Ports of Auckland Limited v New Zealand Waterfront Workers Union Inc CA124/96 [1996] NZCA 231; [1996] 3 NZLR 268; (1996) 5 NZELC 98,409; [1996] 2 ERNZ 25 (29 July 1996)

Last Updated: 13 January 2019

IN THE COURT OF APPEAL OF NEW ZEALAND CA 124/96



BETWEEN PORTS OF AUCKLAND LIMITED

Applicant

AND NEW ZEALAND WATERFRONT WORKERS UNION INC

First Respondent

AND GORDON ALEXANDER KOPU

Second Respondent

AND NEW ZEALAND EMPLOYERS FEDERATION

Third Respondent


Coram Richardson P McKay J Henry J Thomas J Blanchard J

Hearing 15, 16 July 1996

Counsel J R F Fardell and R L Towner for Applicant
J G H Hannan for First and Second Respondents
J F Timmins and A L Knowles for Third Respondent Judgment 29 July 1996


JUDGMENT OF THE COURT DELIVERED BY RICHARDSON P




This case stated by the Employment Court under s 122 of the Employment Contracts Act 1991 raises a question of law of wide significance concerning payment for public holidays observed by workers which fall on days that would otherwise be

working days for the workers. It arises under s 7A(1) of the Holidays Act 1981 which provides:

Every employment contract shall provide, in relation to every worker bound by it, for the grant to the worker in each year of not less than 11 whole holidays which shall, where they fall on days that would otherwise be working days for the worker, be holidays, on pay, in addition to annual holidays.

Subsection (2) goes on to state that unless the employment contract otherwise provides, or worker and employer otherwise agree, the holidays provided for under subs (1) will be the 11 days listed in subs (2).

The background

The proceeding before the Employment Court is a rehearing of a dispute concerning the calculation of amounts payable by Ports of Auckland Ltd to some 300 employees in various job categories under a number of collective employment contracts.

Section 122 of the Employment Contracts Act confines a case stated to any question of law arising in the matter “excluding any question as to the construction of any employment contract”. Accordingly, we are not to consider the details of any particular contract. It is sufficient for understanding the present issue to set out para 8 of the case stated:

8. The contracts represented a significant change from the previous employment contracts in that:

(a) They moved most employees to a “5 over 7” system, or similar systems. Under these systems they would work any 5 (in some cases 4) work periods allocated to them in a 7 day period.
(b) Under the previous contracts overtime and shift (or other) allowances or premiums were payable for hours worked beyond the minimum work periods or work outside normal hours. Overtime and shift or other allowances or premiums were (in most of the new contracts) replaced with a “flat rate” or similar system. Under this system the same rate of pay would apply to both minimum and additional work periods.

(c) There was a distinction made between an “ordinary time hourly rate” and a higher “composite flat rate”. The composite flat rate is paid for all ordinary hours and for all extra time hours. The only time the ordinary time hourly rate alone is paid is for statutory holidays (when observed) and for sick leave after the first five days. Some contracts provide that the composite flat rate “ ... shall be paid for all ordinary time and extra time hours”. Other contracts provide that the composite flat rate “ ... shall be paid for all ordinary time and extra time hours worked”. The contracts do not state that the ordinary time hourly rate shall be paid for statutory holidays. That is done as a matter of practice.

The dispute over the appropriate basis of payment came before Judge Colgan. In his judgment reported at [1993] NZEmpC 181; [1993] 2 ERNZ 988 he concluded that payments to employees pursuant to s 7A in respect of four collective employment contracts at issue were to be at the “ordinary time hourly rate” provided for in the contracts, not at the composite flat rate or equivalent rate. On 10 June 1994 the Employment Court ordered a rehearing ([1994] 1 ERNZ 604).

