Businesses do not tend to thrive through financial downturns, or even worse, recessions. Hard decisions need to be made; efficiencies need to be found, changes or redundancies may be required.

Often these hard decisions are made in circumstances where managers are trying to work out what is around the corner; how long will this downturn last, will our customers stay with us, or will they be making changes, too?

Perhaps we have been through the most challenging circumstances we are ever likely to see for generations – a global COVID-19 pandemic, our international borders closed and national and regional lockdowns being imposed.

Standards unchanged

No matter how challenging the circumstances, the recent decision of the Employment Court of Drivesure Limited v McQuillan and Ors confirms that the usual “fair and reasonable” standards required by employment law will continue to apply.

Drivesure provides vehicle testing services at various sites. It had a contract with the Penrose Compliance Centre (PCC) to carry out such services at its site. That contract was unexpectedly terminated by a letter dated 6 March 2020, effective from 8 May 2020. Mr McQuillan and two other defendants were employed by Drivesure at the PCC site. The case involves a restructuring that ran into the nationwide lockdown in March and April 2020.

Drivesure unsuccessfully attempted to get PCC to reconsider terminating the contract. On 10 March, Drivesure advised the defendants of the termination of the contract with PCC. In letters dated 17 March, Drivesure wrote to each of the defendants proposing that all the positions at PCC would be made redundant. Drivesure said it had considered redeployment to other sites, but that was not possible.

Rushed job?

Drivesure wanted to meet with the defendants to receive feedback on the proposal, with a meeting suggested to take place on 24 March 2020. There was some correspondence between Drivesure and the defendants after the letter of 17 March, including a request from Mr McQuillan to postpone the meeting until 26 March as his legal advisor was busy. Drivesure was not prepared to defer the meeting but offered to meet any time before then, including before work and in the evening.

Circumstances intervened, and on 23 March 2020, the Prime Minister announced that New Zealand was immediately moving to Alert Level 3 under the Government Alert Level Framework and would move to a strict Alert Level 4 lockdown two days later. It was after that announcement that Drivesure said that it intended to make a decision on the redundancy proposal by 25 March 2020.

The defendants sent an email on 23 March 2020, and again the following morning, outlining why they could not meet, including their frames of mind, health and safety reasons for meeting in person, and their legal advisers being unavailable.

Time to consider feedback?

Drivesure considered that because of the lockdown, it was critical to act quickly to preserve the whole Drivesure business. Drivesure responded to the defendants on 24 March, saying that if the defendants did not wish to meet that day, then they were to provide any further feedback on the proposal in writing by 25 March 2020, after which Drivesure would consider all feedback received and make a decision. Each of the defendants responded in different ways:

• Mr McQuillan asked some questions about the selection process for staff and asked to attend mediation
• Mr Raj questioned the rationale for the proposed redundancy and questioned that PCC was his fixed site
• Mr Rafiq thought the decision was unfair, having regard to his history and experience with Drivesure. He offered to make changes, including changing his workplace to another site, reducing his working hours or days, or helping out in other areas of the business.

On 25 March 2020, Drivesure emailed each of the defendants advising that the proposal would go ahead and that their employment would be terminated.

Judge Holden found that even taking account of the circumstances that Drivesure was facing, the last part of the process was unduly rushed. It was not a process that was open to a fair and reasonable employer in all the circumstances.

The Court found no reason to reduce the relatively modest compensation awarded by the Employment Relations Authority of $8,000 for each of the defendants.

Interestingly, the case was argued on the basis of unjustified disadvantages rather than unjustified dismissals. The process was successfully challenged, but the substantive reasons for the redundancies were not challenged. Read more

Published in:

2023 HRNZ Autumn Magazine ISSUU Case Law Review.pdf

Public servants have been waiting some time to see some movement in the so-called “pay restraint” imposed on Government agencies following the Covid-19 epidemic. It has been anticipated that the Public Services Commission will shortly issue new guidelines for pay increases in the public service.

While efforts are made to ensure that government workers are fairly compensated their pay often lags behind that of their private sector counterparts. This disparity has become more pronounced since the Government applied a “pay freeze” in 2020, citing the threat of rising Covid-19. The Government softened its 2020 approach slightly in 2021 when the Public Services Commission directed government agencies to ensure that pay increases did not occur unless they met very strict criteria.

Agencies were permitted to provide modest pay increases for staff earning less than $60,000. Agencies could provide for small increases in pay for lower to middle earners by a modest progression within their salary band; or where there was a demonstrable recruitment demand that was not being met. There were to be no increases to salary bands or pay increases for those paid over $100,000. In exceptional circumstances agencies could obtain approval from the Commission.

While the Commission’s current guidelines remain in place, it is widely accepted that New Zealand is going through a “cost of living crisis”. Annual inflation is tracking at 7.2 percent. Stats NZ has reported that increasing prices continued to affect all household groups in the 12 months to December 2022. The cost of living for the average household (as measured by the household living-costs price indexes) increased by 8.2 percent in the 12 months to December 2022.

