New Zealand Airline Pilots' Association Inc. v Mt Cook Airlines Ltd

• Jurisdiction: New Zealand
• Judge: A D Ford
• Judgment Date: 17 December 2012
• Court: Employment Court
• Docket Number: ARC 2/10
• Date: 17 December 2012

IN THE MATTER OF a Challenge to a Determination of the Employment Relations Authority

BETWEEN

New Zealand Airline Pilots' Association Inc

First Plaintiff

And

Mark Paul Ritchie

Second Plaintiff

and

Mt Cook Airlines Limited

Defendant

[2012] NZEmpC 218

ARC 2/10

IN THE EMPLOYMENT COURT AUCKLAND

Challenge to a determination of the Employment Relations Authority which found the defendant correctly calculated the relevant daily rate payable to its pilots who performed work on public holidays under the Holidays Act 2003 — defendant calculated daily pay by dividing the annual salary by 365 — plaintiff contended daily pay should be calculated by the number of days the pilots were actually required to work in order to earn their salary (206 days) — definition of “relevant daily pay” under s9 Holidays Act 2003 (meaning of relevant daily pay).

Appearances:

Simon Dench, counsel for the plaintiffs

Kevin Thompson, counsel for the defendant

JUDGMENT OF JUDGE A D Ford

Introduction

1 After the hearing of this case in May 2011, the parties agreed that judgment should be deferred pending delivery of the Court of Appeal decision in Postal Workers Union of Aotearoa Incorporated and Street v New Zealand Post Limited. 1 It was considered that the decision in that case could have relevance in that it was concerned with the correct method of calculating “relevant daily pay” for the purposes of the Holidays Act 2003 (the Act) and that is also the principal issue in the present case, albeit, against a different factual scenario. The judgment of the Court

of Appeal in the Postal Workers case was delivered on 30 October 2012 and the parties in the present case were then given the opportunity to file supplementary submissions in response

2 The case comes before this Court by way of a de novo challenge by the plaintiff to a determination 2 of the Employment Relations Authority (the Authority) dated 18 December 2009. By way of a minute dated 11 November 2010, Judge Travis recorded that by agreement between the parties, Mr Mark Ritchie would be joined in the proceeding as second plaintiff and that the hearing would be limited to the issue of liability at this stage with quantum to be determined later if the plaintiffs succeeded.

3 Before the Authority, the first plaintiff argued that the defendant, Mount Cook Airline Limited (Mount Cook or the defendant), had breached the Act by incorrectly calculating the relevant daily pay payable to its pilots who performed work on public holidays. The significance of ascertaining the correct method of calculating relevant daily pay arises in the context of the obligation of an employer under s 50 of the Act to pay an employee at least time and a half of his or her relevant daily pay for working on a public holiday. Under s 56(2)(a) of the Act an employer must also provide the employee with an alternative holiday.

4 Mount Cook had been using a divisor of, effectively, 1/365th of the pilots' annual salary in identifying the value of the relevant daily pay. Before the Authority the first plaintiff contended that the correct divisor was 206 or, in the alternative, 235, representing what it claimed was the number of days the pilots were actually required to work in order to earn their salary. In its determination the Authority concluded that the approach taken by Mount Cook in calculating the relevant daily pay, by looking at a day's pay as being 1/365th of the pilots' annual salary, waspermitted under the Act and it did not lead to any breach of the legislation.

The statutory provisions

5 The Act, which came into force on 1 April 2004, repealed the Holidays Act 1981 and introduced the concept of “relevant daily pay” for the purposes of

calculating payments for public holidays, alternative holidays, sick leave and bereavement leave. Under the previous legislation the term “ordinary pay” had been used for calculating such payments

6 The expression “relevant daily pay” is defined in s 9 of the Act. The section was amended and a new s 9A was added by s 5 of the Holidays Amendment Act 2010 but this case is concerned with the provision in the form in which it stood prior to the recent amendment. The section then provided:

9 Meaning of relevant daily pay

• (1) In this Act, unless the context otherwise requires, relevant daily pay, for the purposes of calculating payment for a public holiday, alternative holiday, sick leave, or bereavement leave, —

  • (a) means the amount of pay that the employee would have received had the employee worked on the day concerned; and

  • (b) includes —

    • (i) productivity or incentive-based payments (including commission) if those payments would have otherwise been received on the day concerned:

    • (ii) payments for overtime if those payments would have otherwise been received on the day concerned:

    • (iii) the cash value of any board or lodgings provided by the employer to the employee; but

  • (c) excludes any payment of any employer contribution to a superannuation scheme for the benefit of the employee.

