John Matsuoka v LSG Sky Chefs New Zealand Ltd

JurisdictionNew Zealand
CourtEmployment Court
JudgeB S Travis
Judgment Date18 May 2011
Docket NumberARC 19/11
Date18 May 2011

[2011] NZEmpC 44


ARC 19/11

In the Matter of proceedings removed

John Matsuoka
LSG Sky Chefs New Zealand Limited


Service and Food Workers Union

Rob Towner, counsel for plaintiff

Garry Pollak, counsel for defendant

Timothy Oldfield, counsel for intervener

Determination of questions of law removed to Employment Court — whether plaintiff entitled to transfer his employment to another contractor taking over airport food catering-work previously forming part of his employment — whether a “vulnerable worker” test applied in determining whether an employee eligible for transfer after restructuring under Part 6A Employment Relations Act (“the Act”)(continuity of employment if employees' work affected by restructuring) — whether employees not directly involved in preparation of food working in “food catering services” as defined under the Act and eligible for transfer.

The issues were: (i) Whether a “vulnerable workers” test applied in determining whether an employee was eligible to transfer under Part 6A and whether M met the test; (ii) whether ground stewards/senior ground stewards for the PRI/PFC group worked in “food catering services” under Schedule 1A; (iii) Whether M's shareholding in the holding company and other relationships with PRI/PFC disentitled him to a transfer per se; (iv) was M was entitled to a transfer notwithstanding his not being employed by the contractor that lost an applicable contract under Part 6A; and (v) M's appropriate terms of employment if he were held to be entitled to a transfer.

Held: (i) Schedule 1A was intended to provide protection to specified categories of employees if, as a result of a proposed restructuring, their work was to be performed by another entity, i.e. a right to elect to transfer to the new employer where there is a causal link between their original employment ending and the work moving to the new employer. Although the explanatory note to Schedule 1A in bill form referred to workers in the specified categories as being “vulnerable” and the EC in Gibbs v Crest Commercial Cleaning Ltd and Service and Food Workers observed that Part 6A was intended to cover “vulnerable workers”, the latter phrase should not form part of the test to determine whether an employee is entitled to a transfer. This was the case as this phrase never appeared in any relevant part of the ERA and it was also difficult to articulate what precisely the words meant.

(ii) The phrase “food catering services” in these instances should be given a wide interpretation. The relevant parts of the Select Committee report on these clauses clearly showed that Parliament contemplated the inclusion of employees working in the areas of preparation and delivery of food to third parties for consumption in a catering situation in addition to those involved in the actual preparation of food. Relevantly, New Zealand dictionary definitions of “catering” indicated that the word encompassed the provision of drink and food and the necessary implements for third parties to be able to consume the items supplied.

(iii) LFG's argument was reliant on the Court accepting another permutation of the “vulnerable employee” test or synonyms therein — essentially, it was said that M's situation showed that he was not intended to be covered by Part 6A. This was to be rejected for the same reason stated in (i). Moreover, the Employment Relations Authority had made clear in Hughes v Upper Hutt Cosmopolitan Club Inc that an employee need not be vulnerable to be covered under Schedule 1A, a conclusion which the EC endorsed.

(iv) M's circumstances fell within the ambit of “subsequent contracting” under s69C(4) (definition of subsequent contracting). Ordinarily, example E under s69E (examples of contracting in and subsequent contracting) would cover this situation succinctly: SQ (person A) entered into an agreement with an independent contractor, i.e. PFC (person B), to provide food catering services to its passengers at Auckland Airport and then later entered into another agreement with LSG (person C), a second independent contractor, to provide the same. The problem was M was employed by PRI. However, the loss of the PFC contract with SQ affected the plaintiff as an employee of PRI because he could no longer perform his work on SQ aircraft and since PRI engaged in restructuring as a result of the loss of PFC's SQ contract, M was no longer required by PRI to perform the work performed by him at all and that work (or work that is substantially similar) was now to be performed by or on behalf of LSG. Thus the necessary causal link under Part 6A existed. Therefore, an employee to whom schedule 1A applied could be an employee affected by a “restructuring”, as defined in s69B, and had to be given the opportunity to exercise the right to make an election to transfer regardless of whether that person's employer was person B in the definition of “subsequent contracting” under s69C(4).