Subsequently a Full Court of the Employment Court (Goddard CJ, Finnigan and Colgan JJ) determined a dispute raising various Holidays Act issues between Lyttelton Port Co Ltd and the applicable unions. On the point now in issue before this court, the Full Court concluded ([1995] 2 ERNZ 177, 194) that, while it is open to the parties to make contractual arrangements, they are bound by s 7A and s 33 (the contracting out limitation protecting any benefit to a worker provided for by the Holidays Act) to provide for payment of at least what the employee would have received had the employee actually worked that day:
The parties are free to contract for a payment greater than the minimum which we have decided the statute provides, ie no less than would have been received had the day been worked and not taken as a holiday. What the actual amount or method of calculating the actual amount of this payment will be, is a question of interpretation of the parties’ contract. But it must, in every case, be an amount not less than what would be paid or have been paid if the day is or was worked.

Case stated: the rival contentions and the question of law

The contentions of the parties as recorded in the case stated are:

• Ports of Auckland contends that its present practice of payment for statutory holidays by paying the “ordinary time hourly rate” complied with s 7A and the collective employment contracts.

• New Zealand Waterfront Workers Union contends that the rates of payment for statutory holidays should be the same as are paid for a day actually worked.

The question of law for this court as posed in the case stated is:

Does section 7A(1) of the Holidays Act 1981 require that an employee who observes a public holiday - either on one of the prescribed days in section 7A(2) or on another day provided for in the employment contract or otherwise agreed between the employee and employer - be paid the amount which the employee would have been paid if the employee on holiday had actually worked the day?

Mr G A Kopu on behalf of and for the benefit of all present and past employees under the particular Ports of Auckland collective employment contracts and the New Zealand Employers Federation were joined as parties by order of the Employment Court of 27 May 1996.

Leave to admit further evidence refused

The Employers Federation sought leave from this court to admit affidavit evidence described in the supporting memorandum as providing an historical understanding of “on pay”; outlining generally the structure of employment relationships for business and industries throughout New Zealand based on that understanding and the realities of the 1996 work place and remuneration structures; and explaining the effect of upholding the Employment Court decision in the New Zealand Harbour Workers Union v Lyttelton Port Co Ltd case in terms of uncertainty, complexity and cost.

After hearing all counsel and Mr K G Douglas, President of the New Zealand Council of Trade Unions, we dismissed the application. The question for this court is a question of law. The clear statement made to the Employment Court on behalf of the Employers Federation when seeking to be joined, and recorded in the court’s minute of 27 May 1996, was that the Employers Federation did not seek to canvass any matters of fact. And, of particular significance, material in the affidavits was contested. Nothing further needs be said as to that.

Section 7A

The crucial question is the meaning of the expression “holidays on pay” in s 7A in the statutory context. The words “on pay” are not defined. The ordinary and natural meaning of “pay” in that context is the remuneration received for a working day. It is payment for labour or service. It is an earned benefit in the sense that the holiday and so the pay accrues because the recipient has been working under an employment contract. That is reflected in the definition of “Paid holidays” in the

New Shorter Oxford English Dictionary: “an accrued holiday period for which wages are paid as normal”.

The scheme of the section itself also provides some guidance as to the meaning of the words. First, it is directed to “every employment contract” and to the provision “in relation to every worker bound by it” for the grant of public holidays. In that respect it is directed to all employees affected, rather than focussing on the work that the particular worker would have done or might have done on a particular day. Second, it provides globally in respect of not less than eleven “holidays on pay”. That theme carries through the next group of words referring to holidays “where they fall on days that would otherwise be working days for the worker”. Those features all point to the use of the same calculation basis to arrive at the pay for each holiday and to the pay being that received for a working day’s work.

Elsewhere in the statute somewhat different terminology is used. The calculation of pay for annual holidays is based on a worker’s “average weekly earnings”, a defined term which through the further defined term “gross earnings” means “the total amount of remuneration payable to him by his employer by way of salary, wages, allowances or commission” (s 3). Again, “ordinary pay” means “the remuneration for the worker’s normal weekly number of hours worked calculated at the ordinary time rate of pay” (s 4). The expression is used in s 16(4) which requires that holiday pay be at a rate not less than the worker’s current rate of ordinary pay. “Ordinary pay” would often be a lower figure than “average weekly earnings”, for example where a worker has been paid substantial amounts of overtime during the year in question. Special sick and bereavement leave under s 30 uses the formula of “pay at the ordinary time rate of pay for the normal number of hours that that worker normally works on that day”.