• (2) To avoid doubt, if subsection (1)(a) is to be applied in the case of a public holiday, the amount of pay does not include any amount that would be added by virtue of section 50(1)(a) (which relates to the requirement to pay time and a half).

• (3) If it is not possible to determine an employee's relevant daily pay under subsection (1), the pay must be calculated in accordance with the following formula:

  

  • where–

  • a is the employee's gross earnings for–

  • (i) the 4 calendar weeks before the end of the pay period immediately before the calculation is made; or

  • (ii) if, the employee's normal pay period is longer than 4 weeks, that pay period immediately before the calculation is made

  • b is the number of whole or part days during which the employee earned those earnings in the 4 calendar weeks, or longer period (as the case may be) including any day on which the employee was on a paid holiday or paid leave; but excluding any other day on which the employee did not actually work.

• (4)However, an employment agreement may specify a special rate of relevant daily pay for the purpose of calculating payment for a public holiday, alternative holiday, sick leave, or bereavement leave if the rate is equal to, or greater than, what would otherwise be calculated under subsection (1) or subsection (3).

The facts

7 The Court was told that the dispute giving rise to this litigation affects approximately 100 pilots employed by Mount Cook. The first plaintiff, New Zealand Air Line Pilots' Association Incorporated (NZALPA), is an industrial union and professional association for pilots and air traffic controllers in New Zealand. Its members include the pilots who are employed by Mount Cook. The second plaintiff is an airline captain and a member of NZALPA. He has been employed by Mount Cook as a pilot since November 2002.

8 There was no real dispute between the parties as to most of the relevant facts. All pilots employed by Mount Cook are parties to a collective employment agreement. At the time of the hearing there had been three such collective agreements since the Act came into force. Mount Cook operates its business 365 days a year. Pilots are rostered to work under fortnightly rosters which operate throughout the year. Pilots cannot be rostered to work, without agreement, on more than nine days in any 14–day period. They do not work an eight-hour day and the number of hours they are actually required to work on any given day will vary. The rosters are published seven days in advance. In advance of any particular 14–day roster period (other than pre-booked annual leave or planned sick leave, for example) there is no certainty as to the number of days that a pilot will work or the actual days on which a pilot will work. Over the course of a year, the number of days that one pilot will work compared to another (assuming leave taken is the same) will vary, but salary is the same for pilots on the same pay scale. While there is a maximum limit on the number of days on which work can contractually be rostered for a pilot, there is no minimum limit.

9 The remuneration arrangements require an annual salary to be paid to pilots each year and this amount is paid by regular fortnightly payments. The evidence was that since June 1997, pilots have been paid for each of the 14 days in a fortnightly pay period. The background to this pay structure was outlined by Mr Paul Crooke, the long-serving HR Manager for Mount Cook. By reference to relevant correspondence, Mr Crooke explained, in evidence which I accept, that the problem came about because the company payroll system paid employees on the basis of an 80–hour fortnight payroll system whereas the pilots' contract was constructed as a seven-day-a-week operation. After seeking advice from Datacom Employer Services Ltd, which manages Mount Cook's payroll, the payroll system was changed in June 1997 to the current arrangements whereby payments are made to pilots for each day of the year.

10 Mr Crooke told the Court:

33. Therefore, it was the contract structure which required the change to the payroll, because the payroll was out of step with the contract. It was the payroll system which had to be changed to allow pilots to be paid correctly for the purposes of their employment contract entitlements. Since that time, there have been a number of renewals of the collective contract, and more latterly the collective agreement.

11 Pilots are paid on the basis of a notional figure of 112.30 hours per fortnight. Mr Crooke explained that the figure of 112.30 hours per 14–day roster/pay period is arrived at by multiplying 14 days by a notional eight hours per day which equals 112 hours. Mr Cooke then said:

• 44.2 Salary is paid to pilots over 26 fortnightly roster/pay periods.

• 44.3 However, because 26 times 14 is 364 days, there is an anomaly because annual salary is...