Employment law’s hottest topics under the lens
The ADLS Employment Law Committee recently held its annual Burning Issues Forum.
Catherine Stewart, Convenor of the Committee, opened the Forum by traversing key issues in employment law over the past year. These included the increasing trend for large penalties to be awarded by the Employment Relations Authority and Employment Court for serious breaches of minimum standards, the development of case law regarding the application of scale costs (such as an uplift of 15% for GST on an award of reasonable costs), and a number of decisions from the Employment Court and Supreme Court over the prior 12 months which encapsulate important and developing principles in employment law. Ms Stewart also referred to likely employment law changes under the Labour-led government – burning the brightest of all burning issues – and outlined what proposed changes the government has signalled will occur.
Russell McVeagh partner Kylie Dunn focussed on the ten awards of compensation made by the Employment Court over the past 12 months. The mean award in this admittedly small sample, including dismissal and disadvantage grievances, and taking into account reduction for contribution by the employee, was $12,000. Ms Dunn compared the $12,000 figure with an analysis carried out last year covering the years 2013 to 2016. She concluded that there had not been much movement in compensation awards from 2013 to 2017. Ms Dunn referred to the Employment Court judgment of Stormont v Peddle Thorpe Aitken Limited, in which the Court analyses the three distinct concepts listed in section 123(1) (c)(i) of the Employment Relations Act 2000 – humiliation, loss of dignity, and injury to feelings. She encouraged those present to be mindful of the breadth of harm that section 123(1)(c)(i) is meant to encompass.
The Court in Stormont also held that:
- the imposition of a penalty is not relevant to the amount of compensation awarded;
- relying on its “gut feel” does not discharge the employer’s obligation to provide adequate information during redundancy consultation; and
- the fact no redeployment is available does not excuse the employer from consulting about redeployment.
In relation to penalties, Ms Dunn referred to three Employment Court cases in the last year where penalties have been awarded for breaches of the implied duty of good faith and, in one case, breach of a settlement agreement by an employer. In the breach of settlement agreement case (Lumsden v Sky City Management Limited), the Court considered the section 133A factors relevant to assessing the quantum of penalties. The Forum was also advised of an Employment Court judgment issued only a few days earlier (Waikato DHB v Archibald), in which the Chief Judge found it helpful (in that particular case) to assess compensation for humiliation, loss of dignity and injury to feelings against three bands, describing the $20,000 compensation awarded in that case as “moderate” and in the middle of the middle band. Ms Dunn pointed to the Stormont and Lumsden judgments as providing good guidance about payment of penalties to the wronged party versus payment to the Crown.
Availability provisions and disclosure obligations
His Honour Judge Smith spoke first about the “availability provisions” that came into effect on 1 April 2016 (including section 67D). These provisions were a response to zero hour contracts, that is, contracts containing no guaranteed hours but requiring employees to be available should work be offered. His Honour discussed the first and only Employment Court judgment to consider whether section 67D had been engaged or infringed, Fraser v McDonalds Restaurants NZ Ltd.
The evidence in this case was that the employees nominated the maximum hours they would be available to work. From that nomination, the employees were guaranteed 80% security of hours, up to 32 hours per week. Hours were adjusted each quarter based on what was worked in the previous quarter. This formula, provided in the employment agreement, meant hours could reduce over time. The employees argued that, under this formula, they had to work more than their nominated hours in order to avoid the effects of this automatic reduction. The Court was not prepared to make a declaration that the employment contained an availability provision. What made the difference in this case, was the evidence that McDonalds did not actually reduce the plaintiff employees’ hours. The facts of the McDonalds case, as determined by the Court, meant that while the judgment dealt with section 67C and 67D, it did not need to address all the nuances those sections create. The primary take-home message is that flexibility in arranging roster relationships is achievable with careful drafting.
His Honour also spoke to the recent Supreme Court case ASG v Harlene Hayne, Vice-Chancellor of the University of Otago. The issue in this case was the obiter remark in the Court of Appeal decision, left unaltered by the subsequent Supreme Court decision, that the employee owed a duty of good faith to report to his employer the fact that he was facing charges. This employee had, in the District Court, been discharged without conviction precisely because of the potential impact on his ongoing employment. His Honour raised the scope of an employee’s duty to disclose, and when that duty manifests itself. It is clear that some nexus to employment is needed before an employee is required to disclose, but how far does the duty to inform on yourself go? The answer appears to be: It depends on the nexus between the facts of the charge and the nature of the employment. There was an obvious nexus in the ASG case, but what about cases on the cusp?
His Honour also considered whether the employee’s duty to disclose conflicted with the defendant’s right to silence in criminal cases. It appears, after ASG, that suppression orders to avoid the follow-on consequences (to employment) of being charged or convicted, may be pointless because “publication” does not include bare disclosure to those who, objectively assessed, have a genuine interest in knowing – in that case, the employer.
Philip Skelton QC addressed the issue of pay equity, acknowledging that the Bill currently before Parliament, to implement the principles of the Joint Working Group on Pay Equity, would not proceed under the new government.
Mr Skelton QC said the Employment Relations Authority has been holding onto more than 100 pay equity claims, waiting for the legislation to be passed. He observed that the Equal Pay Act 1972 continues to apply and (as interpreted in TerraNova) its provisions apply not just to equal pay but to pay equity. He questioned whether there was any need for the Equal Pay Act to be replaced – the Terra Nova case indicates it is working well. Mr Skelton QC urged the Authority to determine the backlog of pay equity claims without further delay and observed that those determinations will present an opportunity for the Employment Court to set guidelines to assist resolution of such claims. Employment lawyers will need to upskill on how to deal with what will be complex class action litigation in this area. As he noted, we are used to dealing with disputes of rights, but these are disputes of interests.
The ADLS Employment Law Committee thanks Simpson Grierson for, once again, providing an excellent venue for learning and conviviality.