Service and Food Workers Union Nga Ringa Tota Inc. v Ocs Ltd

JurisdictionNew Zealand
CourtSupreme Court
JudgeTipping J
Judgment Date09 August 2012
Neutral Citation[2012] NZSC 69
Date09 August 2012
Docket NumberSC 124/2011

[2012] NZSC 69

IN THE SUPREME COURT OF NEW ZEALAND

Court:

Tipping, McGrath, William Young, Gault and Blanchard JJ

SC 124/2011

Between
Service and Food Workers Union Nga Ringa Tota Inc
First Appellant

and

The Persons Listed in Schedule a of the Application (The Employees)
Second Appellants
and
OCS Limited
Respondent
Counsel:

P Cranney and T Oldfield for Appellants

B A Corkill QC, P A McBride and G A Ballara for Respondent

Appeal concerning circumstances in which employees might bargain for redundancy entitlements pursuant to pt 6A Employment Relations Act 2000 (“ERA”) (continuity of employment if employees' work affected by restructuring) — employees were cleaners at Massey University — cleaning contracts put up for tender — respondent was successful tenderer and employees elected to transfer to respondent as new employer — shortly after, employees informed that work would cease unless prepared to accept different and less beneficial terms and conditions of employment — the collective employment agreement provided that no claims for redundancy payments would be made as a result of loss of employment due to downsizing of client contract or loss of client contract — whether employees entitled to redundancy entitlements under s69N(1)(c)(i) ERA (employee who transfers may bargain for redundancy entitlements with new employer).

Held: If the employees' argument was correct, it would render subparagraph (ii) redundant. If express exclusion was treated as being the same as not providing for redundancy entitlements, the subparagraphs would be inherently contradictory and the right to bargain could never be excluded by agreement. Parliament could not have intended to achieve this result, nor would it have legislated in such a way that a discrete and substantive part of paragraph (c) of s69N(1) had to be treated as redundant. A cumulative reading of the two subparagraphs was the only way to make sense of s69N(1)(c) as a whole.

Importantly, such a reading was also consistent with s69A(b), which demonstrated that the right to bargain was intended to be subject to the relevant employment agreement. The right, and hence the bargaining, were subject to whatever contractual provisions there were in the employment agreement on the subject of redundancy entitlements. If the employees' argument were correct, the Employment Authority could require a new employer to pay redundancy compensation when the employment agreement provided there was to be no entitlement to any such compensation.

Therefore in order to satisfy s69N(1)(c) ERA the employee had to show not only that there was no provision for redundancy entitlements in the employment agreement, but also that the agreement did not expressly exclude redundancy entitlements. If the agreement did make provision for redundancy entitlements, there was no need for a right to bargain, as the agreement dictated what was due. If the agreement expressly excluded redundancy entitlements, the employees' position did not get better on transfer to the new employer. Even though the legislation was dealing with vulnerable employees with little bargaining power, there was no basis for reading down the terms of s69A(b)

The distinction argued for by the employees in respect of the redundancy clause was extremely fine and unpersuasive. The Employment Court had interpreted this clause as an express exclusion of any right to have financial compensation for redundancy and hence to bargain for it. The crucial question was the extent to which the clause excluded bargaining for redundancy entitlements.

The expression “redundancy entitlements” was defined in s69B ERA (interpretation) to include redundancy compensation. An express exclusion of a right to monetary compensation could not be regarded as an express exclusion of redundancy entitlements which didnot involve paying the employee monetary compensation. The legislature's use of the language of express exclusion in s 69N(1)(c)(ii) was significant. The text and purpose of the ERA made it plain that only forms of redundancy entitlement that were expressly excluded by the employment agreement could not be the subject of the bargaining regime. There were different forms of redundancy entitlement. If all forms were excluded by the agreement, there could be no bargaining at all. Where (as here) only one form was excluded (redundancy payments) there could be bargaining in respect of other forms that were not excluded. The use of the expression in s69N(1)(c)(ii) was not intended to be read in a generic way. An exclusion of some entitlements did not exclude all

Appeal allowed. Court of Appeal orders set aside, Employment Court orders reinstated.

JUDGMENT OF THE COURT

A The appeal is allowed.

B The orders made by the Court of Appeal are set aside.

C The orders made by the Employment Court are reinstated.

REASONS

(Given by Tipping J)

Introduction
1

This appeal concerns the circumstances in which employees may bargain for redundancy entitlements pursuant to pt 6A of the Employment Relations Act 2000. It is convenient to set out the relevant statutory provisions before coming to a brief description of the factual background. I will then address the issues which the appeal raises.

The legislation
2

Part 6A deals with continuity of employment if the work of employees is affected by restructuring. Subpart 1 of pt 6A applies in the case of specified categories of employees. It applies in this case because the employees involved are within one of those categories. 1 The object of subpart 1, as stated in s 69A, is to provide protection to qualifying employees if, as a result of a proposed restructuring, their work is to be performed by another person, meaning another employer. In that situation the legislation is designed to give:

  • (a) the employees a right to elect to transfer to the other person as employees on the same terms and conditions of employment; and

  • (b) the employees who have transferred a right,—

    • (i) subject to their employment agreements, to bargain for redundancy entitlements from the other person if made redundant by the other person for reasons relating to the transfer of the employees or to the circumstances arising from the transfer of the employees; and

    • (ii) if redundancy entitlements cannot be agreed with the other person, to have the redundancy entitlements determined by the Authority.

3

The purpose of para (a) above is fulfilled by s 69I which gives qualifying employees the right to elect to transfer to the new employer. Under s 69J, the employment of an employee who so elects is to be treated as continuous. Section 69M applies if an employee who elects to transfer to a new employer is a

member of a union and bound by a collective agreement and the new employer is not already a party to the collective agreement that the union is a party to. 2 In that situation, which exists in the present case, the new employer becomes a party to the collective agreement but only in relation to, and for the purposes of, the transferring employee.
4

Next comes s 69N. It is this provision that has given rise to the two issues that require resolution. The section provides:

69N Employee who transfers may bargain for redundancy entitlements with new employer

  • (1) This section applies to an employee if—

    • (a) the employee elects, under section 69I(1), to transfer to a new employer; and

    • (b) the new employer proposes to make the employee redundant for reasons relating to the transfer of the employees or to the circumstances arising from the transfer of the employees; and

    • (c) the employee's employment agreement—

      • (i) does not provide for redundancy entitlements for those reasons or in those circumstances; or

      • (ii) does not expressly exclude redundancy entitlements for those reasons or in those circumstances.

  • (2) The employee is entitled to redundancy entitlements from his or her new employer.

  • (3) If an employee seeks redundancy entitlements from his or her new employer, the employee and new employer must bargain with a view to reaching agreement on appropriate redundancy entitlements.

5

Subsequent sections set out what happens if the bargaining process required by s 69N(3) does not result in agreement. It is unnecessary to refer to all the details. The ultimate position is that, if agreement cannot be reached, the Employment Relations Authority settles the matter by determining the redundancy entitlements due to the relevant employees. This is a form of compulsory arbitration.

The background
6

The employees...

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