GREENLEA PREMIER MEATS LTD v MARK ANTHONY HORN [2002] NZCA 318 (16 December 2002)

IN THE COURT OF APPEAL OF NEW ZEALAND

CA98/02

BETWEEN

GREENLEA PREMIER MEATS LTD

Appellant

AND

MARK ANTHONY HORN

Respondent

Hearing:

7 October 2002

Coram:

Elias CJ

Keith J

Tipping J

McGrath J

Anderson J

Appearances:

W M Wilson QC, T P Cleary and G Gowland for Appellant

P J Gunn and S M Carr for Respondent

Judgment:

16 December 2002

JUDGMENTS OF THE COURT

Judgments Paragraph No

Elias CJ [1]

Keith J [12]

Tipping J [44]

McGrath J [55]

Anderson J [69]

ELIAS CJ

[1]	The point of law which arises on the appeal is whether the Holidays Act 1981 requires an employer to pay wages for statutory holidays calculated by reference to the average wages actually received by the employee, rather than at the rate specified in the employment contract.The Employment Court held a calculation by reference to the average wages received was required by s7A and s25(1) of the Act.In that determination, it overturned the decision of the Employment Tribunal.Judge Shawin the Employment Court found that a term in the collective employment contract between Greenlea Premier Meats Limited (Greenlea) and the workers employed in its export beef processing plant establishing a wage rate of $9.50 per hour for public holidays was an attempt to contract out of the Act, contrary to s33.I consider that conclusion to have been in error.In my view the contractual entitlement complied with the requirement in s 7A of the Holidays Act that every employment contract must provide for statutory holidays “on pay” and payment in accordance with its terms discharged the employer’s obligation under s25 to pay by reference to “the wages for an ordinary day”.I agree with the other members of the Court that the appeal must be allowed.
[2]	I am in substantial agreement with the judgment of Keith J, which I have had the advantage of reading in draft.I adopt his review of the legislative history and the background facts.I wish to add very little to the reasons he has given.
[3]	The Act deals distinctly with the payment of wages for annual holidays and wages for public holidays.That is partly referable to the legislative histories of the two entitlements, as described by Keith J.Calculation of wages for annual holidays is based on average weekly earnings (ss16-18).The responsibility of employers for payment for statutory holidays is based upon employment in the preceding fortnight but is calculated in application of the wages payable for an “ordinary working day” (s25(1)).
[4]	By s7A every employment contract must provide for 11 holidays on pay in addition to annual holidays.Unless the employment contract provides otherwise those holidays are to include the 10 national statutory holidays and the date of the anniversary of the relevant province (or some other day in its place).Except as is specifically provided for in the Holidays Act 1981, the benefits provided for by the Act cannot be contracted out of (s33).
[5]	Section 7A was introduced into the Act by amendment in 1991.As the requirement for provision in “every employment contract” contained in s7A indicates the 1991 amendment was enacted as a parallel measure to the Employment Contracts Act 1991.
[6]	The collective employment contract entered into between Greenlea and those employed in its export beef processing plant did make provision for statutory holiday payments.While construction of the contract is a matter within the exclusive jurisdiction of the Employment Court, its construction was not in issue on the appeal.It was acknowledged that the contract provides that the wages for public holidays are fixed by application of an hourly rate of $9.50, payable for an eight-hour day.That rate, we were advised, was equivalent to the rate payable for “non-production” work.Generally speaking it was considerably less than the workers could earn on the piece-work basis which applied to production work.But, because of the seasonal nature of beef production and because of stoppages of the plant for maintenance and other reasons, the non-production work rate was an integral part of the overall remuneration package, which included significant incentives for production work.
[7]	The Employment Court decision was that the employees were entitled to receive, not the contractual rate stipulated for, but a calculation to represent what they would actually have received had the holiday been a working day.That approach turns on s25 of the Holidays Act which identifies how the wages payable for holidays are to be ascertained:

25. Wages payable for holidays allowed and for holidays worked

(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.

[8]	Apart from the reference to s7A(2), this sub-section has been in the same terms since 1946.Its derivation is even older, as the judgment of Keith J describes.As Keith J notes, in successive determinations of the Arbitration Court, it was not understood to require remuneration for public holidays to be calculated to reflect average actual earnings.In my view the meaning of s25(1) does not support the revision suggested.The section identifies the responsibility of an employer for payment of wages for statutory holidays.There is no question here of any shared responsibility, but if there had been more than one employer in the fortnight preceding the statutory holiday, s25(1) provides the method of apportioning liability amongst them.In addition, the entitlement is to the wages payable in respect of an “ordinary working day”.In context, as the multiplication formula in s25(1) indicates, ordinary working days are the 10 days out of the past fortnight which would normally count as two working weeks.It is necessary to deal with weekends by such formula in order to come up with a fair system as between different employers and to ensure that the entitlement does not exceed one day’s wages per fortnight (as is made clear by s25(4)).Section 25(1) identifies the entitlement in terms of one day’s wages.But it says nothing about how those wages are calculated.That calculation turns on the employment contract.
[9]	It was not suggested that the provision made in the employment contract here was a sham to defeat the purpose of the legislation.A special pay rate applicable only to statutory holidays would not comply with s7A because it would not treat the statutory holiday as an “ordinary working day”.Such a rate would be in breach of s33.Here however the rate of remuneration provided for by the contract is referable to the non-production rate paid on working days when the plant is not operating. The only criticism of the payments is that they do not equate to the average earnings during the fortnight before a statutory holiday.Section 25(1) does not require payments to be made on that basis.It does not adopt the approximation of actual earnings provided for annual holidays.There is no reason why the contractual provision should not be applied.
[10]	There are statements in the decision of this Court in Ports of Auckland Ltd v New Zealand Waterfront Workers Union Inc [1996] 3 NZLR 268 which, taken out of context, may be somewhat misleading.In particular, the Employment Court relied upon the expressed view that employees “are entitled to observe public holidays without loss of what they habitually receive for ordinary working days”.If “what is habitually received” is a reference to the contractual entitlement for ordinary working days, then it is unexceptional.The Employment Court however took it to be a reference to the wages actually received.If that is the meaning to be taken from the judgment, I think it right to say I do not agree with it.
[11]	The members of the Court being unanimous, the appeal is allowed and the respondent’s claim is dismissed.Costs were reserved in the Employment Court.If any question arises about costs it can be the subject of memoranda.

