guaranteed hours of work;
  2. the employer has genuine reasons based on reasonable grounds for its inclusion; and
  3. reasonable compensation is provided for the availability.

In this case, the relevant collective employment agreement provided that delivery agents were required to work “reasonable overtime in excess of their standard hours.” However, the clause did not include any reasons for the requirement to work overtime or any provisions for compensation for this work, meaning that it did not comply with statutory requirements. Accordingly, the employer was unable to rely on this clause to require that employees worked overtime.

Fixing provisions of a collective employment agreement

Jacks Hardware and Timber Ltd v First Union Inc [2019] NZEmpC 20 highlights the importance of employers engaging positively during negotiations of collective agreements. In cases of strong disagreement, employers may want to avoid any apparent breaches of good faith that may lead to an unfavorable provision being fixed by the Employment Relations Authority (Authority).

The ERA provides that the Authority may fix the provisions of the collective agreement when:

  1. there has been a serious and sustained breach of good faith;
  2. all other reasonable alternatives for agreeing have been exhausted; and
  3. fixing the provisions is the only effective remedy.

This case involves a protracted history of unsuccessful bargaining over the terms of a collective agreement between the union and the employer (a building supplies retailer). The employer was found to have breached its statutory duty of good faith in 2015 when it unilaterally withdrew from bargaining due to disagreement over a remuneration clause.

The union applied to the Authority to fix the provisions of the remuneration clause as a result of the breach of good faith in 2015, three years later. The employer argued that a new breach of good faith must be proven and that the union could not rely on the employer’s 2015 breach for the Authority to fix provisions of a collective agreement. However, the Authority disagreed and confirmed that the breach does not have to be new (provided it meets the ERA test as outlined above).

Written by Tim Clarke and Simon Moore of Bell Gully and Roger James of Ogletree Deakins

© 2019 Bell Gully and Ogletree, Deakins, Nash, Smoak & Stewart, P.C.