Sfwu and Others v Ocs Ltd
 NZEMPC 113
IN THE EMPLOYMENT COURT WELLINGTON
In the Matter of proceedings removed from the Employment Relations Authority
Peter Cranney and Tim Oldfield, Counsel for Plaintiffs
Paul McBride and Tina Mitchell, Counsel for Defendant
Stephanie Dyhrberg, Counsel for Building Service Contractors of New Zealand Inc (appearing and heard by leave)
Application seeking determination of the question as to the entitlement in law of employees about to be dismissed for redundancy following a transfer of an undertaking — whether the second plaintiffs (union members) were entitled to “redundancy entitlements” under s69N Employment Relations Act 2000 (employee who transfers may bargain for redundancy entitlements with new employer) — collective agreement expressly prohibited monetary compensation for redundancy — employees transferred under Part 6A Employment Relations Act 2000 — interpretation of Part 6A (continuity of employment) affecting vulnerable employees — if bargaining for redundancy entitlements was permitted, whether that include bargaining for such redundancy entitlements prohibited by the employment agreement.
Held: Section 69N ERA fell within Part 6A ERA. Its interpretation was governed by s69A ERA (Object of this subpart) which gave transferring employees the right to bargain for redundancy entitlements. The case turned on the interpretation of phrases contained in the ERA and collective agreement.
The general scheme of Subpart 1 of Part 6A ERA (specified categories of employees) was to protect the employment of vulnerable employees. Section 69N ERA was to provide additional protection for employees who had transferred their employment but was at risk because of prospective redundancy only to the extent that the employees and employer had not previously addressed the question of redundancy entitlements in their employment agreements.
The phrase “redundancy entitlements” was used in the sense of a just claim, the precise nature of which was indeterminate until either agreed to or fixed by the Employment Relations Authority (“the Authority”). The use of the plural indicated “entitlements” was to be regarded as a collective singular and not a series of separate things, so provision for the payment of monetary compensation for dismissal by way of redundancy was “redundancy entitlements” which the collective employment agreement did not provide for. That engaged s69N(1)(c)(ii) ERA (employees may bargain for redundancy entitlements with new employer if the employment agreement did not provide for redundancy entitlements). The phrase “redundancy entitlements” in s69N(1)(c) ERA included, but was not limited to, monetary redundancy compensation. Therefore the second plaintiffs were precluded from claiming monetary redundancy compensation under s69N(1)(c)(i).
The second plaintiffs were entitled to bargain for other “redundancy entitlements”. O Ltd had indicated a willingness to agree to other “redundancy entitlements” such as redeployment and the provision of financial advice.
The second plaintiffs were to be allowed time to bargain with O Ltd for redundancy entitlements, excluding the provision of monetary compensation. If no settlement could be achieved, either party could apply to the Authority for determination. For the outcome to be meaningful it was desirable that any redundancies would not take place until after the Authority had determined the entitlements.
JUDGMENT OF Chief Judge GL Colgan
This judgment deals with the entitlement in law of employees about to be dismissed for redundancy following a transfer of an undertaking as that concept is known under Part 6A of the Employment Relations Act 2000 (the Act). It interprets and applies for the first time some of the provisions of Part 6A affecting vulnerable employees who are proposed to be made redundant, after having transferred to a new employer, for reasons related to the circumstances of those transfers.
The Service and Food Workers Union Nga Ringa Tota Inc (SFWU) has, as members, a number of cleaners who are the named second plaintiffs. Now, only some of them are affected by the issues for decision because the employment circumstances of others have changed. They are employed at Massey University (Massey) sites in Albany, Palmerston North, and Wellington. Until recently, their employers were other companies which lost their Massey cleaning contracts. OCS Limited (OCS) tendered successfully for that work and the second plaintiffs transferred to OCS as their new employer on the same terms and conditions of employment. So although the identity of the second plaintiffs' employer changed as did their work, the terms and conditions under which they performed these duties have continued, at least for a short period.
The history of relevant events in this case is as follows. Before 1 July 2010, cleaning work at Massey's sites in Albany, Palmerston North and Wellington was carried out by two companies, Spotless Services Ltd (Spotless) and Total Property Services Group Ltd (Total). In January 2010 Massey put out for tender its cleaning contract or contracts at the three sites in anticipation of the expiry of Spotless's and Total's cleaning contracts on 30 June 2010. Tenderers were asked to submit tenders for reduced cleaning services when compared to those being performed by Spotless and Total under their contracts due to expire on 30 June 2010. In February 2010 OCS tendered for the cleaning contract with Massey based on Massey's specifications set out in the tender process. OCS was announced as the successful tenderer on 28 April 2010.
Remarkably, in a commercial sense, the evidence for OCS discloses that it was only after becoming the successful tenderer that OCS first considered what staffing resources it would need to meet the contract specifications it had entered into. The evidence establishes that up to 80 per cent of a cleaning contract price is the cost of labour. It is therefore remarkable that it quoted for the Massey contract before it gave consideration to what staff it would need to perform that and, by implication, what would therefore be its labour costs.
Although the defendant's witnesses speak of cleaning contracts being “transferred” between cleaning companies, that is an inaccurate description, at least of the legal and commercial position. Rather, a cleaning company tenders for, and is contracted to provide, specified cleaning services to a client for a specific period and on specified terms and conditions as to cost. Towards the expiry of that contractual period, clients such as Massey will often invite tenders from interested cleaning companies to provide cleaning services for a further contractual period following the expiry of the current contract. The specifications may or may not change but if the client wishes to have new cleaning specifications and thereby lower cleaning costs, then this is the time for it to implement them. In that sense, therefore, there is neither a “transfer” of a cleaning contract from one cleaning company to another cleaning company or even the transfer by the client (Massey) of one cleaning company's contract to another cleaning company. Rather, one legal transaction (contract) comes to an end and a separate legal transaction with another contractor begins on separate negotiated and settled terms and conditions.
Although 1 July 2010 was the date on which OCS commenced its new cleaning contract with Massey and on which the second plaintiffs transferred from their previous employers to OCS, the defendant had been aware for at least the best part of the previous month that the terms and conditions of its cleaning contract with Massey would require a number of changes to the work of the cleaners. These included combinations of the following. Some cleaning that was done at night would be performed by day. There would be less cleaning work at the university premises during the 21 weeks per year outside university term times and there would be none during the two weeks per year that the university was closed completely. It was also clear from Massey's requirements of OCS that there would be significantly less work per week for a number of cleaners.
Despite knowing of these changes and their effects on cleaning staff before it began work under its new contract with Massey and before it accepted the transfer of all relevant existing cleaning staff to it, OCS nevertheless took on as employees all of the second plaintiffs who wished to transfer to it as their new employer.
After 1 July 2010 the second plaintiffs continued to work on the same terms and conditions as they had before that date, except as to amounts and timing of work. The employees and the plaintiff were nevertheless on notice from OCS that it intended to make changes to these terms and conditions of employment which, if they were not agreed to, might result in the redundancy of a number of the cleaners. Indeed, even before the 1 July changeovers, OCS began consulting with the second plaintiffs and with the union about how the changes to their work might be achieved. OCS regarded itself as required to undertake such consultations pursuant to cl 25(3) of the operative collective agreement. OCS began these consultations in mid June so that it could conclude them and put in place the changes that would have to be made as soon as possible after 1 July 2010.
By 10 August 2010 OCS...
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