KEITH J

[12]	This appeal is about holiday pay.Since 1873, different groups of workers have been entitled by statute to have specified public holidays on pay.It was only in 1944 that annual holidays on pay were provided for by statute.Awards and employment contracts would also of course have dealt with both those matters.
[13]	This case is more specifically concerned with the entitlement to pay for public holidays of three workers employed in the appellant’s meat works.They were paid at what their collective employment contract referred to as the “ordinary hourly rate” of $9.50.Under the Holidays Act 1981 they were entitled to have the public holidays “on pay” (s7A) or an amount fixed by reference to their “wages for an ordinary working day” (s25).The Act forbids contracting out of those rights and obligations (s33; compare ss25(9), 27(3) and 30(2) allowing contracting out in particular contexts).
[14]	A Labour Inspector brought an action in the Employment Tribunal claiming that the employer had not met its obligations under the Act.The Tribunal dismissed the application but Judge Shaw in the Employment Court allowed the appeal and ordered the employer to pay arrears which increased the total payments for the holidays from $9.50 an hour to between $21.90 and $27.50 – figures determined by averaging the wages paid to each worker for the 4 weeks before the public holidays which the Inspector had chosen on a representative basis.
[15]	The employer appeals, contending that the Employment Court erred in law.
[16]	The 1981 Act is “An Act to consolidate and amend certain enactments relating to the observance of certain days as public holidays and to the provision of annual holidays with pay for workers”.It brought together three major sets of provisions – the Public Holidays Act 1955, provisions of the Factories Act 1946 also relating to public holidays, and the Annual Holidays Act 1944.Given the complexity of the legislation, the indications that it is being reviewed are to be welcomed.
[17]	The 1955 Act, like the original Public Holidays Act 1910, provided for anniversary days and Labour Day to be held on the nearest Monday and for adjustments if Christmas Day and New Year’s Day fell on Friday, Saturday or Sunday, in each case if an Act, award or industrial agreement provided for the granting on those days of holidays, the observance of certain hours of labour or the payment of certain rates of wages.The Act did not itself require that those public holidays be paid holidays.Sections 8-10 of the 1981 Act made similar provision.By contrast ss24-25 and 27-29 brought forward provisions from the Factories Act 1946 which provided for paid public holidays, with the pay being calculated under both the 1946 and 1981 Acts by reference to the worker’s “wages for an ordinary working day”.The formula in earlier legislation was essentially the same, stating a right to be paid “at the same rate as paid on [or for] ordinary working days” (eg Factories Act 1891 s58).
[18]	The entitlement to paid annual holidays introduced by the Annual Holidays Act 1944 (“An Act to make provision for annual holidays with pay for workers”) was initially “on ordinary pay” (s3(1)).“Ordinary pay” was defined as remuneration for the normal working hours of work calculated at the ordinary time rate of pay and included the cash value of board and lodging if the employer provided them.
[19]	Those participating in the debate that led to the 1944 Act were aware of the International Labour Organisation Holidays with Pay Convention 1936 (40 UNTS 137) which provides that workers taking their annual holidays are entitled to their “usual remuneration, calculated in a manner which shall be prescribed by national laws or regulations, ... or the remuneration determined by collective agreement” (article 3).The Convention also prohibits contracting out (article 4).Public and customary holidays are not to be included in the annual holiday with pay (article 2(3)(a)).New Zealand became a party to that Convention in 1951.
[20]	In 1974 the basis of the calculation of annual holiday pay was altered significantly to some workers’ advantage by amendments made to the 1944 Act.Annual holiday pay was now to be calculated by reference to the rate of the worker’s average weekly earnings (defined as 1/52 of gross earnings for the year, which in turn was defined as the total amount of remuneration payable by way of salary, wages, allowances, or commission (whether in cash or otherwise) in respect of the employment, and including holiday pay, and the cash value of board and lodging if provided).That method of calculation would plainly produce a higher figure than “ordinary pay” for workers who, for instance, worked overtime in the course of the year.The method now appears in the 1981 Act (ss16, 2 and 3).As will appear, the expression “ordinary pay” has been retained in annual holiday provisions but with a subordinate role different from the primary role it had in the original 1944 Act.
[21]	In 1991, as part of the employment contracts reform and in the context of the introduction of elements of a minimum employment code, the 1981 Act was amended by the introduction of s7A which requires employment contracts to grant to all workers all 11 public holidays “on pay”.The original provision to similar effect but relating only to factory workers (s24) was consequentially repealed.The legislature did not attempt to elaborate the newly introduced “on pay” requirement, or make any relevant amendment to the payment formulas in ss25 and 27-29 dealing with factory workers.
[22]	As indicated, the expression “ordinary pay”, retained in the annual holiday provisions, now has a different, subordinate role.That role is to provide a minimum entitlement when the averaging of the worker’s gross earnings would provide a lower figure than “ordinary pay” as defined (ss16(4), 17(6) and 18(7); and see also s30A(4) regulating entitlement to special leave for sickness and bereavement).
[23]	On the face of it, the expression “ordinary pay” has nothing directly to do with pay for public holidays.That expression has never been used in the public holiday provisions. In particular, it is not the expression used in s25 which specifically deals with factory workers, our case, nor in s7A which states the general entitlement to public holidays as being simply “on pay”.It relates only to annual holidays and to special leave.And it now operates mainly to provide a minimum for annual holiday pay when the generally applicable gross averaging calculation would result in a lower payment.But while the expression is not directly in point, it is part of the context in which this case is to be considered.
[24]	On that view of the legislation, the issue before the Court is to be resolved essentially by reference to the terms of s25(1) read in their context, and by reference to their purpose.Under that provision, a factory worker is entitled to be paid for a public holiday one tenth of the worker’s “wages for an ordinary working day” multiplied by the number of ordinary working days on which the worker was employed during the previous fortnight – in the normal course 10 days.Subsection (4) prevents any argument that a worker who worked for 11 or 12 days during the fortnight would get 10% or 20% more by saying that:

