AIR NEW ZEALAND LIMITED V THE NEW ZEALAND AIRLINE PILOTS' ASSOCIATION INDUSTRIAL UNION OF WORKERS INC. CA CA113/05

AIR NEW ZEALAND LIMITED V THE NEW ZEALAND AIRLINE PILOTS' ASSOCIATION INDUSTRIAL UNION OF WORKERS INC. CA CA113/05 13 November 2006IN THE COURT OF APPEAL OF NEW ZEALAND CA113/05BETWEEN AIR NEW ZEALAND LIMITED Appellant AND THE NEW ZEALAND AIRLINE PILOTS' ASSOCIATION INDUSTRIAL UNION OF WORKERS INC. Respondent Hearing: 12 April 2006 Court: William Young P, Chambers and O'Regan JJ Counsel: C H Toogood QC and K M Thompson for Appellant R E Harrison QC and R R McCabe for Respondent T P Cleary and R N Searle for Business New Zealand Intervener Judgment: 13 November 2006 at 11 amJUDGMENT OF THE COURT A The appeal is dismissed. We answer the questions for which leave to appeal was granted as follows: (a) Did the Employment Court err in holding that s 44(2) of the Holidays Act 2003 requires, in relation to any transferred public holidays, the observance of a specified public holiday on a particular day which is able to be identified?: "No" (b) Did the Employment Court err in holding that the Collective Employment Agreement between the Appellant and the Respondent did not comply with the requirements of s 44(2)?: "No".B The cross-appeal is allowed. We find the Employment Court erred in not dealing with the issue of relief. We remit the matter to the Employment Court for it to deal with that issue. C The appellant must pay to the respondent costs of $6,000, plus usual disbursements. REASONSWilliam Young P and O'Regan J [1] Chambers J [53]WILLIAM YOUNG P and O'REGAN J(Given by O'Regan J)Table of Contents Para No Introduction [1]Issues on appeal [4]Can an employee's entitlements relating to a public holiday be transferred to another day? [6]Does the collective agreement effectively transfer pilots' entitlements? [27]Questions for which leave granted [48]Costs [51]Postscript [52]Introduction[1] Air New Zealand flies every day of the year. The collective agreement between the airline and the respondent union, which represents many of its pilots, provides for a rostering system for pilots. Pilots can be rostered to work on public holidays. The way the roster works makes it likely that, in the course of a year, a pilot would work on some of the 11 public holidays specified in the Holidays Act 2003 (the 2003 Act), but not all of them. Pilots do not receive additional remuneration for working on a public holiday. Instead, the collective agreement provides pilots with 11 additional days leave, added to their annual leave, regardless of the number of public holidays they have actually worked. [2] The collective agreement predates the 2003 Act. The union says the agreement does not comply with the 2003 Act because an employee who works on a public holiday is entitled not only to an alternative day's holiday, but also to be paid time and a half for that day (ie. normal daily pay plus half that amount again). It concedes that the entitlement to 11 additional days' leave meets the requirement that pilots receive an alternative day's leave when they work on a public holiday. But it says the time and a half requirement is a minimum entitlement which always applies to employees whose agreement provides for them to work on a public holiday. To the extent that the collective agreement fails to meet that minimum requirement, it is of no effect. [3] The airline says that the collective agreement complies with the 2003 Act. It says that the relevant provision in the collective agreement amounts to an agreement by the pilots who work on public holidays to transfer the public holiday (and the entitlements for working on a public holiday that go with it) to another day on which the employee will observe the public holiday. As the pilots do not work on the other day on which they observe the public holiday, the time and a half requirement does not arise.Issues on appeal[4] The dispute raises two difficult issues of interpretation of the 2003 Act: (a) Can an employee's entitlements to a public holiday be transferred to another day? (b) If such transfers are permitted, does the collective agreement effectively transfer pilots' entitlements? [5] The case comes to us as an appeal against a decision of a Full Court of the Employment Court, now reported at [2005] 1 ERNZ 180.Can an employee's entitlements relating to a public holiday be transferred to another day?