Employment Update – Week 3, May

Updated: Jun 24, 2019

Our weekly update on ER issues, changes and important updates:


Cases of Interest

No constructive dismissal as employee already resigned

In a recent decision of the Employment Relations Authority, events taking place after a resignation was tendered were found unable to support a constructive dismissal claim. An employee sought to support a claim of constructive dismissal through alleging unjustified actions of the employer as having taken place both before she gave notice of her resignation and after she had given notice and while she was working her one-month notice period. The Authority did not accept that the employer had committed any unlawful actions towards the employee before she gave notice of resignation. However, in giving her notice of resignation to the Board Chairperson the employee raised allegations of bullying by her manager. In doing so, the employee provided detailed allegations relating to a specific incident. The actions of her manager were claimed to have contributed to the employee deciding to resign. The Chairperson emailed an acceptance of the resignation. The employee’s manager also emailed the employee and, having been provided a copy of her resignation, advised that since she and the employee have differing views of the events in question the matter should be left as it stands.

The Authority criticised the employer for making no attempt to arrange some investigation or reasonable assessment of the employee’s complaint despite the fact that there was still an employment relationship in place while the employee was working out her notice period. However, the Authority found that these failings could not have caused her to resign or support a constructive dismissal claim because they happened after she sent her letter of resignation. The employer’s failure to deal with the complaint properly was, however, found to amount to an unjustified disadvantage grievance and the employer was ordered to pay $5,000 in compensation to the employee.

Mediator-signed settlement agreements not as bullet proof as some might have thought

A number of attempts to set aside mediator-signed settlement agreements have been made in the Employment Relations Authority and Employment Court. None have been successful. However, in a recent decision the Chief Judge of the Employment Court came to the conclusion that mediator-signed settlement agreements are not unassailable.

In coming to that conclusion, the Court observed the limited extent of a mediator’s statutory obligations before signing such agreements:

[23] The Act confers no role on an approved mediator to provide legal advice, or to explain the substantive legal effect of any term that a party (however vulnerable) may have agreed to. Nor is there any requirement that a party (however vulnerable) obtain independent advice prior to entering into an agreement. Under the Act there are two mandatory steps that must be taken before a mediator can sign an employment settlement agreement – the mediator must explain the effect of s 149(3) (that the terms of the agreement are final and binding and enforceable) and the mediator must be satisfied that, knowing the effect of s 149(3), the parties affirm their agreement.

While there is emphasis under s 149 of the Employment Relations Act 2000 around such agreements being full and final, the Court emphasised that the wording of that section was about the terms of the agreement being final, not the entire agreement itself. Therefore the terms of the agreement may be set in stone, but insofar as the whole agreement itself is concerned the Court can inquire as to whether requirements of contractual formation have been met or not. The Court commented as follows:

[33] All of this suggests that the exclusory focus of the provision is on the terms of the settlement, not the validity of the precursor act of entering into the settlement agreement itself. Such an approach may explain what might otherwise be regarded as the illogicality of a privative provision precluding actions based on duress, unconscionability or mental incapacity. On this analysis, the statute is silent on such issues because it is focussed on the content of the agreed terms, not the way in which the agreement itself was entered. Such an approach might also explain why the only statutory requirements on the mediator are to explain to the parties the effect of subs (3) and be satisfied that, knowing the effect of the subsection, the parties affirm their request ....

Given that the Court considered there was nothing preventing it in theory from setting the agreement aside on the basis of non-compliance with the principles of contractual formation, the Court proceeded to consider whether there were grounds to set it aside on the basis of duress, unconscionable bargain and mental incapacity.

Ultimately, the employee failed to set the agreement aside under any of those grounds. The one which came closest was mental incapacity. A psychiatrist had provided an opinion that the employee had been mentally incapacitated at the time she signed the settlement agreement and when the mediator telephoned her due to suffering from a significant depressive episode with ongoing anxiety symptoms. However, the second limb of the test for setting aside an agreement for mental incapacity failed as the employer neither knew nor ought to have known that the employee was mentally incapacitated at the time of entering into the agreement. While in theory it was possible for the agreement to be set aside for mental incapacity the Court observed that there were significant hurdles to having a settlement agreement set aside on that basis.

See TUV v WXY [2018] NZEmpC 154.

Q&A

Pay for getting ready at work

Background: We require our production staff to clock in after they have gotten ready and are set up at their workstations. We do not pay them for this time as some of them can take their time in getting ready. This is the arrangement we have in our employment agreements. One of our staff has raised a complaint saying that we have to pay for this time.

Question: Do we have to pay for it?

You potentially may be required to pay minimum wage for this period of time. The situation you describe falls into somewhat of a grey zone. The issue as to what constitutes “work” and is required to be paid is a developing area of case law.

The key piece of legislation involved is the Minimum Wage Act 1983 (the Act). Section 6 requires all “work” to be paid at no less than the minimum rate. The issue is whether your workers’ getting ready and set up in the factory constitutes “work”.

A decision of the Employment Court found that an employer breached s 6 of the Act by failing to pay employees for the periods of time when they were donning and doffing their personal protection equipment (“PPE”) at the start and end of each shift: Ovation New Zealand Ltd v The New Zealand Meat Workers and Related Trades Union [2018] NZEmpC 151. Given health and safety as well as hygiene regulations impacting the employer’s particular workplace, the donning and doffing of PPE was fairly involved, prescribed and required mandatory compliance from employees. The average time spent donning clothing and equipment at the commencement of a shift was three minutes and 15 seconds. The Court was satisfied that time spent donning and doffing PPE was “work” for the purposes of s 6 of the Act.

The test for whether a period of time constitutes work in this developing area of law originates from the 2010 Employment Court decision of Idea Services Ltd v Dickson (2010) 9 NZELC 93,403 (EC) which was subsequently sanctioned by the Court of Appeal in Idea Services Ltd v Dickson (2011) 9 NZELC 93,722. The flow-on effect of this decision has led to employers being liable to pay the minimum wage for periods of time they had otherwise not contemplated, such as in some specific instances during sleepover shifts, during times when employees have been on call and during times when employees are undertaking training prior to a shop opening. The Idea Services decision was applied in the decision of whether donning and doffing of PPE in Ovation New Zealand constituted work. The Idea Services decision outlines a test to determine whether something constitutes work:

• the extent to which the employer imposes constraints on the freedom the employee would otherwise have to do as he or she pleases

• the nature and extent of responsibility on the employee, and

• the benefit to the employer of having the employee assume the role in question.

Applying the Idea Services test in Ovation New Zealand, the Court considered that putting on or removing clothing and equipment imposed significant constraints on the freedom of the workers involved. The Court also considered it was obvious that the donning and doffing activities were an essential aspect of the employers’ business. As such the employer benefited from the activities.

Ultimately, whether or not you need to pay your employees at least the minimum wage for the time they spend getting ready will depend on the circumstances. Therefore, if it they are required to put on and prepare substantial clothing and equipment and to prepare their workstation to suit the requirements of your business, such as for health and safety reasons or for other regulatory, production or quality reasons, it is likely you will need to pay them for the time spent getting ready. By contrast, if the business imposes very basic and limited requirements upon what the employees must do to be prepared, and the time involved in getting prepared for work is not occasioned by the employer or demands of the business and rather due to staff attending to personal matters which provides no benefit to your business (eg, personal phone calls or texts or spending a long-time drinking coffee in the staff room) then it is unlikely you will need to pay for such time if it has never formed part of agreed hours of work.



Reproduced by permission of Wolters Kluwer NZ





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