no worker shall be entitled to receive payment ... for more than the equivalent of one ordinary day’s wages for any such whole holiday.

[25]	On the other hand, the payment is not reduced if a public holiday has occurred during the fortnight since, under subs (5),

the expression “ordinary working day” includes any such whole holiday if that holiday is granted on a day on which the person concerned would normally work.

[26]	A Monday to Friday worker would accordingly include Good Friday as an ordinary working day in the preceding fortnight when the holiday pay for Easter Monday was calculated.
[27]	But what is “an ordinary day’s wages” or “wages for an ordinary working day”?I put the question in those terms since the two expressions appear to be indistinguishable;the legislature certainly appears to treat the two expressions as the same in s25.Plainly the wages provisions of the employment contract are central to answering that question.Before I consider them, I mention one aspect of the wider context provided by the provisions in the annual holidays part of the Act concerning “ordinary pay” and the averaging of the annual gross earnings.As noted, the 1974 amendments introducing the averaging of gross earnings would have increased the annual holiday pay of some workers above “ordinary pay” (s4).That averaged figure could also have exceeded “wages for an ordinary working day” (s25), for instance by including overtime.The entitlement under s25 does not include overtime (Ports of Auckland Ltd v New Zealand Waterfront Workers Union Ltd [1996] 3 NZLR 268, 273 lines 42-46).
[28]	The employment contract fixed the hours of work at 40 (5 days of 8 hours, Monday to Friday, with two shifts; and 4 days of 10 hours Monday to Thursday, again with two shifts) and 36 (3 days of 12 hours Friday to Sunday).That statement of hours, the contract said, did not constitute a guarantee of 40 hours (clause 7).
[29]	Such a guarantee could not be given because of the nature of the industry.The Managing Director of the employer gave evidence, which was not contested, about the fluctuations in the workforce through the processing season:

8. The Hamilton plant continues to employ approximately 110 processing employees at the peak of the processing season, reducing to 75 employees at the seasonal trough.Operating on a similar basis, the Morrinsville plant’s employment levels for seasonal peaks and troughs are approximately 90 and 45 employees respectively.

9. The processing season operates each year from November to the following June, give or take a month either way depending on the climate and market conditions.At the peak of the season, the company’s objective is to procure enough stock to provide the two shifts at each plant with 200 cattle per shift, a total of 4000 cattle per week.However, even during this time, [it] is not uncommon for the company to experience short shifts or “no kill” days due to cattle not being available, usually because farmers withhold stock when feed is plentiful to improve weight gain and price margins.

10. As the seasonal downturn approaches, the two-team shift arrangements reduce to one large team, at which time the seasonal layoffs will commence.The two plants will then shut for 4/6 weeks each alternately sometime over August/October to allow for maintenance, annual leave, etc, before the seasonal upswing begins again in November.

...

13. When stock throughput is low or non-existent e.g. on a “no-kill” day, all production employees may be required to participate in plant cleaning and maintenance or other non-production work.Because of their lower weekly incomes, however, it is the employees working in the C grade piece rate or hourly rate positions that tend to monopolise the available non-production work.

[30]

The wage scale contained certain hourly rates and piece rates (cl 9(a)(i)).The hourly rates varied between $9.50 (for instance for Casual Employees) and $11.50 (for Labourers – Knife Hand) and the piece rates between $0.745 and $2.200 per body.Immediately after setting out that scale, the employment contract provided as follows in cl 9(a)(ii):

(ii) Ordinary Hourly Rate – The ordinary hourly rate payable shall be $9.50 per hour.This ordinary hourly rate shall be paid where entitlements to sick leave, domestic leave, bereavement leave, statutory holiday and jury service leave exist.

[31]	Clause 9(b) provided:

(b) Minimum Weekly Payment – Except in the case of casual employees, a minimum weekly payment of $335.00 shall be paid each week, provided that where no work is physically performed during a week, then no minimum payment shall be made.