[6] The union contends that there is a single statutory regime which always applies to an employee who works on a public holiday. Under that regime, an employee who works for any reason on the 11 public holidays specified in s 44(1) of the 2003 Act is entitled to be paid time and a half and to receive an alternative day's holiday. The public holiday entitlements in the Act apply only to each of the 11 specified days: they cannot be transferred to another day. The evaluation of that argument requires a careful consideration of the public holidays provisions of the 2003 Act which appear in Subpart 3 of Part 2. [7] Before turning to those we note s 6, which deals with the relationship between the 2003 Act and employment agreements. Section 6(1) says that each entitlement provided to an employee by the 2003 Act is a minimum entitlement. Section 6(3) provides that an employment agreement that excludes, restricts or reduces an employee's entitlements under the 2003 Act has no effect to the extent that it does so.[8] There are a number of important provisions in Subpart 3 of Part 2, but for present purposes the focus is on ss 43, 44 and 48. Section 43 sets out the purposes of the public holidays provisions as follows:43 Purpose of this subpartThe purpose of this subpart is— (a) to provide employees with an entitlement to 11 public holidays if the holidays fall on days that would otherwise be working days for the employee: (b) to enable employees to agree to work on a public holiday in exchange for another day's paid leave.[9] Section 44 provides the mechanism for determining what days are public holidays. It provides:44 Days that are public holidays(1) The following days are public holidays: (a) Christmas Day: (b) Boxing Day: (c) New Year's Day: (d) 2 January: (e) Waitangi Day: (f) Good Friday: (g) Easter Monday: (h) ANZAC Day: (i) the birthday of the reigning Sovereign (observed on the first Monday in June): (j) Labour Day (being the fourth Monday in October): (k) the day of the anniversary of a province or the day locally observed as that day. (2) However, an employer and employee may agree (whether in an employment agreement or otherwise) that any public holiday specified in subsection (1) is to be observed by the employee on another day. (3) An agreement between the employer and employee under subsection (2) must not diminish the total number of paid public holidays that would otherwise be available to the employee in any year. (4) If 2 or more of the public holidays specified in subsection (1) fall on the same day, the public holidays must, for the purposes of this subpart, be treated as 1 day.[10] We will refer to the days specified in s 44(1) as "specified days" and the "other day" on which a public holiday is observed under s 44(2) as an "exchange day". [11] Although s 44(1) is expressed in definite language, this is then qualified by s 44(2), as the introductory word "However" confirms. In effect, the combined effect of the two subsections is that each of the specified days are public holidays, but if there is a s 44(2) agreement in respect of any of those specified days, the exchange day is then a public holiday for that employee: that is the day on which the employee observes the public holiday. [12] The ambit of agreements under s 44(2) is restricted by s 44(3). That subsection appears to be aimed at preventing agreements to transfer a public holiday falling on a working day to a day falling on a non-working day, thereby reducing the number of paid public holidays for the employee. [13] Section 44 is further qualified by s 45. Under that section, public holidays in the Christmas/New Year period are transferred to the next Monday or Tuesday if they fall on a weekend day and that weekend day is not a working day for the employee concerned. [14] Having set out how public holidays are identified in ss 44 and 45, the focus of the subpart then changes to entitlements. There is a subheading "Entitlements to public holidays" under which ss 46-48 appear. [15] Section 46 is headed "Entitlement to public holidays" and states that an employee is entitled to public holidays in accordance with Subpart 3 and payment for those holidays, and confirms that public holidays are in addition to annual holidays. Section 48 stipulates the requirements for compliance with s 46. Section 48(2) provides that payment for public holidays which fall on working days is required in the following terms:(2) If a public holiday falls on a day that would otherwise be a working day for an employee, section 46 is complied with if— (a) the employee—(i) does not work on that day; and (ii) the employer pays the employee in accordance with section 49; or (b) the employee— (i) works (in accordance with his or her employment agreement) on any part of that day; and (ii) the employer pays the employee in accordance with section 50; and (iii) the employer provides the employee with an alternative holiday under section 56.