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

• Jurisdiction: New Zealand
• Court: Supreme Court
• Judge: Tipping J
• Judgment Date: 09 August 2012
• Neutral Citation: [2012] NZSC 69
• Docket Number: SC 124/2011
• Date: 09 August 2012

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

[2012] NZSC 69

Court:

Tipping, McGrath, William Young, Gault and Blanchard JJ

SC 124/2011

IN THE SUPREME COURT OF NEW ZEALAND

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).

Counsel:

P Cranney and T Oldfield for Appellants

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

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.

JUDGMENT OF THE COURT

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 in this case, who were supported by the appellant union, were all cleaners at Massey University. The contracts between their original employers and the University were due to expire on 30 June 2010. In anticipation of that expiry, the University put its cleaning contracts from January 2010 in respect of its Massey sites out for tender. The respondent, OCS, was the successful tenderer. The employees in question elected to transfer to OCS as their new employer. In August 2010 they were informed by OCS that their work would cease unless they were prepared to accept different and less beneficial terms and conditions of employment. Issues then arose as to their entitlements under s 69N. That is a sufficient sketch of the factual background to put the legal issues in context.

The issues

7 The first issue concerns the correct interpretation of para (c) of s 69N(1). It is common ground that paras (a) and (b) of the subsection are fulfilled. The second issue concerns the extent to which the collective employment agreement in this case excludes redundancy entitlements.

First issue

8 The question is whether subparas (i) and (ii) of s 69N(1)(c) are to be read alternatively or cumulatively. The employment agreement in the present case expressly excludes “redundancy payments”, they being a form of redundancy entitlement. Mr Cranney, for the appellants, argued that despite his clients failing to satisfy subpara (ii), they did satisfy subpara (i) because the employment agreement did not provide for redundancy entitlements (because they were excluded). Hence, because his clients could fulfil subpara (i), that was enough to satisfy para (c) as a whole.

9 This argument was accepted by the Chief Judge of the Employment Court but not by the Court of Appeal. We consider the Court of Appeal was correct. AsMr Cranney was constrained to accept, if his argument were correct subpara (ii) would become redundant. This is because, on the posited interpretation, an express exclusion under subpara (ii) would always be defeated by the fulfilment of subpara (i). If express exclusion is treated as being the same as not providing for redundancy entitlements, the subparas would be inherently contradictory and...