[32]	The appellant’s Managing Director testified that all employees when engaged in non production work were paid the “$9.50 ordinary rate per hour”.On that matter he explained:

25. Greenlea and its employees had earlier agreed in 1997 to a specific ordinary rate of $9.50 per hour for non-production work and other time-based arrangements including statutory holiday pay, for three reasons:

(a) Firstly, using production-based piece rate work as a predictive formula for calculating a fixed rate for authorised leave entitlements such as statutory holiday pay was extremely difficult and impracticable due to fluctuating stock supply and other operational uncertainties.

(b) Secondly, having a mutually-agreed ordinary rate of $9.50 per hour common to statutory holidays as well as non-production work and work stoppages, reaffirmed the “rate-for-the-job” principle accepted by Greenlea’s employees, recognising that on any given working day any employee (including an A grade position) could be performing work of relatively low skill and value, including non-production work.

(c) Thirdly, agreeing a baseline ordinary rate of $9.50 per hour reinforced the company’s expressed commitment to offering significant incentives to reward high-skill, high-quality production work e.g. an employee working in an A grade position processing 200 carcasses in an 8-hour shift, earned an hourly rate equivalent of $27.50 per hour.

[33]

The combination of piece work and hourly rates of pay in freezing works can be traced back over a lengthy period.That was the case, for instance, with the New Zealand (Except Westland) Freezing Workers Award (1936) BA 1011 made by the Arbitration Court in 1936 and the New Zealand (Except Westland) Meat Processors, Packers, Preservers, Freezing Work Employees Composite Award (1990) BA 9982 made by the Arbitration Commission in 1990.Those awards were handed to us during argument without objection.They were not, I understand, before the Employment Court.The 1936 award provided for public holidays on pay which were to

be paid as for an ordinary working-day of eight hours.Pieceworkers shall be paid the hourly rates specified herein for time-workers.Where no such rate is specified 2s. 6d. per hour.

[34]	The Factories Amendment Act 1936, mentioned in that award, required holiday payments to be “at the same rate as for ordinary working-days”.The 1990 award also contained both hourly rates and piece rates and for public holidays required payment as for an ordinary working day of eight hours.Different groups of pieceworkers were paid either $9.850 or $9.496 an hour.
[35]	I return to the contract in issue in this case.The expression “ordinary rate of pay” appeared in clause 8:

8. MECHANICAL, ORGANISATIONAL AND HYGIENE STOPPAGES

In the event of a mechanical breakdown, hygiene stoppages, organisational stoppages or any stoppage due to MAF requirements, the employees will be paid at the ordinary rate of pay for all time lost on production except where any stoppages have occurred as a direct result of any employee(s) work standards or deliberate act on behalf of any employee(s).Any payment for time lost on production is made on the provision [proviso?] that employees are prepared to work on should the employer decide to continue processing.

[36]	That expression was also used in clause 12 concerned with public holidays.Subclause (a) listed the 11 recognised public holidays.The clause continued as follows:

(b) Employees who are normally employed on the day on which a Public Holiday occurs shall, if their services are not required by their employer on such a holiday, be paid their ordinary rates of pay at the hourly rate of $9.50 for that day.

(c) Where an employee is normally employed on the day on which a Public Holiday occurs, and is required to work on one of the days prescribed above, the employee shall be entitled to payment at the ordinary rate of pay for all hours worked, plus a paid holiday in lieu thereof.

(d) Employees who are not normally employed on the day on which a Public Holiday occurs shall, if they are required to work on such days, be paid at the ordinary rates of pay for all hours worked and shall not be entitled to a day in lieu.

[37]	Clause 11, annual holidays, explicitly invoked the Holidays Act, set out the entitlements under it (in terms of average weekly earnings), and stated that the provisions were added for clarity only and did not detract from the rights and obligations under the Act.
[38]	This case concerns clause 12(b).Does it “deprive [the three] worker[s] of [a] right” under s25 (or s7A), to recall s33’s ban on contracting out? Judge Shaw thought that it did.The essence of her reasoning appears in this passage which followed her discussion of s7A and the Ports of Auckland case, and her setting out of s25(1), (2) and (4):

[25] This section provides for calculation of holiday pay according to wages actually received during the fortnight before the public holiday.Payment is therefore related to wages for the ordinary working day rather than the hours worked.The Court of Appeal made it clear in Ports of Auckland v NZ Waterfront Union at [272] that the meaning of the words “ordinary pay” in s7A and s25 is the same.The scheme of the Act is directed to compensating employees who would otherwise be at work on the day which a public holiday falls in a manner so that they receive no less than what they habitually receive for an ordinary working day.

[26] Although counsel cited a number of cases where s7A has been applied it was also accepted that each case must turn on its own facts according to both the applicable contract and to the nature of the work performed.In this case the contract provides for two rates of pay.The first, in clause 9(a)(i) is called the flat inclusive rate of pay.This is a piece rate.The employee is paid according to the grade of the position he or she is working on at any particular time and the number of bodies processed.It is a payment reliant on productivity.The employees are guaranteed a minimum of $335 a week when work is available but this is increased according to the work output.

[27] The second rate of pay is called the ordinary hourly rate of $9.50 specified in clause 9(a)(ii).The evidence confirms that this rate is the non-productive rate.It is not “the remuneration received for a working day [from Ports of Auckland at 271, lines 4-5].” Although it is expressed to be an ordinary hourly rate the contract provides for it to be paid only when the employee has taken specified leave or when production work is delayed or stopped (clause 8).