Of particular significance in this regard are the provisions of s 25 for payment for public holidays to persons employed in a factory (extended to employment in an “undertaking” under s 30). The expression used in s 25 for the calculation required is “wages for an ordinary working day”. Subsections (1), (2) and (4) provide:

(1) Where any person has been employed in any factory at any time during the fortnight ending on the day on which any of the whole holidays referred to in section 7A(2) of this Act occurs, each employer who employs him in a factory during that fortnight shall, subject to subsection (2) of this section, pay him for the holiday, on or before the next regular pay day after the holiday, an amount equal to one-tenth of his wages for an ordinary working day multiplied by the number of ordinary working days on which he is employed during the fortnight by that employer.

(2) Where on any ordinary working day during the fortnight ending as aforesaid any such person has not otherwise been employed in any employment in which he is entitled to payment for the holiday, the employer who last employed him in the factory during that fortnight shall be liable to pay him in respect of each day on which he was not otherwise employed as aforesaid an amount equal to one-tenth of his wages for an ordinary working day.

...

(4) Notwithstanding the provisions of this section, no worker shall be entitled to receive payment under the foregoing provisions of this section for more than the equivalent of one ordinary day’s wages for any such whole holiday.

Sections 7A and 25

Sections 7A and 25 are both directed to pay for public holidays. They are not mutually exclusive. Section 7A applies to all employment under employment contracts including employment in factories. Section 25 applies to all persons employed in factories. Each provides a code of benefits. The entitlement under the employment contract provided for in terms of s 7A is to holidays on pay. Section 25 requires employers for the previous period to pay “for the holidays” proportionate

shares of the worker’s “wages for an ordinary working day”. There is no room in the statutory scheme for a mismatch, for arriving at different base figures under the two provisions. And, as earlier indicated, pay for a working day is what underlies the expression “on pay” in the context of s 7A.

The two provisions, s 7A and s 25, only came together in the Holidays Act 1981 in 1991 when s 7A was enacted and s 25(1) was amended to refer to s 7A. Section 25 derived from provisions in successive Factories Acts, eg s 58 of the Factories Act 1891 allowing women and boys employed in factories certain holidays “at the same rate as paid on ordinary working days” (extended to every person employed in a factory: Factories Act 1946, ss 26 and 28) and only came into a Holidays Act in 1981. The precursor of s 7A was s 150A of the Industrial Conciliation and Arbitration Act 1954 enacted by the 1965 Amendment. At that time and in the succeeding provisions of the Industrial Relations Act 1973 and the Labour Relations Act 1987, an additional subs (3) allowed for the non-application of subss (1) and (2) in respect of any award or agreement where there were special reasons for making other provision in respect of holidays. Section 7A introduced into the Holidays Act in 1991 allows no such exception. Parties to an employment contract cannot by their bargain water down the public holiday entitlement under s 7A.

Sections 7A and 25: conclusions

While the interpretation task would have been facilitated by use of the same set of words in both s 7A and s 25, we consider there is no distinction of substance in the meaning of the two expressions in their statutory context and in the scheme of the Act as a whole. In each case the pay for the statutory holiday is that for an ordinary

working day. Nor does it seem that the meaning of “ordinary pay” as defined in s 4 can be any different.

The whole purpose of s 7A and s 25 is to ensure the availability to workers of paid holidays where public holidays fall on working days. As Myers CJ said in Moon v Kent’s Bakeries Ltd [1946] NZGazLawRp 62; [1946] NZLR 476, 484, with reference to the Annual Holidays Act 1944:

It is an enactment intended for the benefit of the workers. It speaks to them of matters affecting their everyday work, and should, if possible, be interpreted by the Court in the way in which it might be expected to be generally understood by them.
In the same case Fair J said at p 498:

The statute is one that must be fairly construed. Its intention, it is true, must be gathered from the circumstances to which it applies as well as from its language. Clearly its broad intention is to give the worker two weeks’ holiday at a rate of pay that he earns in the ordinary course of his work in his ordinary working-week throughout the year.

