Around the traps May 2018

Employment Relations Amendment Bill In my December newsletter I reported on the employment law changes the Labour government had planned for its first 100 days. Fortunately good sense has prevailed following intensive lobbying about the 90 day Trial period. The Employment Relations Amendment Bill (“the Bill”) provides that Employers with fewer than 20 employees will still be able to use the 90 day Trial Period (for new employees) when the Bill becomes law. 20 employees means total number of actual employees, not 20 full-time equivalents or FTEs. The Bill has been referred to a Select Committee which will report on 1 August 2018, so there is no need to make any changes yet. Other significant changes in the Bill include:

• Reinstatement will be restored as the primary remedy in the event of a personal grievance being upheld for unjustified dismissal

• Restoration of statutory rest and meal breaks • Strengthening collective bargaining and union rights in the workplace • Increased protection for vulnerable workers such as cleaners and caterers when a business

is restructured. Hopefully more good sense will eventually prevail in relation to reinstatement as the primary remedy in the event of a successful personal grievance for unjustified dismissal. After a wrecked employment relationship has been trawled through the Employment Relations Authority or Court, it is rare for either party to be keen on working together again. Politicians may believe it is a nice idea in principle, but I have yet to come across anyone else who thinks it is a constructive outcome. I will keep you posted as the Bill proceeds through Parliament.

Reflections from Chris Rowe on dealing with employment matters, and review of topical and current employment law. Chris Rowe, Director of Corporate Dynamics Ltd, is a Mediator, Employment Relations Advisor, and Employment Investigator based at Sandspit, Rodney District, AUCKLAND Tel 09 425 9069 or 021 284 9292 Email: chris@corporatedynamics.co.nz Web: www.conflictsolutions.co.nz

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Interesting Case Law

I have selected four interesting recent cases which provide some useful learning for every business. Case Law #1: Redeployment following Redundancy

The case of Stemmer v Van Den Brink Poultry 1 concerned an HR Manager (Dr Stemmer) who was dismissed as a result of redundancy and later claimed unjustified dismissal. The employer counter-claimed that Dr Stemmer had breached her duty of good faith by not being forthcoming about travelling to Bermuda to attend the Americas Cup event while on discretionary leave which had been granted because she had no entitlement to sick leave. The redundancy resulted from a proposal to disestablish Dr Stenner’s former role as Human Resources Manager on a salary of $165,000 per annum plus a motor vehicle, and create a Human Resource Advisor position at $100,000. The Employment Relations Authority (ERA) found there were genuine reasons for the redundancy. But significantly the ERA found there was a deficiency in the process of consultation in that the original proposal to create the new position was later abandoned without informing Dr Stenner. This meant she was not given an opportunity to comment on the revised proposal which had no redeployment options for her. The ERA determined that “Dr Stemmer was unjustifiably dismissed because her employer failed to advise her that redeployment was not an option prior to her dismissal for redundancy”.2 Dr Stenner had not indicated at any stage during the redundancy process, or in her personal grievance letter that she was interested in the lesser role. Nevertheless the ERA found that the oversight was an important change to the restructuring proposal and it created unfairness for Dr Stemmer because redeployment was no longer available. Dr Stemmer was awarded $15,000 as compensation for unjustified dismissal. But that’s not all about this case. Towards the end of the redundancy consultancy process, after her employer had responded to her feedback in writing, and declined a further meeting, Dr Stemmer began suffering dizzy spells and was prescribed anti-depressants. She had no sick leave available, so was granted 2 weeks’ discretionary leave, during which time Dr Stemmer chose to travel to Bermuda to attend the Americas Cup event. She did not inform her employer of this prior to her redundancy. Her employment was terminated as a result of redundancy the day after she returned to work. In her email to her employer attaching her medical certificate seeking 14 days’ leave, Dr Stemmer had said “ (GP) has me trying something different this week.” Little did her employer know that the “something different” was that she was sunning herself in Bermuda. The employer found out about her travel after she had been made redundant. The ERA referred to Dr Stemmer’s duty of good faith to be active and constructive, responsive and communicative; and that she ought to have known it was relevant to the continuation of discretionary leave that her employer knew she was not recuperating at home but was in fact overseas. In relation to the counter claim from her employer, the ERA said this:

1 [2018]NZERA Auckland 36 2 Ibid para 48

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“Dr Stemmer’s actions were deliberate, serious and sustained in respect of her travel to Bermuda during a period she had been granted discretionary paid leave. They justify the imposition of a penalty of $5000.00. ……..The entire penalty is to be paid to Van Den Brink Poultry Limited.”3

There’s important learning for both parties in this case. For the employer: get your process right when dealing with restructuring or any other potential changes to an employee’s conditions. For the employee: remember the obligations of good faith are reciprocal. Do not mislead or withhold information from your employer.