[28] I conclude the clause 12(b) of the contract is an attempt to contract out of s7A of the Holidays Act 1981.The rate of $9.50 per hour does not reflect the ordinary pay received by employees in this case.The Court of Appeal held that employees [273, lines 4-5] “are entitled to observe public holidays without loss of what they habitually receive for ordinary working days.”The facts show that during the season the employees ordinarily and habitually receive wages considerably in excess of the minimum rate.

[39]	She then discussed some of the relevant decisions and continued:

[35] The Tribunal held that the payment by piece is analogous to productivity or incentive-barred payments and are dependant on actual working results.It moved then to conclude without more, that the work patterns and the remuneration arrangements have not merged into what the Court of Appeal referred to as “composite rate.”I cannot agree with this analysis.The payment by piece under the collective employment contract is the only method of calculating the wages for an ordinary working day.If the day were not a working day in the sense of being productive, then the $9.50 rate was the norm for doing cleaning and maintenance work only.Whenever there was production the piecework became the ordinary working rate. This claim does not include meal allowances and the like which naturally should be excluded from the composite rate.

[36] I conclude that the decision of the Tribunal was incorrect and that the ordinary rate of pay for the purpose of s7A was not $9.50.It required an alternative method of calculation.In the course of the hearing it was suggested that at certain times of the year these rates would fluctuate considerably depending on the availability of stock.This was accepted by counsel for the appellant as being one of the consequences of this finding.I would add that it is also one of the consequences of working in a seasonal industry dependant on the flow of produce.While the effect of this decision will be to increase the holiday pay due to the three employees on this occasion, on others this may not be so.

[40]	With respect, the first sentence of para [25] is wrong as a matter of law.While the method of calculation of annual holiday pay (as introduced in 1974) is primarily based on actual gross earnings (in that case over the preceding year), the public holiday entitlement by clear contrast is not:the references to “ordinary working day” in s25 make that point clear.That error, repeated in the last sentence of para [28], permeates the whole judgment since, as already noted, the method of calculation accepted by the Judge depends on the Inspector’s calculations based on the workers’ actual earnings in the four weeks preceding each of the public holidays he selected.
[41]	The appellant contended, so far as para [27] of the Employment Court judgment is concerned, that the $9.50 rate was also paid for non production work and on some days could be the remuneration actually received on some occasions for a working day (see para 25(b) of the Managing Director’s evidence quoted in para [32] above).Although this appeal is limited to questions of law it is the case that the employer’s evidence to that effect was not questioned.
[42]	There is a further point to be added about the appropriateness of the payment of $9.50 an hour for an ordinary working day in the circumstances of this case.The awards mentioned earlier in this judgment were made by the Arbitration Court (with a dissent by the Union nominated member but not on this point) in 1936 and by the Arbitration Commission in 1990.Those bodies were obliged in making those awards to comply with relevant statutes, including at those times the provisions of the factories and holidays legislation, which required public holiday pay to be fixed by reference “to wages for an ordinary working day” (Industrial Conciliation and Arbitration Act 1925 s150 and Labour Relations Act 1987 s170(3)).As with the contract in issue in this case, the awards fixed relatively low hourly rates for public holiday pay for workers who generally received piece rates.The Arbitration Court’s and Arbitration Commission’s understanding of the requirements of that legislation in relation to the awards they made following judicial processes and in exercise of subordinate legislative power should not lightly be put to one side.Over a long period now this Court has indicated the need to defer to the institutions established under employment law, particularly in respect of disputes of interest where no doubt overall balances are being struck;see eg the authorities assembled in New Zealand Van Lines Ltd v Gray [1999] 2 NZLR 397, 403-404.
[43]	This Court, in deciding this appeal, may not enter into questions of the construction of the employment contract.Since however the Employment Court has construed the contractual right to “wages for an ordinary working day” as being the wages “ordinarily and habitually receive[d]” in the sense of the average received over a period it has erred in law in its interpretation of the Holidays Act.To the extent that its judgment construes the contract, it has also adopted the wrong approach to the construction of the contract, a matter which this Court can consider;eg Wellington College of Education v Scott [1999] 3 ERNZ 98 (CA).Accordingly, I too would allow the appeal and restore the decision of the Employment Tribunal.