[16] Other relevant provisions in Subpart 3 of Part 2 are: (a) Section 47, which provides that an employer may require an employee to work on a public holiday if the public holiday falls on a day which would otherwise be a working day and "the employee is required to work on the public holiday under the employee's employment agreement"; (b) Section 50, which requires an employer to pay an employee on a time and a half basis if the employee works on any part of a public holiday "in accordance with his or her employment agreement"; (c) Section 56, which provides for alternative holidays. Section 56(1) says that an employee is entitled to another day's holiday instead of a public holiday if the public holiday falls on what would otherwise be a working day and the employee works "in accordance with his or her employment agreement" on any part of the public holiday. Section 56(2) makes it clear that the requirement that the employer provide an alternative holiday under s 56(1) is cumulative on the requirement to pay the employee on a time and a half basis under s 50. We will call an alternative holiday provided under s 56 an "alternative day";(d) Section 57, which provides a mechanism for identifying the alternative day for an employee who has an entitlement to such a day. [17] The combined effect of ss 48, 50 and 56 (which we will call the "entitlement regime") is that, where an employee works on a public holiday in accordance with his or her employment agreement, the employee is entitled to be paid time and a half, and, in addition, is entitled to an alternative day. The airline accepts this, but says that, where an employee agrees to observe a public holiday on an exchange day under s 44(2), these entitlements arise only if the employee works on the exchange day: the references to "public holiday" in ss 48, 50 and 56 mean "specified day or exchange day". [18] The union refuted the airline's contentions that the regime governing an agreement to observe a public holiday on an exchange day in s 44(2) (an "exchange agreement") means that s 48(2)(b) then applies in respect of the exchange day (the day on which the public holiday is observed), rather than the specified day on which the employee worked. The union argued that employees must be paid time and a half whenever they work on a specified day. [19] The arguments made by the union in support of that submission are: (a) Section 44(2) is no more than an enabling provision which authorises employers and employees to enter into agreements to which s 48 applies. It does not create a parallel regime to the entitlement regime; (b) Section 44(2) has to be considered in the context of s 6(3), which renders ineffective any employment agreement which excludes, restricts or reduces an employee's entitlements under the 2003 Act. This includes the entitlement to a time and a half payment and the provision of an alternative day if the employee works on a public holiday. Section 44(2) cannot therefore operate to remove these entitlements, and must be interpreted as simply a mechanism which triggers the entitlements;(c) Using the terminology we have adopted for this judgment, the exchange day is not something separate from an alternative day, but rather is the alternative day. And, where the phrase "public holiday" is used in sections such as ss 50 and 56, it means only "specified day", not "specified day or exchange day". If it had been intended that the observation of a public holiday on an exchange day had the effect of turning the exchange day itself into a "public holiday", this would have been stated expressly either in s 44(2) itself, or in the definition of "public holiday". There is no mention of it in either; and (d) If the airline's position is upheld, there will be difficulties in differentiating between an exchange agreement and a situation to which s 48 applies. The regime for public holidays in the 2003 Act would essentially be the same as the contractually-driven regime under the predecessor to the 2003 Act, the Holidays Act 1981 (the 1981 Act). That was plainly not what Parliament intended, given the clear intention in the 2003 Act to reward employees who work on public holidays with a statutory entitlement to a time and a half payment. [20] In our view, the union's position incorrectly characterises s 44(2) as an enabling provision for the entitlement regime. The entitlement regime does not require an enabling provision, authorising the parties to enter into agreements requiring employees to work on specified days, yet that is the purpose which the union attributes to s 44(2). [21] The problem inherent in the union's position is illustrated by the following example: A non-Christian employee says to his employer, "Christmas Day has no significance for me, but a feast day in my religion does. I would like to swap the Christmas Day public holiday for the feast day". The employer agrees to this variation of the employment arrangements between them. It seems unlikely that Parliament would have wished to impose on an employer that agreed to this request an obligation to pay the employee time and a half on Christmas Day. If there is suchan obligation, it is an obvious disincentive for the employer's assent to such a request, contrary to the purpose stated in s 43(b). [22] It is more consonant with the statutory scheme to classify such an