Case Law # 2: What constitutes work?

You may have read in various media about an Employment Court case involving Smiths City Group Limited 4 and whether employees are entitled to be paid for attending meetings. Smiths City Group operates 34 stores throughout New Zealand with approximately 400 store based employees. For at least the last 15 years every Smiths City store has held a meeting of sales staff each morning before opening for business. Sales staff who are on duty in the morning are expected to attend but no wage and time records are kept. During the week the meetings start at around 8.45am and stores open at 9.00am. On weekends they start at 9.45 am and stores open at 10.00am. Sales staff have not been paid for these meetings. This case started when the Labour Inspectorate issued an Improvement Notice to Smiths City on 14 January 2016, as the failure to pay employees during these meetings meant they were not paying at least the minimum wage for all hours worked. Smiths City lodged an objection to the Improvement Notice in the ERA arguing that the meetings were not work, and the minimum wage did not apply. The ERA ruled in their favour. The ERA determination was appealed to the Employment Court which has ruled in its 8 May 2018 judgment that the meetings are work, and accordingly the employees must be paid for them.` The Employment Court case provides some helpful discussion on what constitutes work, bearing in mind that “work” is not actually defined in the Minimum Wage Act. The Court cited the assessment undertaken in what is widely known as the “sleepover “ case5 as follows6: The issue requires a broader consideration of all the facts and we do that under three headings:

(a) Constraints on the employee (b) Responsibilities of the employee (c) Benefit to the employer.

The greater the degree of constraint on the employee, the more likely it would be that the period of it

ought to be regarded as work. At Smiths City, the expectation to attend the meetings, and pressure placed on employees to do so was direct and forceful. The practical reality for sales staff was that in order not to be seen as poor performers, they had to attend.

The greater and more extensive the responsibilities placed on the employee, the more likely the period was work. Most of the time the Smiths City employees attending the meetings had no active responsibilities to discharge. However they were obliged to sit and listen to the work-related

3 Ibid para 63 4 A Labour Inspector v Smiths City Group Limited [2018]NZEmpC43 5 Idea Services Ltd v Dickson [2009] 6 Ibid at [64]

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information that was being imparted and to absorb it. The Court said that, if it had been otherwise, it is doubtful Smiths City would have seen any benefit in convening the meetings7. The benefit of the meetings was seen to be exclusively enjoyed by Smiths City because it had a cost-free opportunity to prepare its staff for the working day. That benefit was not seen to be offset by opportunities provided to the employees. While this case related specifically to the effect of non-payment for this meeting time in relation to employees on or near the minimum wage, there is little doubt that it will at least for now determine what employees should be paid for. The Labour Inspectorate has been clear in a press release about the case following the release of the Employment Court decision: “….If the activity is integral to the employees’ role, and there is expectation to attend – this is work, and employers should be paid for it. Employers should not pass the cost of doing business onto their employees. Employees must be paid for all the work they do, and this includes handover times, briefings, and in some situations, the travel time to and from a work site. Too often we encounter employers attempting to avoid paying their employees by dressing up activities outside of business hours as something that is for the benefit of the employee or something that’s not work. However we will look behind that at the real nature of the activity. We encourage any other employers who are currently failing to pay their employees for such activities – and we know there are some out there – to fix these practices, as following this decision, they cannot continue to plead ignorance.” This is no doubt a good time to review any practices you have as an employer which might lead you into the kind of trouble Smiths City has encountered. Smiths City are not only required to change their policies, but pay backpay to all affected employees.

Case Law #3: How to calculate whether a public holiday would otherwise be a working day

This is another case involving the Labour Inspectorate. Wendco (NZ) Limited operates 23 restaurants in New Zealand. It is one of the smaller operators in the quick service restaurant sector commonly known as the fast food sector. At any one time it has in excess of 500 employees.8 The Labour Inspectorate became involved because of a complaint that an employee or employees had not received alternative holidays for working on public holidays. The Inspectorate examined records and conducted interviews at various Wendco restaurants before concluding that the way the employer assessed entitlements to alternative holidays was too restrictive and failed to take into account all of the factors in section 12(3) of the Holidays Act 2003. Wendco objected to an Improvement Notice served on it by the Labour Inspectorate in October 2015. The central issue when it came to the ERA in July 2017 was the way Wendco determined whether a public holiday would otherwise be a day that an employee would work, for the purpose of section 12 of the Holidays Act 2003. The method Wendco used to determine eligibility for an alternative holiday was whether an employee had worked on the same day of the week as the public holiday in the three preceding weeks. This method is also common practice among other restaurant chains like McDonald’s, whose collective Agreement with Unite Union at the time used the “Three week rule”. The Labour Inspector disagreed,