TIPPING J

[44]	As the background to this appeal is described in other judgments, I can move straight to my conclusions.My first approach to the central issue is based on an application of the earlier decision of this Court in Ports of Auckland Ltd v New Zealand Waterfront Workers Union Inc [1996] 3 NZLR 268.There was no challenge to any aspect of this decision by either side.In Ports of Auckland at 272, line 36, the Court treated as synonymous the expressions “wages for an ordinary working day” used in s25(1) of the Holidays Act 1981 and “ordinary pay” used in s4 of the Act.On this basis a worker’s entitlement to statutory holidays “on pay” under s7A(1) was treated, via s25(1) and s4, as equivalent to an entitlement to the statutory holiday on ordinary pay.Thus the expression “on pay” was held to denote both the entitlement to pay on a statutory holiday and the amount of that entitlement.The worker was entitled to receive ordinary pay on a statutory holiday.
[45]	The meaning of the term “ordinary pay”, as defined by s4, is the remuneration for the worker’s normal weekly number of hours of work, calculated at the ordinary time rate of pay.There are thus two ingredients:normal weekly hours and ordinary time rate of pay.Each of those ingredients are as agreed by the employer and the worker or, in default of agreement, as fixed by a Labour Inspector.In the present case both ingredients are the subject of agreement between employer and worker.The normal weekly number of hours of work are 40 and the ordinary time rate of pay is $9.50 per hour.Section 4 talks of ordinary time rate of pay, whereas the contract speaks of an ordinary hourly rate.These must be the same.Hence a worker’s ordinary pay on a weekly basis is $380.00.Reduced to a daily basis this is $76.00.On this line of reasoning there cannot be any question of contracting out or breach of the Act because the Act mandates the amount payable in accordance with the formula prescribed by s4.
[46]	This was essentially the appellant’s primary argument, based on and justified by the earlier decision in Ports of Auckland.From the point of view of precedent I think that this approach is mandated by Ports of Auckland.As noted above, neither side suggested that case had been wrongly decided, albeit each relied on it to support a totally different result.While this is the reasoning which I think ought to be adopted from the precedent point of view, I must confess that I consider a second line of thought (which leads to the same result) is more in accordance with both the policy and the terms of the Act.
[47]	This second approach proceeds along the following lines.There is nothing in the Act which prevents the parties from agreeing what should be paid on a statutory holiday unless such agreement amounts to contracting out, which is prohibited under s33.An agreement which the parties have reached will only amount to contracting out if it produces a less advantageous result than that which the Act mandates.The question therefore becomes whether the Act mandates any particular quantum of payment in the circumstances of these parties and, if so, whether the amount mandated is more favourable to the employee than the amount agreed.
[48]	On this approach the expression “on pay” in s7A(1) does not mean on ordinary pay.It simply signals an entitlement to pay, with the quantum of that entitlement to be found elsewhere.Prima facie a contractual entitlement is sufficient to fulfil the “on pay” criterion, unless of course that contractual entitlement produces a lesser amount than that mandated by the Act.The question becomes whether the Act mandates a greater amount than that produced by multiplying $9.50 by 8 hours, ie. $76.00 per day.
[49]	The only section in the Act which is said to mandate any particular quantum in the circumstances of these parties, is s25(1).Effectively that provision, if applicable, entitles the workers in the present case (they being deemed to work in a factory) to an amount equal to one-tenth of their wages for an ordinary working day, multiplied by the number of ordinary working days on which they were employed by their employer during the relevant fortnight.On the basis that the relevant number of days is 10, the calculation can be simplified into an entitlement to wages for one ordinary working day.The concept in s25(1) of “wages for an ordinary working day” presupposes:

[1] the existence of an ordinary working day

[2] identifiable wages for such a day

[3] constancy of wages for each such day.

[50]	Crucially for present purposes the wages to which s25(1) is directed are by necessary implication wages which are the same for all ordinary working days.In the present case one can posit as an ordinary working day any week day between the hours of 8am and 5pm.That, it should be noted, is a time concept, not a piece work concept.The problem in the present case is that the wages derived by the employees do not remain constant for each working day.They vary from ordinary working day to ordinary working day, according to the throughput of the workers.They vary according to the amount of stock processed on the particular day and the speed with which the individual worker processes the stock.It therefore seems to me that, in the particular circumstances of the present case, s25(1) is not engaged because there is no such thing as “wages for an ordinary working day”.The variability of the wages earned on different ordinary working days means the statutory approach in s25(1) cannot take effect.A fortiori, any averaging approach, such as appealed to the Employment Court, cannot be in accordance with the statutory formula.Averaging is necessarily the product of lack of constancy and is the antithesis of what is envisaged by s25(1).On the averaging basis the wages are not for an ordinary working day.They are for an entirely fictional working day.
[51]	Against that background the question becomes whether the agreement which the parties have reached represents a contracting out or is otherwise in breach of the Act.That can only be so if the Act mandates a particular quantum for the particular circumstances of the case.The foregoing analysis demonstrates that s25(1) does not mandate any particular quantum for this case.No other section in the Act was said to do so.Hence, by agreeing what the rate should be for a statutory holiday, the parties are not in these circumstances contracting out of the Act nor are they breaching it.There being no concept of wages for an ordinary working day applicable to the particular circumstances in this case, the parties were, in my view, free to contract as they saw fit.Put shortly, if there is no otherwise mandated quantum, an agreement entered into by the parties, as here, in good faith and not otherwise impeachable, will govern the issue as it does not amount to a contracting out or a breach of the Act.
[52]	Although s4 of the Act is not directly relevant on this second approach, the Ports of Auckland decision suggests that s4 will apply if the Act does not otherwise mandate quantum and the parties have not reached agreement on quantum.In those circumstances the holiday pay must be fixed by an Inspector.In the present case, if s4 were invoked as a statutory indicator of quantum, it necessarily produces the same quantum as the parties have agreed.Thus, on this alternative basis of approach, which I do not think strictly engages s4, it is material on the contracting out front to note that if s4 were engaged it would not produce an amount greater than that which is produced without reference to its terms.
[53]	The consequence is that whether one takes the Ports of Auckland approach, or the second approach, which I would prefer if Ports of Auckland were able to be put to one side, the same result is reached.The parties have, in good faith, agreed on the amount to be paid for a statutory holiday.That agreement is either ratified by s4, read in conjunction with s25(1), or it is independently valid because it represents neither a contracting out nor a breach of the Act.
[54]	On either basis I would allow the appeal, set aside the judgment of the Employment Court, and restore the decision of the Tribunal which upheld the contractually fixed rate of $76.00 per day for the holidays in question.