agreement as defining the day on which the employee will observe the public holiday. Once that is done, the specified day is no longer treated as a public holiday for the employee, and the exchange day takes on that status. If as anticipated, the employee does not work on the exchange day, the purposes of s 43 will be fulfilled. If, for some reason, the employee does work on the exchange day, the entitlement regime will apply. The references in s 50 and s 56 to "public holiday" refer to the day identified as a public holiday in accordance with s 44 (not just s 44(1)), that is either a specified day or, where there has been an exchange agreement, an exchange day. [23] Section 44(3) supports this interpretation because it says a s 44(2) agreement must not diminish the number of paid public holidays otherwise available to the employee. Where an employee works on a public holiday and becomes entitled to an alternative day under s 56, it is hard to say that has not diminished the number of public holidays for that employee. The compensation is an alternative day which, under s 56, is an entitlement that applies "instead of" a public holiday. This suggests s 44(2), which refers to a specified public holiday being "observed" on another day, is referring to a transfer of the entitlements arising from a public holiday, rather than a triggering of the entitlement regime (including the provision of an alternative day). As long as the employee observes the specified public holiday on an exchange day, s 44(3) is complied with. [24] The heading of s 44 also supports this interpretation of s 44: s 5(3) of the Interpretation Act 1999. The subject matter of the section is identification of the days that are public holidays. It is hard to see why s 44(2) would be part of s 44 if, in fact, the only provision defining public holidays were s 44(1). And if only s 44(1) defined public holidays, it could be expected that the definition of that term in s 5 would cross-refer to s 44(1), or that the content of s 44(1) would appear in the definition. In fact, the definition refers, rather enigmatically, to "a public holiday provided under subpart 3 of Part 2".[25] We acknowledge that there will be cases where it is difficult to determine whether a particular provision in an employment agreement can fairly be characterised as valid exchange agreement under s 44(2). These are highlighted in the judgment of Chambers J. The fact that such difficulties may arise is not, however, a reason for concluding exchange agreements are not permitted. On the strict approach we take to the scope of exchange agreements, which we set out below, we do not envisage that these difficulties will be of significance in practice. [26] We accept there is one regime governing entitlement to pay on public holidays, namely that provided for by the cumulative effect of ss 46-48, 50 and 56. But, in our view, where the parties have agreed under s 44(2) that an employee will observe a specified public holiday on an exchange day, the employee's entitlements in respect of public holidays transfer to the exchange day. It should be emphasised that a s 44(2) agreement is not a way of "contracting out" of the entitlement regime, but rather a way of specifying a different day to which that regime applies.Does the collective agreement effectively transfer pilots' entitlements?[27] The airline says the collective agreement should be classified as an exchange agreement under s 44(2). It points to the provision in the collective agreement which ensures pilots have 11 extra holidays to compensate them for the specified days on which they are rostered to work. It says this provision means that pilots have agreed that, when they are rostered to work on a specified day, they will observe that public holiday on one of the 11 extra days of holiday provided to them under the collective agreement. Thus one of the days of leave enjoyed by the pilot (not identified) is an exchange day for that specified day. [28] The significance of this argument is that, if it is correct, it would mean that pilots are never required by their employment agreement to work on public holidays (s 47) and never work on public holidays in accordance with their employment agreement (ss 50 and 56), and therefore never become entitled to a time and a half payment. This is because when a pilot works on a specified day, the exchange agreement operates and the pilot agrees to observe the public holiday on an (unidentified) exchange day. As the pilot does not work on the exchange day (whichwill not be identified but will be assumed to be one of the days of leave taken by the pilot), ss 48, 50 and 56 are not triggered. [29] The airline attaches particular significance to cl 16 of the collective agreement, which provides: [T]he specified number of days of annual leave do include provision for statutory and public holidays as specified in s 7A(1) of the Holidays Act 1981.