Did Personal Grievance Awards Just Get Bigger?

Ogilvy New Zealand Limited (Ogilvy) was recently ordered to pay almost $350,000 after the Employment Relations Authority found that it had unjustifiably constructively dismissed a senior advertising executive (Whitten v Ogilvy New Zealand Limited (30/4/ 2010)).

Ms Whitten had been employed by Ogilvy from 1993 until July 2008, at which point she held the title of Deputy Managing Director.

In July 2008, Greg Partington, Ogilvy's Managing Director asked Ms Whitten if she had time for a 10 minute meeting. He told her he had appointed a new Deputy Managing Director and asked her to relinquish her title in exchange for a directorship. If not, her role would be reduced.

Three days later staff and national newspapers were told of the appointment of the new Deputy Managing Director. Ms Whitten's legal adviser wrote expressing her shock and upset at the announcement and reiterated her desire to continue to explore the directorship offer.

Ogilvy's legal adviser said the new Deputy Managing Director's appointment did not undermine Whitten's position. Her title was merely a title, she had never held a 2iC position, and she 'had only ever been a strategic planner in respect of two ... clients'. The offer of directorship was withdrawn. Unspecified performance concerns were raised. In early August Ms Whitten resigned.

Was Ms Whitten unjustifiably constructively dismissed?

The Authority considered whether Ms Whitten's resignation was caused by a breach of duty Ogilvy owed her, and whether that breach made her resignation reasonably foreseeable.

The Authority said Ogilvy's actions backed Ms Whitten into a corner. In effect, her existing position had significantly changed, the directorship option had been unilaterally withdrawn and Ogilvy's conduct towards her had undermined her trust and confidence that she would be fairly treated. Ms Whitten's resignation was foreseeable. She was unjustifiably constructively dismissed.

Was Ms Whitten's position made redundant?

Ms Whitten had held the position of Deputy Managing Director for some 3.5 years. Whilst she could retain her title, her role would apply to the Auckland office only. Her redeployment options were to take the directorship or accept a reduced role.

The Authority held that Ms Whitten's position had been made redundant as it no longer existed in the new structure. It awarded her redundancy compensation under her employment agreement which was four weeks' salary for the first complete 12 months and two weeks for each completed year thereafter. She was awarded $128,615 as redundancy compensation.

Hurt and humiliation

The Authority held that the following factors meant a high level of compensation for hurt and humiliation was warranted: Ms Whitten's long service and seniority, the highly public nature of her departure, Ogilvy's vindictive reaction to her assertion of rights and withdrawing the directorship offer, the raising of unspecified performance concerns and the demeaning characterisation of her contribution to the business. Ms Whitten was awarded $15,000 for hurt and humiliation.

Ms Whitten was also awarded eight months' lost wages (in excess of the statutory minimum) and some payments towards contractual benefits.

Lessons learnt

  • Don't dance around the issue. If it's a performance issue, address it head on.
  • Act in good faith. Follow your policies and agreements. Avoid skipping any steps.
  • It is better to be safe than sorry. In other words, consult.

Air Nelson Strikes Back

The Supreme Court has recently ruled in favour of Air Nelson in its dispute with the Engineering, Printing & Manufacturing Union (EPMU). The EPMU had claimed that Air Nelson had breached strikebreaking laws during industrial action in 2007.

In the Employment Court, the EPMU argued that Air Nelson illegally used independent contractors and other employees to perform striking workers' tasks. The Employment Court ruled in favour of Air Nelson. However, the Court of Appeal overturned this decision last year.

The Supreme Court favoured the approach adopted by the Employment Court and held that the contract engineers had not been performing the work of striking employees. Rather they were performing their own work.

Air Nelson had both employees who carried out line maintenance tasks, and contract engineers who also carried out line maintenance. The contract engineers typically carried out only a very small fraction (1-2%) of line maintenance activity.

In 2007 line maintenance employees were engaged in a lawful strike. Contract engineers were engaged to carry out a routine inspection of an aircraft and replaced some cabin and reading lights. The following day a contract engineer carried out more line maintenance by performing what is known as an engine compressor wash.

The EPMU asserted that Air Nelson had contravened section 97 of the Employment Contracts Act as it had allowed line maintenance work during a lawful strike. Section 97 provides that an employer may employ or engage another person to perform the work of a striking or locked out employee if the person:

  • is already employed or engaged by the employer at the time the strike or lockout commences;
  • is not employed principally for the purpose of performing the work of a striking or locked out employee; and
  • agrees to perform the work.

The court explained that section 97 is an anti strikebreaking mechanism. It confers employment-related rights on employees and constrains the bargaining power of the employer for the benefit of striking or locked out employees.

The court explained that whether a person was or was not performing the work of a striking or locked out employee, was essentially a question of fact to be ascertained by analysis of the circumstances of each case. In this case the contract engineers were performing their own work, not that of the striking employees.

Legislative Update

Holidays Act 2003

Last year a Ministerial Advisory Group was set up to consider public submissions made in response to the Act. The Group reported back on seven specific issues.

  • Calculation of relevant daily pay - Employer representatives recommended the accrual and payment mechanism for all statutory leave should be changed to one rate for which all leave are paid. This single rate would be calculated by dividing the employee's annual gross earnings by contractual hours for the relevant period (ie the period in which the employee earned the annual gross earnings). The accrual of leave should be in the time unit best suited to the workplace (hours, days or weeks) eliminating the need for variable work periods. The union sought to retain the status quo for the calculation of annual holiday pay.
  • Trading in annual holidays for cash - The union representatives recommended the statutory minimum annual holiday entitlement should not be traded for cash. Employer representatives recommended employees are able to trade annual holiday entitlements provided a balance of three weeks remain and it was subject to safeguards.
  • Casual employees - The Group recommended maintaining current leave entitlements for casuals, but that the Department of Labour provide more educational information.
  • Transferring public holidays to another day - The Group recommended the ability for employers and employees to agree to transfer public holidays should be restored subject to conditions, such as voluntary agreement in good faith, the public holiday must have been a working day and the public holiday and day on which the public holiday will be observed must be identifiable.
  • Accumulation of alternative holidays - The union recommended retaining the status quo as it compensated for the loss of opportunity to enjoy a public holiday with family/friends. The employer representatives recommended deleting 'alternative holiday' as a category and instead of accumulating a 'day' of leave, units worked on a public holiday should be used.
  • Treatment of public holidays - Should Waitangi Day and ANZAC day be 'Monday'ised'? The Group recommended no changes to current public holidays.
  • Should Easter Sunday be recognised as a public holiday - The union recommended a 12th public holiday, while the employer representatives recommended the status quo. The Minister of Labour is currently considering this report and it is anticipated the Minister will soon comment on it.

Employment Relations (Rest Breaks and Meal Breaks) Amendment Bill

The Bill implements government policy to make rest break and meal break provisions for employees more flexible. The shift from prescriptive to flexibility encourages employers and employees to negotiate in good faith about workable arrangements regarding how and when meal and rest breaks should be taken. Employers ultimately decide having regard to their operational environment, resources and the employee's interests. The Bill proposes meal breaks, paid rest breaks or compensatory measures (ie late start or early finish time) to suit service / production continuity. This Bill has passed its first reading and has been referred to the Transport and Industrial Relations Committee for review.

Paid Parental Leave

Paid parental leave payments have increased from $429.74 per week to $441.62 from 1 July 2010. The number of parents receiving paid parental leave is steadily increasing, with over 25,000 families getting assistance each year. This rate is adjusted annually to account for any increase in average weekly earnings.

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