McGRATH J

[55]	This is an appeal by a meat processing company against a judgment of the Employment Court holding the appellant liable to pay three employee meat workers arrears of holiday pay. The Employment Court allowed an appeal from the Employment Tribunal and found the arrears of pay to be owing under the Holidays Act 1981 (the Act).The appeal raises issues concerning the obligations and entitlements of employers and workers in relation to pay due to workers in factories for public holidays.The particular context is the freezing industry in which since at least 1936, awards and, since 1991, agreements, have continuously provided that the bulk of the workforce working on the chain is to be remunerated at piece work rates according to production achieved.
[56]	In March 2000 the respondent, a Labour Inspector, brought proceedings in the Employment Tribunal against Greenlea Premier Meats Limited (the appellant) under s35 of the Act, for recovery of arrears of holiday pay.The arrears were said to be payable by the appellant to Maurice Baldwin, Clayton Heu and Stephen Burgess, three meatworkers at the appellant’s export beef processing plant at Hamilton.The respondent claimed that each of the employees had been employed between January and November 1999 at the plant, and was entitled, under s7A of the Act, to holiday pay in respect of Anniversary Day, Good Friday, Easter Monday, Queens Birthday and Labour Day being public holidays specified in the Act.The respondent’s claim was that the appellant had underpaid the workers concerned for their entitlements under the Act.While payment had been made in accordance with the terms of employment contracts the respondent’s case was that these did not reflect what the Act required they provide.
[57]	In my consideration of the statutory provision I have been assisted by the discussion in Keith J’s judgment of the legislative history of statutory provisions in relation to annual holidays and public holidays. Section 7A of the Act was inserted by s5 of the 1991 amendment.It requires that every employment contract provide for the grant of eleven holidays, in addition to annual holidays, “on pay”.The Act stipulates the eleven public holidays which, in the absence of agreement by the employer and worker, will be the holidays concerned.Specific provision is also made in relation to wages payable for such public holidays in factories as follows:

25.Wages payable for holidays allowed and for holidays worked-(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.

[58]	The section imposes an obligation on an employer to pay a factory worker for the public holiday concerned an amount which if the worker had been working for the previous fortnight would be the worker’s “wages for an ordinary working day”.“Factory” is defined by reference to definitions in the Factories and Commercial Premises Act 1981 and includes a meat abattoir.It is common ground that the appellant’s plant is a factory for the purposes of s25.
[59]	The phrase “wages for an ordinary working day” can be related to the phrase “the ordinary rate of pay” in s27 of the Act being the pay which a worker actively employed in a factory on a Sunday is entitled to recover in addition to payment for time worked on the Sunday at not less than the ordinary rate.In both instances the reference is to a method of remuneration involving payment by reference to a period that has been worked.The word “ordinary” which qualifies “working day” in s25 carries the connotation of a “regular, normal or customary” day.It is a standard day.In the normal course “wages for an ordinary working day” will be the sum determined by applying the applicable periodic rate to a working day of the normal duration worked by the person concerned.
[60]	The phrase, accordingly, has no relationship to a method of remuneration according to what is produced.In the case of such a worker there is no “ordinary working day” at all in the sense of a standard period by which an entitlement to wages can be determined.Piece workers, in short, do not get wages for an ordinary working day, they get remunerated according to what they have produced.
[61]	The notion that provisions in an enactment which are concerned with payment the time worked are not invoked by a method of payment in accordance with production achieved was recognised by a decision of this Court referred to in its decision by the Employment Tribunal.In NZ Freezing Companies Association v Wages Tribunal & Another [1978] 1 NZLR 243 this Court was required to interpret an order of the Wages Tribunal made under the Economic Stabilisation Regulations 1973.The order provided that the rate of wages payable at the commencement of the Regulations was to be increased by the lesser of 8.5% or a specific sum in the case of a worker who was “paid at an hourly rate”, or “paid by the week or any longer period”.The Court held that a worker paid piece work rates fell into neither category.There was nothing in the Award which established any relationship between piece work rates and hourly rates nor any relationship between piece work rates and “a full days work”.The essential issue before the Court was whether a worker who was paid piece work rates was one within the two categories referred to that is workers “paid an hourly rate” or workers “paid by the week or any longer period”.The Court held that they were not.The Regulations were concerned with adjustments to rates of wages and the manner of expression embraced only those workers who were paid at a periodic rate.
[62]	Returning to s25 in my view it follows from what I have said that the provisions in collective employment contracts for payment according to production could not give rise to the operation of s25(1) of the Act.I do not agree with the view taken by the Employment Court that through a process of averaging amounts earned over the periods specified s25 can be given effect where payment is for production achieved.But the collective contract in question did make provision for payment of some categories of work undertaken by the workers concerned on a payment for time worked basis.Clause 8 of the contract provided that in relation to mechanical breakdowns, hygiene stoppages, organisational stoppages or stoppages due to MAF requirements employees would be paid at “the ordinary rate of pay” for time lost on production, subject to certain exceptions with which we need not be concerned.The evidence indicated that organisational stoppages could include periods in which stock was not available for processing.The provision in the contract for an ordinary hourly rate “payable” in these circumstances was the rate of $9.50 per hour.The same rate was also payable in situations of entitlements to sick leave, domestic leave, bereavement leave and jury service and in particular specified that it was payable for statutory holidays (clause 9(a)(ii)).The position accordingly is that the parties contracted for “wages for an ordinary working day” in relation to particular types of work done by the persons on behalf of whom the proceeding was brought which can be broadly categorised as non-productive work.Holiday pay was paid to the workers concerned on the basis that these contractual provisions were the “wages for an ordinary working day” under s25 of the Act.
[63]	The rate so provided for non-productive work was a real and not artificial rate, in the sense that it was a rate agreed on by the parties to be the basis for payment at times when work was being done by employees covered by the collective contract.The contract also provided for a minimum weekly payment of $335 provided that some work had been performed during the week (clause 9(b)).The rate of $9.50 per hour for 40 hours which we were advised from the bar would be a standard week would exceed the minimum weekly payment.Be that as it may an agreement which stipulates a rate of pay for a period for certain types of work and uses that rate as the basis of the agreed provision for holidays is not precluded by the language of s25.
[64]	I recognise the possibility that an employer might reach an agreement for remuneration of workers to be solely by reference to production there being no genuine agreement as to a payable periodic rate at all.In those circumstances, however, the Act provides another outcome.The underlying principle under s7A is that the employer must pay the worker for a public holiday on which he does not work.Under s4(2) of the Act there is provision, where the parties fail to agree on an ordinary time rate of pay, for a labour inspector to fix that ordinary time rate and the normal weekly number of hours of work.That default mechanism can in my view, without straining the language of the Act, be applied to enable the inspector to determine wages for an ordinary working day in a factory under s25 of the Act, where there is no genuine provision for such payment under an agreement.That approach gives content to the statutory obligation reflected in s7A and spelt out in s25.The parties to agreements may not wish a labour inspector to have that power but they can readily avoid it by making provision for wages for an ordinary working day in their agreements.
[65]	Finally I turn to the decision of this Court in Ports of Auckland Limited v New Zealand Waterfront Workers’ Union Inc [1996] 3 NZLR 268 on which the argument of Mr Gunn, for the respondents, was largely based.In that decision the Court identified the consequences of its interpretation of ss7A and 25 of the Act which equated the expressions “ordinary working day” and “ordinary pay”.(Page 272 line 30).The Court identified as the third of four consequences of its interpretation that:

