Employees’ entitlements to time and a half and an alternative day off for working on a public holiday were reviewed by the Court of Appeal in the recent decision Air New Zealand Limited v The New Zealand Airline Pilots’ Association Industrial Union of Workers Inc. [13 November 2006] CA113/05. The outcome of the case is interesting particularly in the lead-up to the Christmas period.
The Court decided an employer could avoid paying time and a half to employees working on the public holidays specified in the Holidays Act 2003 (the Act) if an employer had agreed with its employee to transfer the specified public holiday to a specified ‘exchange day’.
The majority decision referred to an employee’s entitlement to the 11 public holidays specified the Act. It said if under an employment agreement the parties agreed that a public holiday was to be taken on a specified exchange day then the exchange day was to be deemed the actual public holiday and the entitlements would transfer to the exchange day. The Act is complied with if the employee has a holiday on the exchange day and is paid as if it were a public holiday. If the employee has to work on that specified exchange day then the employee is entitled to time and a half and an alternative day off work. The specified public holiday becomes a normal day and attracts only the entitlements of a normal working day.
Justice Chambers agreed with the outcome of the case, but strongly disagreed with the reasoning of the majority. The outcome was that Air New Zealand had not effectively agreed with their employees, through clauses in the collective agreement, for public holidays to be observed by their employee pilots on an exchange day. The Court said the agreement had to be very clear. Air New Zealand’s collective agreement provided pilots with 11 additional days’ leave, added to their annual leave regardless of the number of public holidays they actually worked. These additional days were provided to compensate pilots for any specified public holidays they ended up working on. The Court held this was not an effective mechanism to transfer the specified public holidays to other exchange days.
The Court of Appeal states:
agreements to exchange days must have a genuine element of exchange, and the specified day relinquished and the agreed exchange day must be identified or, at least, be able to be identified with certainty
Justice Chambers believed the majority had got the interpretation of the Act wrong. He didn’t believe the new holiday’s regime ‘could be avoided by the simple expedient of an agreement to transfer the public holiday’. If the majority was right ‘the penal rates regime and the alternative holiday’s regimes would never bite.’
It will be interesting to see if Parliament reacts to the decision. Clearly there is now the ability for employers to agree with employees to exchange the specified public holidays under the Act for specified ‘exchange days’. It remains to be seen what later Courts say about whether agreements to exchange days have involved a ‘genuine element of exchange’ and ‘can fairly be categorised as a valid exchange agreement’. For now, employers should note the decision and consider whether operational requirements suggest the holiday clauses in their employment agreements should be reviewed.
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