It may fairly be assumed that the purpose of s 7A and s 25 is to enable workers observing statutory holidays falling on what would otherwise be working days to have the pay they would have earned on an ordinary working day. That is reinforced by s 33 which bars any contracting out which will “deprive any worker of any right, power, privilege or other benefit provided for by this Act”. They are entitled to observe public holidays without loss of what they habitually receive for ordinary working days. Any lesser remuneration is something less than “pay” using that word in its ordinary sense.

The interpretation consequences

Four consequences follow from this interpretation.



First, and contrary to what might be read into the question posed in the case stated, and to the judgment in the New Zealand Harbour Workers Union v Lyttelton Port Co Ltd case, the inquiry is not what the employee would receive if he or she worked on the particular holiday. The inquiry is what is payable for an ordinary working day.

Second, there is no scope for bargaining for a lesser special rate for the purposes of calculating statutory holiday pay. Mr Fardell eschewed the argument which had been advanced for the Port Lyttelton Co Ltd before the Employment Court that it was open for the parties negotiating the employment contract to agree a quite nominal special rate of pay for statutory holiday purposes. He accepted that the rate agreed for statutory holiday purposes had to be a real rate, not something artificial or arbitrary: it could not be less than the base rate or ordinary time rate under the employment contract and excluding allowances and extras. Once it is accepted that the term “on pay” cannot mean whatever rate of pay is agreed upon between the parties without restriction it becomes necessary to provide a meaning which is both consonant with the scheme of this legislation and capable of objective practical application with an acceptable degree of certainty. The concept of real, not artificial or arbitrary does not meet either criteria.

Mr Timmins for the Employers Federation submitted that “on pay” could cover a range of remuneration calculations but there was a level of remuneration payable to employees for public holidays beneath which the parties could not go or else a court would say that the employee was not on pay. The short answer is that the statute is concerned with what is paid for an ordinary working day and it does not allow a special contractual arrangement directed to pay for a public holiday. That is the natural meaning of the language of s 7A and s 25 and the interpretation accords with the scheme and purpose of the legislation.



In fairness to the Employers Federation’s stance, we should add that Mr Timmins also submitted:

An acceptable level of public holiday pay is not less than the ordinary time rate of pay multiplied by the ordinary hours of work; and alternatively, in the case of fortnightly employees, one-tenth of an ordinary day’s wages for each day worked in a fortnight, calculated by reference to ordinary time rates of pay.

Third, if the focus is on pay for the ordinary working day, anything which is clearly payable only in defined circumstances or at defined times is excluded. Overtime, bonuses and allowances of various kinds are usually add ons and, as Mr Hannan accepted, productivity and incentive based payments which are dependent on actual working results need not be notionally calculated and paid.

Fourth, the work pattern and remuneration arrangements may have reached the point under the employment contract where, instead of a traditional separation between ordinary time rates and other payments referable to particular times and conditions, a composite rate made up of a number of components applies generally and covers the ordinary working day. In such a case the composite rate will have become the wages for an ordinary working day within s 25 and the rate for calculation of holidays on pay within s 7A. It will be a matter of interpreting the particular employment contract to determine on what side of the line the particular case falls. That will require distinguishing allowances which have been incorporated into a global rate or are payable as of course from those payable only in particular circumstances, even if they recur regularly and even if they would have been payable if the employee had worked that day.

Case law

In the course of argument we were referred to numerous authorities, including decisions of the Employment Court and its predecessors. Apart from the

Employment Court decisions in this case and the New Zealand Harbour Workers Union v Lyttelton Port Co Ltd case, there are no decisions directly in point under s 7A. While helpful in understanding other provisions of the Holidays Act and earlier legislation, other cases canvassed in argument were concerned with their particular context. They are of no immediate assistance when it comes to construing s 7A along with s 25 in their context in the Holidays Act.

Result

The conclusions we have reached on the interpretation of s 7A do not allow an

unqualified Yes or No answer to the question posed in the case stated. That question focuses on what would have been received had the holiday been worked. The correct approach is to ask what was the pay for an ordinary working day. That is a matter of construction of the particular employment contract.

In the circumstances there will be no orders as to costs.









Solicitors

Russell McVeagh McKenzie Bartleet & Co, Auckland, for Applicant Phillips Fox, Auckland, for First Respondent
Solicitor, New Zealand Employers Inc, Wellington, for Third Respondent