7 Smiths City [2018]NZEmpC43, at I[67] 8 Wendco (NZ) Limited v A Labour Inspector [2017 NZERA Christchurch 199

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maintaining her view that the original rosters and the days an employee had made him/herself available was the correct way to assess whether a worked public holiday would otherwise have been a working day. Section 12(2) and (3) of the Holidays Act says the following (in part):

If is not clear whether a day would otherwise be a working day for the employee, the employer and employee must take into account the following factors: (a) The employee’s employment agreement (b) The employee’s work patterns (c) Any other relevant factors including rosters…………

There was no case law on precisely this issue. The ERA noted9 that the three week rule was a pragmatic one which suited Wendco precisely because it did not have to consider the circumstances of each employee who worked on each public holiday, but said those were not considerations the Authority had to take into account. After considering all the evidence the ERA concluded that the three week rule would in some cases restrict or reduce an employee’s entitlement to an alternative holiday after working on a public holiday, and could not stand. The ERA determined that the correct approach was to adopt a formulaic approach for each employee using the above criteria in s 12(2) and (3) for each public holiday, despite that being a more time consuming and expensive exercise for the employer. If this issue is one which affects your business, and you have to determine a work pattern, the ERA has determined that a minimum of three months and a maximum of six months is a reasonable period during which to assess an employee’s work pattern. It is not appropriate to use a “one size fits all” formula. You need to do the assessment for each affected employee. Case Law # 4: Who should supply PPE? A company which dismissed an employee for not wearing steel capped safety boots was in January 2018 ordered to pay the employee $9600.00 in compensation, plus three months wages, less 20% for the employee’s contribution to the employment problem.10 Lefiu Matthew Naoupu worked for Wallboard and Insulation NZ Limited (WIS) as an insulation installer from December 2014 until September 2016 when he was dismissed for knowingly working without adequate personal protection equipment (PPE) on three occasions. WIS provided Mr Naoupu with a range of PPE when he was first employed. He already had some steel capped boots when he started work and these became very worn during 2016 and were not considered safe. He told WIS that he needed new boots. WIS told him to go to NZ Safety and purchase some safety boots for up to $70 which would be put onto the employer’s account. Mr Naoupu said he went to NZ Safety on at least one occasion, but they did not have suitable boots within the WIS price limit, and he could not afford to pay for more suitable boots which he needed to support a previously injured ankle. Subsequently a company client complained about Mr Naoupu not wearing adequate boots, and he was called to a disciplinary meeting about not wearing PPE on three separate occasions, and was later dismissed.

9 Wendco [2017]NZERA Christchurch 199 at {58] 10 Naoupu v Wallboard and Insulations Supplies NZ Ltd [2018] NZERA Christchurch 1

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The ERA decision referred to the joint responsibilities of employers and employees to take reasonable care for their health and safety, and in this case this required the employer to actually supply the required safety boots when it was clear Mr Naoupu had not achieved this himself. The ERA also found a number of defects in the process of investigating the matter, including that Mr Naoupu was not allowed extra time to find support or representation for the disciplinary meeting, and this meant he was treated unfairly. That defective process coupled with WIS’ shortcomings in not complying with its regulatory obligation to supply Mr Naoupu with PPE that was suitable and in good repair meant that WIS did not act as a fair and reasonable employer could have acted in all the circumstances at the time. Therefore Mr Naoupu was unjustifiably dismissed. His compensation was reduced by 20% because Mr Naoupu bore some responsibility to go and buy the correct boots. And from the Jargon department……….. “Presenteeism” is apparently on the rise among UK workers. This is defined as workers turning up at work while ill, often because of job insecurity. “Leavism” is the growing problem of workers using their annual leave to complete backlogged tasks. Both seem extremely unhealthy and are to be discouraged! Best wishes for winter. Do let me know if there are issues you would like me to cover in future newsletters. There is no shortage of material. Cheers Chris Rowe

Disclaimer: The information in this newsletter is to the best of the author’s knowledge true and accurate, but does not constitute professional advice, and should not be relied on as such. The author will be pleased to comment on specific issues of concern to readers, and to offer appropriate, specific advice. Chris Rowe – BA, Grad.Dip.Bus Studies (Dispute Resolution), FAMINZ (Mediation) - is a Director of Corporate Dynamics Ltd, and is a Fellow(Mediation) and Member of the Accredited Panel of Mediators for the Arbitrators’ and Mediators’ Institute of NZ Inc. (AMINZ).