[30] This signals that the parties agreed the collective agreement satisfied the requirements of the 1981 Act. At first glance, it is hard to see why compliance with the now repealed 1981 Act tells us anything about compliance with the 2003 Act. But the airline (supported by Business New Zealand) sought to convince us that 44(2) was effectively a re-enactment of s 7A of the 1981 Act (as interpreted by the courts), so if the agreement complied with the latter, it must also comply with the former. This was the airline's key argument before us. [31] The approach adopted in s 7A was to require that employment agreements make provision for the employee to be granted "not less than 11 whole holidays which shall, where they fall on days that would otherwise be working days for the worker, be holidays, on pay, in addition to annual holidays": s 7A(1). Section 7A(2) provided:Unless the employment agreement otherwise provides or a worker and the worker's employer otherwise agree, the holidays provided for pursuant to subsection (1) of this section shall include – [11 named public holidays].[32] For present purposes the important points about s 7A are: (a) It adopts a contractual model. Rather than the statute providing a statutory entitlement to workers in respect of public holidays like the 2003 Act does, s 7A required employment agreements to provide such an entitlement;(b) Although s 7A(2) specified 11 named public holidays, it provided these only as a default position in the event that the parties did not agree on some other days to be observed as public holidays. It was in reliance on this provision that cl 16 of the collective agreement was based. [33] The airline argues that the legislative history supports the view that there was no intention to change the flexibility inherent in s 7A of the 1981 Act in the drafting of s 44 of the 2003 Act. The Holidays Bill as introduced was based on the second report of the Holidays Act Advisory Group to the Minister of Labour in September 2001, paragraph 4.2 of which recommended that the 1981 Act position in relation to public holidays should be continued. Its recommendation was expressed as follows:Continue with the current position: Unless an employer and an employee agree otherwise, the public holidays to be observed by default are [the specified days].[34] The relevant clause in the Bill as introduced was cl 38, which said:Except as an employment agreement otherwise provides, or as an employer and employee otherwise agree, the following days are public holidays: [the specified days].[35] When the Bill was reported back to the House by the Transport and Industrial Relations Committee, the report said at 6:The bill provides for all employees to continue to receive 11 public holidays annually, and sets out a framework whereby employer and employee may agree to observe the public holidays on alternative days if they wish Some submitters were concerned that the public holiday entitlements in the bill would be too onerous on the employer. They also consider the intent of the bill is unclear as the wording is open to interpretation. By majority we recommend substantial redrafting of the bill to make it explicit in what circumstances the public holiday entitlements would arise, and to clarify the intent of the bill. This is effected by amendments to clauses 38.[36] The airline argued that this illustrates that the change of drafting technique in s 44, with s 44(1) setting out the specified days and s 44(2) providing for agreements to the contrary, was in response to employer concerns about lack of clarity, not toemployee concerns about the need to alter the 1981 Act regime. So there is no reason to believe that the legislature intended to remove the flexibility to agree on exchange days, and the same broad interpretation should be given to the 2003 Act as was given to the 1981 Act. [37] The airline contends that the intention to carry forward the 1981 Act regime can also be discerned from the use of the word "observed" in s 44(2), which appears to adopt the terminology used in the decision of this Court in Barrycourt Motel and Tourist Flats Ltd v Mitchell [1996] 2 NZLR 676 at 680 where this Court said of s 7A: "The intention would appear to be to widen the scope for the parties to make their own agreement as to the days to be observed as holidays". [38] The airline's argument was rejected in the Employment Court. The Court considered that s 44 had to be interpreted differently from s 7A(2) in the 1981 Act, as interpreted in Barrycourt. It said the 2003 Act needed to be seen as part of a legislative package, including the Employment Relations Act 2000 and other employment legislation, intended to improve conditions for employees. The introduction of a statutory requirement to pay time and a half to employees required to work on public holidays was a significant enhancement