The basic costs of living have cut significantly into workers’ pay packets. “Higher prices for housing, food, and transport were the main contributors to the increase across all household groups,” NZ Stats consumer prices manager James Mitchell said.

Meanwhile the Ministry of Business, Innovation and Employment has recently provided an updated benchmark of rates that the Governments pays to contractors. It compares 2021 to the 2022 financial year using the average rate for the top 10 commonly reported job categories. It shows that there have been steep rate rises for some contactors of up to 46%, but also drops of up to 15%.

Overall, contractors were getting 8.5% more in 2022, just ahead of inflation and well ahead of most private and public sector wage rises.

IT contractors, as usual, dominate the high rates at up to about $250 an hour and averages about $150. But it is much lower paid public-facing roles, such as helpdesk, contact centre, and customer service contracts, that went up the greatest percentage in the year to July 2022. These average around $50-$60 an hour.

"We have high inflation and a tight labour market, including a skills shortage and low unemployment," said MBIE delivery services director Matt Perkins.

Of course the National Party has been castigating the Government about its spending on contractors. But both the leaders of the Labour Party and National Party have recently talked about increasing in-house core public sector capability to lessen reliance on contractors, though National has at the same time said it wants to cut the 60,000-strong core workforce of the public service.

It has been reported that the Commission’s new guidelines will give weight to a new pay approach called the Public Sector Pay Adjustment (PSPA) that has been used to recently settle some collective bargaining in the public sector. It is understood that the PSPA had been used to settle more than a dozen collective agreements so far, offering a $4000 pay rise in the first year and three percent, or $2000, in the second. But some powerful unions, such as those representing teachers, nurses and senior doctors, have rejected it as putting their workers’ pay behind inflation.

In the Public Service, about a fifth of collective agreements are settled or in a ratification process, while just under a third are in bargaining now or expected to start bargaining soon.

The Commission has declined to comment on what may be in its new guidelines "Because it could impact current bargaining".

What is clear is that the financial pressure on many government employees and their families is going to continue for some time. With high inflation, with higher mortgage costs and rent payments continuing, the cost of living is unlikely to reduce soon. Hopefully the Commission’s new guidelines will provide a well-deserved catchup to ensure we have a public service that retains and attracts talented people that can service us well. Read more

David Burton is an employment law barrister at www.burtonlaw.co.nz

The Public Services Commissioner has written to the Chairs and Chief Executives of the public service reminding them of their obligations to be impartial and that they and their entities are subject to the Code of Conduct for the public service.

This has arisen out of allegations of bias on the part of senior governance figures in the public service.

Rob Campbell, the former chair of Te Whatu Ora/Health NZ and the Environmental Protection Authority criticised the leader of the National Party and likened the National Party's Three Waters policy to a "thin disguise for the dog whistle on co-governance". He refused to accept that he had done anything wrong, even though he is meant to have apologised to the leader of the National Party and the Minister of Health.

Former Labour MP, Steve Maharey, in opinion pieces in the media, has made comments that could be read as politically partial. When the issue arose around Mr Campbell, Mr Maharey front footed the matter and raised it with the Public Service Commission and his Ministers. He offered his resignation as Chair of Pharmac, ACC and Education New Zealand.

Another former Labour MP, Ruth Dyson, is Deputy Chair of the Earthquake Commission and Fire and Emergency New Zealand and has also come under scrutiny for apparently partisan Twitter comments criticising Mr Luxon's speech at Waitangi and for displaying Labour Party connections.

Mr Campbell was removed from his roles by his respective Ministers. Mr Maharey has kept his roles. In a statement last week the Prime Minister said that the advice from the Public Service Commissioner was that Mr Maharey had breached the Code of Conduct, but his actions did not justify his removal from his roles.

The Prime Minister said the Commissioner has characterised Mr Maharey's actions as 'unwise', but at the 'lower end of the spectrum’. He said there was a "clear distinction" between Mr Maharey's breach and Mr Campbell's. "In Mr Maharey's case, he proactively acknowledged the error, has undertaken to stop writing the column and apologised".

When Ms Dyson was pulled into the affray and her defence appears to have been that she had not read the Code of Conduct. But she has now said that she will read the Code and she was rethinking her social media use.

The Prime Minister last week said he had confidence in Dyson "She's a very competent and able chairperson, board member, contributor". However, he expected her to have read the Code of Conduct.

Mr Luxon has said Ms Dyson would be gone under National. "I think, you know, when you see Ruth Dyson saying she signed a code of conduct that she didn't read, I just say to you it's not a great start to a governance career."

Campbell, Maharey and Dyson certainly are not employees in their governance roles but they are subject to the Code of Conduct; as are public servants who are generally employees.

In the employment law jurisdiction there is a perception that employers should treat like cases alike when dealing with disciplinary matters.  However, a fairly recent decision of the Employment Court shows that treating "like for like" is not always the right outcome.