(v) Section s69I(3) (consequences of employee's election to transfer) made it clear that in cases where only part of the employee's work was affected by qualifying restructuring, Parliament contemplated that the new employer was only obligated to employ the employee in respect of the affected part of the work and that in some circumstances the employee might have to work for multiple employers. However, s69I(2) provided that the employee was eligible for a transfer to “the extent that the employee's work has to be performed by the new employer”. The relevant work here was “food catering services” and the ground steward and senior ground stewards working for the PRI/PFC group performed a wide range of duties in relation to food catering services for a number of different aitlines, which fluctuated depending on the day of the week, rostering, and so forth. Moreover, M's work was affected to the extent that his employment with PRI was to be terminated and he was no longer required to perform any work for PRI and not just SQ work.

Section 69I(2) must be construed in view of the objects of part 6A. In these circumstances, the only workable interpretation of s69I(2) was that M was entitled to transfer as a full time employee. M was a full time worker and a transfer on any other basis would not be on the same terms and conditions as that he enjoyed with PRI, as required by s69I(2(b).

The EC confirmed that M was prima facie entitled to transfer to LSG as a full time employee, with other defences raised by LSG to be determined later.


The plaintiff claims to be legally entitled to transfer from his previous employment to new employment with the defendant (LSG) which has recently obtained a catering contract to service Singapore Airlines (SQ) at the expense of a previous contractor. The plaintiff claims to be so entitled by virtue of the provisions of subpart 1 of Part 6A of the Employment Relations Act 2000 (the Act) which have not yet been the subject of authoritative determination by the Court. 1


LSG and the intervener, the Service and Food Workers Union Nga Ringa Tota Inc (SFWU), both assert that subpart 1 was intended to provide protection for

vulnerable employees employed in a labour intensive sector in low paid work. The defendant contends that by virtue of the plaintiff's management responsibilities, the nature of his work and his substantial remuneration package, he was not a vulnerable employee intended to be afforded the protection of subpart 1 of the Act.
The proceedings

The matter was removed to the Court by the Employment Relations Authority on 11 March 2011 2 on the basis of seven questions of law which had not previously been before either the Authority or the Court. The matter was accorded urgency by the Chief Judge and was heard over four days on the basis of the pleadings filed in the Authority which disclose the following.


The plaintiff claims that LSG has breached s 69I of the Act by refusing to accept him as its employee in the position he was employed in prior to the loss of the SQ contract. He also claims that he was unjustifiably disadvantaged by the actions of LSG and seeks a declaration, compliance orders, compensation in relation to his alleged personal grievance, damages, penalties for LSG's alleged breaches of contract and an order that LSG pays arrears of wages, interest and costs.


LSG's reply alleges: the plaintiff has an entirely different type of employment agreement to those employees who have transferred to LSG; the plaintiff's employer was not the contracting party that lost the SQ contract; the plaintiff's conditions of employment were commensurate with a manager's employment terms and not those of a senior ground steward or a ground steward and, therefore, the plaintiff is not an employee entitled to elect to transfer to LSG. It also alleges that as a result of a particular shareholding that the plaintiff held and his personal relationships with the directors, he is and would remain, a direct competitor of LSG and would have a serious and obvious conflict of interest should he be able, by law, to transfer to LSG. It also alleges that the plaintiff in communications with it, misrepresented his role, that LSG has lost trust and confidence in him as a prospective employee and is not willing to employ him. Not all of these matters were pursued by LSG in its final submissions and it has been agreed by counsel that the issues of misrepresentation

and conflict of interest will not be dealt with in this judgment. As the case developed LSG also claimed that ground stewards and senior ground stewards were not within the class of persons afforded protection by subpart 1.

It was agreed by counsel that the Court in this judgment would determine whether the plaintiff had a statutory right to transfer to LSG and, if there was such a right, whether this...

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