of employees' statutory rights in comparison with those under the 1981 Act. The Court noted the difference in wording between s 7A(2) ("Unless the employment agreement otherwise provides or a worker and the worker's employer otherwise agree") and s 44(2) ("However, an employer and employee may agree"). It determined that s 44(2) required that the public holiday "be observed on another day" (emphasis in original). It interpreted that as meaning the observation had to be on a particular day. The airline contends the Employment Court illegitimately implied the word "particular" into the statute. It said this implication was not necessary as "another day" simply refers to any day that is not a specified day. [39] The Employment Court's interpretation was said to reinforced by s 81(2)(i) of the 2003 Act, which requires employers to keep records of "the dates of, and payments for, any public holiday on which the employee worked". The Court said this provision could not be complied with until the employer and employee had identified the exchange day, and could therefore identify whether the employee hadworked on the exchange day. Counsel for the airline questioned this. He said the effect of the collective agreement was that a pilot would never be required to work on an exchange day under the rostering system in operation under the collective agreement, and so records of this kind would never need to come into existence. In any event, he said that whether records have been kept was a question of fact to be determined when a situation had arisen, not a basis for the interpretation of the substantive provisions of the 2003 Act. [40] The Employment Court also supported its interpretation by reference to s 40(1), which provides that where a public holiday occurs during an employee's annual holidays, the holiday must be treated as a public holiday, not as annual holiday. [41] We agree with the Employment Court that the differences in drafting style between s 7A and s 44 support the contention that the 2003 Act is not an exact replica of the law which preceded it. Section 44(2) refers to the public holiday being observed on "another day", which is more specific than s 7A(2) and the words used in Barrycourt, which appeared to contemplate global agreements about observance of public holidays. This may simply reflect the use of the singular in the drafting of s 44(2) in contrast to the use of the plural in s 7A(2). The statutory history suggests that may be so. But the primary focus of statutory interpretation is the words used by Parliament: resort to statutory history is normally reserved for cases where the words themselves are unclear. In this case the words of s 44(2) are clear, and the reference to "exchange" in s 43(b) assists in their interpretation. The natural meaning of the words used is that a particular specified day can be exchanged for a particular exchange day. [42] The requirement for the keeping of records in s 81(2)(i) indicates a need to identify an exchange day on which an employee worked, and this is consistent with the Employment Court's interpretation. It is not, however determinative in a case where the agreement is structured to avoid that possibility ever occurring. [43] There is, under the 2003 Act, a very real difference between the entitlements arising for an employee who works on a public holiday and those arising for anemployee who works on a day of annual holidays. Clause 16 of the collective agreement does not differentiate between annual holidays and exchange days. Under the 1981 Act, as reflected in the collective agreement, the entitlements of employees who worked on a day of annual leave or a day exchanged for a public holiday were essentially the same. That meant that assimilating annual leave and public holidays in the collective agreement was of little moment. Now that working on a public holiday attracts a statutory entitlement to time and a half payment, that is no longer the case. [44] While the collective agreement regime of unspecified exchange days may have been compliant with the 1981 Act (we do not express a view on that), we do not consider that it is a good fit with the 2003 Act. The introduction of statutory minimum entitlements, independent of the terms of the collective agreement, was a major change in approach, and the strict terms of s 6(3) make it clear that the new approach overrides the terms of employment agreements. Our approach to the case is to focus on the requirements of the 2003 Act, rather than on what may or may not have been permitted under the 1981 Act. [45] This leads us to conclude that the Employment Court was entitled to conclude that, in the context of the 2003 Act, agreements to exchange days must have a genuine element of exchange, and the specified day relinquished and the agreed exchange day must be identified or, at least, be able to be identified with certainty. That