NZ AMALGAMATED ENGINEERING PRINTING & MANUFACTURING UNION Inc. v AMCOR PACKAGING (NEW ZEALAND) Ltd NZEmpC AK
 NZEmpC 135
IN THE EMPLOYMENT COURT AUCKLAND
In the matter of a challenge to a determination of the Employment Relations Authority
Greg Lloyd, counsel for the plaintiff
Richard Harrison, counsel for the defendant
Challenge to a decision of the Employment Relations Authority which held that a clause in a collective employment agreement did not include authorised absences from the workplace in the calculation of overtime — parties had previous agreement relating to definition of the clause which included such absences — “definitional agreement” reached between the parties — estoppel by convention — interpretation of employment agreements.
The issues were: whether authorised absences from the workplace were to be included in the calculation of overtime and whether the parties had reached their own definition which Amcor was now precluded from denying by estoppel by convention.
Held: The leading authority on contract interpretation was which stated that the Court was required to apply a principled approach to the interpretation of employment contracts. Disputes as to meanings were to be determined objectively. Context was a necessary ingredient in ascertaining the meaning of contractual words, emphasising commercial substance and purpose over semantics. Extrinsic evidence was also admissible as an aid to interpretation.
The parties had proceeded on a common understanding as to the overtime clause and it would be applied in practice. That common understanding had carried through each renewal of the agreement and only became an issue when Amcor had obtained legal advice in May 2009. The law recognised that parties could reach an agreement as to the meaning of an otherwise ambiguous contractual word or phrase and evidence of the existence of such a definitional agreement was relevant and should be decisive. A party that sought to assert a different meaning than the commonly understood one could be estopped from doing so.
The definitional agreement had little in common with the actual wording of the clause and provided that authorised absences would count as actual hours worked for the purposes of calculating overtime. The fact that the definitional agreement bore little resemblance to the actual provisions did not affect the application of estoppel. Although it had not been pleaded, it should have been. In terms of the court's equity and good conscience jurisdiction, there was no unfairness in applying the principle of estoppel by convention notwithstanding its omission from the pleadings or argument. There was no question of surprise or prejudice. It simply gave effect to how both parties had interpreted and applied the relevant provision over the years. It was unconscionable for Amcor to seek to ascribe a different meaning.
Amcor was estopped from contending that the overtime provision should be interpreted in a way that differed from way it had previously been applied. The authority's determination was set aside.
JUDGMENT OF JUDGE A D Ford
The plaintiff (the union) has challenged in this Court the whole of a determination 1 of the Employment Relations Authority (the Authority) dated 11 January 2011, which dealt with the interpretation of a provision in a collective employment agreement relating to overtime. The clause in the collective agreement defined overtime as time worked in excess of 40 hours per week. The short point at issue between the parties was whether authorised absences from work counted as hours worked for the purposes of calculating the 40 hours per week.
The union contended that under the clause in question authorised absences from work are deemed to be time actually worked. The defendant argued to the contrary, submitting that the union's interpretation required the Court to rewrite the agreement because the clause did not say that authorised absences are to be treated as actual hours worked for the purposes of calculating overtime.
The Authority upheld the defendant?s approach. After noting that the relevant provision in the collective agreement drew a distinction between authorised and unauthorised absences, it concluded that authorised absences were not to be counted as time worked for the purposes of calculating overtime as they did not constitute actual hours worked.
The Court was told that the defendant (Amcor) manufactures Coke drink cans and the ‘pop-up tops’ for such cans. The company is based in Wiri and has a workforce of approximately 65. The workers' terms and conditions of employment are covered by the Amcor Beverage Cans Australasia Employees Collective Agreement (the collective agreement) which came into force on 25 November 2009 and operates until 24 November 2011.
The dispute in the present case centres around cl 10 of the collective agreement which I set out in full:
10 OVERTIME-DAY EMPLOYEES
Overtime is defined as:
Time worked in excess of 40 hours per week.
Time worked in excess of the agreed ordinary hours of work provided in clause 9.
10.2 Overtime shall be calculated on a daily basis subject to 40 actual hours being worked by an employee between Monday and Friday. Unauthorised absences shall not be counted as actual hours worked for the purposes of calculating overtime. Any hours of unauthorised absence shall be deducted from the total hours in any one week. Following any such deduction, overtime shall remain payable for hours worked in excess of 40 actual hours.
Authorised absences are as provided for in this agreement. Authorised unpaid leave may be granted by arrangement between an employee and the company.
Authorised absences shall not be deemed as default for the purposes of overtime calculation.
10.3 Overtime shall be paid at the rate of time and a half for the first 8 hours and double time thereafter. Provided that double time is paid for working after 10.00pm, before 6.00am and all day Sunday.
There is another provision in the collective agreement (cl 14.5) which deals with the calculation of overtime for shift workers as opposed to the “day employees” covered by cl 10. Clauses 14.5.1, 14.5.2 and 14.5.3 are virtually identical to cls 10.1, 10.2 and 10.3 with two exceptions. First under cl 14.5.1 there is a third bullet point which does not appear in its counterpart, cl 10.1, which reads: “Time worked on any rostered day off.” Secondly, the words, “Authorised unpaid leave may be granted by arrangement between an employee and the company” which appear in cl 10.2 do not appear in its counterpart, cl 14.5.2. Some reference was made in the evidence to the clauses dealing with overtime for shift workers but the pleadings confine the issue in this case to the calculation of overtime for day employees.
There appeared to be some conflict in the evidence as to how the dispute first arose. The company's evidence indicated that the issue first came to its attention about April 2009 when it was raised by an employee through his union organiser. The worker had indicated that his view of the situation was that if he took a day's absence from work then, for the purposes of determining his overtime entitlement, his eight hour absence still counted towards his 40 hours per week. Amcor obtained legal advice on the clause in question in May 2009 and it then became one of a number of issues included in the negotiations which commenced in September 2009 for the new collective agreement. Privilege was waived by Amcor and a copy of the legal opinion was made available to the union. The union's evidence was that the overtime issue arose in the context of discussions with the company regarding relevant daily pay. In all events, the parties were not able to reach agreement on the overtime point, nor was it resolved through mediation. Eventually the union gave notice of dispute and commenced proceedings in the Authority.
The Authority held that in terms of cl 10.2 of the collective agreement, absences, whether authorised or unauthorised, did not count as actual hours worked. In summarising its conclusions, the Authority stated:
 Authorised absences are not to be counted as time worked for the purpose of calculating overtime. They do not constitute actual hours worked.
 Unauthorised absences are to be deducted from the hours actually worked. If a person has had a four hour absence, four hours will be deducted from the hours that person has actually worked.
Before me, Mr Harrison, counsel for Amcor, contended that the Authority had correctly applied the natural and ordinary meaning of the words and phrases within cl 10.2. Mr Harrison submitted:
10. The purpose of the overtime calculation is reasonably self-evident; it is intended to require employees to put in 40 actual hours of work before being paid at a higher overtime rate of pay. It is to incentivise attendance and penalise unauthorised absences.
To continue readingREQUEST YOUR TRIAL