... 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.

[66]	In my view, contrary to the argument of Mr Gunn, this Court’s indication in this passage was that payments made in defined circumstances, such as production, did not form part of “pay for the ordinary working day”.The indication that productivity payments, which are dependent on actual working results need not be notionally calculated and paid is not premised on the fact that they are to be treated as “add-ons” in this expression.I interpret this passage as indicating that the Court in Ports of Auckland was of the view that piece work payments did not fit the concept of the ordinary working day. I am also of the view that there should in any event be no alteration in the approach taken in the Ports of Auckland case as for a number of years, in those industries in which employees are remunerated according to production achieved employers, workers and those representing them are likely to have reached their contracts and agreements with workers on that basis.
[67]	It is an important aspect of the present case that the terms in relation to payment for statutory holidays at the ordinary hourly rate of $9.50 were part of a package which included the piece work rates for designated employees and certain hourly rates for labourers of particular designations.There would be an inherent anomaly in allowing the review of one element of such a composite package without being able to review the whole.Of course if, on its true interpretation, the Act so required that result could not be avoided.But it would have been an interpretation that did not reflect the understanding of the obligations of an employer under the Act over the years.Piece work payments have been prevalent in this industry since at least the 1936 award and provisions for an ordinary rate for payment of the holidays of those so remunerated featured in awards through to 1990 and thereafter in collective agreements.The interpretation which I consider the correct one is accordingly reflected in the practice of the parties.
[68]	For these reasons I would allow the appeal and reinstate the decision of the Employment Tribunal.

ANDERSON J

[69]	I also agree that the appeal should be allowed and the decision of the Employment Tribunal restored.
[70]	The implication from the judgment of the Employment Court is that payment at a rate per unit of production is equivalent to payment at a rate per unit of time; and that “ordinary” is synonymous with “average”.The implication is plainly untenable and is the result of the error of law in the first sentence of para [25] of the judgment under appeal.
[71]	The respondents were entitled to holiday pay fixed in terms of wages for an ordinary working day.The nature of the industry and the fixing of payment by reference to units of production meant that unless the contract were to make provision for assessing pay by reference to units of time so that wages for an ordinary working day could be identified, there would be a potential breach of s25 of the Holidays Act 1981.I am attracted by McGrath J’s reasons for judgment in relation to the powers of a Labour Inspector under s4(2) and therefore I do not exclude the possibility of a potential breach being avoided by a Labour Inspector’s determination.But the point may be moot because here the contract did make appropriate provision.
[72]	In clauses 9(a)(ii) and 12(b) a rate is fixed by reference to time, namely $9.50 per hour.The contract also fixed the hours of work which, depending on the shifts, could be either 40 or 36 hours per week comprising working days of 8, 10 or 12 hours.In respect of the days preceding a public holiday the hours worked by any employee could be ascertained in respect of any particular day and the application of the time rate would produce a wage for a particular day accordingly.Thus, far from contracting out of the Holidays Act the parties have by contract provided a means of compliance.
[73]	Clause 9(b) of the contract fixed a minimum weekly payment of $335, that is $3 more than would be earned at the ordinary hourly rate for the whole of a 36 hour week.The correlation between the ordinary hourly rate under the contract and the provision for a minimum weekly payment is consistent with the generally understood concept of “ordinary pay” as a minimum baseline above which actual pay might be increased for various reasons relating to the working terms or circumstances.This reinforces the view that the parties have contracted in, not out.

Solicitors

T Cleary, Wellington for Appellant

Legal Services, Department of Labour, Auckland for Respondent