In Smith v Director General of MPI, Clive Smith and another employee (called Mr X) were involved in a physical altercation during a colleague's leaving function at a bar on Courtenay Place.  MPI conducted a disciplinary investigation into the incident and found that both empDisparity of treatment - is it justified?loyees had engaged in serious misconduct. Mr X only received a warning while Mr Smith was dismissed.

Mr Smith subsequently alleged that there had been an unjustified disparity of treatment between himself and Mr X. He said that during the investigation he took agreed leave while Mr X continued to work; he was dismissed while Mr X was only issued with a warning; he referred to an earlier incident at a work-related social function where MPI had not investigated the incident and had not imposed a disciplinary sanction in respect of it; MPI failed to take disciplinary action in respect of other similar incidents.

The Employment Court held that while there had been a disparity of treatment in this case it could be adequately explained.  This is because the investigation revealed that even though Mr X had engaged in the altercation with Mr Smith, Mr Smith was the protagonist and Mr X had acted in self-defence. In addition, the Court was of the opinion that MPI was not bound by its previously lenient treatment.  Mr Smith could not reasonably expect that any subsequent behaviour would be ignored.  

While there is a world of difference between the physical violence that Mr Smith was involved in and the social media commentary Campbell, Maharey and Dyson have engaged in, the Government has exercised its judgement in relation to the three governance leaders differently.

You can argue that the three senior and very experienced governance leaders have clearly engaged in some conduct that appears to have a political bias and is contrary to the Code of Conduct that they are tasked with upholding in their respective roles. Conversely, you can argue that they brought entirely different approaches to the issue when it was raised. It will be the court of public opinion and not the Employment Court that will decide whether the disparity of treatment was justified. Read more....

While six former ex-Gloriavale women are engaged in a lengthy litigation case in the Employment Court arguing that they were employees and not volunteers a group of dancers are picketing outside Wellington’s Calendar Girls strip club and are looking to lobby Parliament over their rights as independent contractors.

It is reported that nineteen dancers working at Wellington's Calendar Girls were told not to come back to work by a Facebook post after requesting better work contracts.

On 30 January, 35 dancers from the Club decided to bargain collectively. The dancers have asked Calendar Girls management for two things; clear income records and a 60 percent cut of their earnings. It is understood that currently Calendar Girls dancers may pay up to 56 percent of their earnings back to their employer.

The dancers sent an email asking for changes. They say that the next day over half of them were told by the proprietor in a Facebook group post to "clear out their lockers".

Immediately after the proprietor's post asking the dancers to clear their lockers, his account made another Facebook post seeking accommodation for what appeared to be their replacements. In a statement, Calendar Girls management said 12 of the 19 dancers asked to clear their locker had already moved away or stopped working for the club.

The 19 dancers have formed a group called the Fired Up Stilettos and are seeking improved industry standards and better independent contractor protection. They say that, nationwide, dancer contracts are predatory by nature and are riddled with fines, retainer bonds and clauses forbidding work at competing venues and media engagement.

The dancers say that although they are treated as employees, as independent contractors they lack the employment protections of the Employment Relations Act. It is alleged that some clubs have really bad management and a culture of bullying.

Aotearoa NZ Sex Workers' Collective founder and national coordinator Dame Catherine Healy said there were many coercive practices across the industry. If they were properly scrutinised, many would not hold up under law.

Unfortunately, the cost of enforcing rights, whether as an employee, volunteer or contractor can be prohibitively expensive. The protracted Gloriavale case has seen Gloriavale apply to the Employment Court to represent itself because it cannot afford to continue to pay its lawyers to represent it.

Even when the Gloriavale case ends and there is a decision as to whether the claimants were employees or volunteers that decision may be challenged. In employment law circles, the Lord of the Rings film case of Bryson v Three Foot Six Ltd is notorious. Mr Bryson was a model maker and challenged his status as to whether he was an employee or an independent contractor. In the Employment Relations Authority he was found to be a contractor, in the Employment Court that decision was overturned and he was determined to be an employee. Then on appeal to the Court of Appeal and ultimately the Supreme Court Mr Bryson was found to be a contractor and then an employee respectively.

There is recent precedent for the dancers call to be allowed to bargain collectively. The Screen Industry Workers Act was passed into law last year. It allows workers to bargain collectively; either at the occupational level to cover all work by a particular occupation of screen workers across all screen productions, or at the enterprise level so it covers a single production or company.

An agreed collective contract needs to meet some minimum requirements including rates of pay, entitlements to breaks, and minimum procedural requirements for raising and responding to a complaint relating to bullying, discrimination, or harassment in the workplace.

In announcing the Screen Industry Workers Act the Minister of Workplace Relations and Safety said “All people in New Zealand deserve good jobs, decent work conditions and fair compensation for their work… our Government is delivering better outcomes for workers and continuing to build New Zealand’s reputation as a great place to work”.

It is arguable that the dancers, largely vulnerable young women, are in far greater need than those working on large film productions. Of course there is a huge difference between the film industry that brings in billions of dollars into the economy and the picketing dancers. It is unlikely that the picketing dancers will get any traction with the Government at present. However, the principles expounded by the Minister should be supported by all New Zealanders. Read more