provides a basis for distinguishing between when s 44(2) has been complied with, such that the ss 48, 50 and 56 entitlements inure to the exchange day, and when s 44(2) has not been complied with, such that those entitlements inure to the specified day. [46] Under the entitlement regime, the requirement to work on a public holiday triggers an entitlement to an alternative day, but that day is not identified: the 2003 Act provides a mechanism for its identification later (s 57). There is no mechanism for later identification of an exchange day. The "exchange" concept contemplates that the exchange day has been identified and agreed before the specified day on which the employee agrees to work. This supports the view that exchange days must be identified or identifiable when the exchange is agreed.[47] We find that in this case there has not been a valid exchange agreement in terms of s 44(2). The failure to identify the exchange day with sufficient particularity means the attempt to transfer the application of the entitlement regime from a specified day under s 44(2) fails. The consequence is that the entitlement regime provided for by ss 48, 50, 56 applies to specified days worked by airline pilots.Questions for which leave granted[48] The questions for which leave to appeal was granted under s 214(3) of the Employment Relations Act 2000, were as follows: (a) Did the Employment Court err in holding that s 44(2) of the 2003 Act requires, in relation to any transferred public holidays, the observance of a specified public holiday on a particular day which is able to be identified? (b) Did the Employment Court err in holding that the Collective Employment Agreement between the [airline] and the [union] did not comply with the requirements of s 44(2)? [49] We answer both of those questions: "No". The appeal is therefore dismissed. [50] The union was also granted leave to cross-appeal on the following question: Did the Employment Court err in failing to grant the relief specified in all or any of paras 3.1-3.4 of the [union's] statement of problem? In those paragraphs, the union sought an order that pilots who work on a specified day be paid time and a half, and ancillary relief. It was agreed at the hearing that if we gave a "no" answer to the two questions on which the airline was granted leave to appeal, we should remit the case to the Employment Court so that the issue raised on the cross-appeal can be dealt with. We therefore formally allow the cross-appeal and remit the matter to the Employment Court for that purpose.Costs[51] The union is entitled to costs of $6,000, plus usual disbursements.Postscript[52] The explanatory note to the Holidays Bill which, when passed, became the 2003 Act, begins with the confident statement "The Holidays Bill implements government policy by providing entitlements that are easy to understand and apply". In this case, we had before us three different interpretations of the public holidays provisions of the 2003 Act: that of the union, that of the airline, and that of the Employment Court. All of them can fairly be said to be credible interpretations. The fact that three credible interpretations are available would tend to suggest that the objective of providing for entitlements that are easy to understand and apply has not been met.CHAMBERS J Introduction[53] I agree with the majority that the appeal should be dismissed. I also agree that the cross-appeal should be allowed and the matter remitted to the Employment Court. [54] But that agreement as to result should not be allowed to camouflage my respectful disagreement with the underlying reasoning of both the Employment Court and the majority in this court. In my view, the majority's reasoning is wrong and its downstream consequences are so significant that I feel compelled to write what is effectively a dissent to the reasoning, even though I concur in the formal result.Issues on the appeal[55] The primary issue Air New Zealand advanced was whether s 44(2) of the Holidays Act 2003 required the "other day" to be identifiable. Air New Zealand argued that it did not, so long as a pilot's annual leave entitlement was sufficiently long to encompass both true annual leave and lieu days in the event that the particular pilot had been rostered to work on one or more designated public holidays. The Employment Court rejected the airline's stance, a rejection upheld by the majority in this court. I too reject the airline's stance, though my reason for rejecting it differs from the Employment Court's and the majority's. [56] As the appeal progressed, what emerged as the dominant issue was whether the Employment Court's underlying approach to s 44(2) had been right. The Employment Court had held that an agreement under s 44(2) could "transfer" a public holiday (say, Christmas Day) to another day (say, 17 July) with the result that, for that particular employee, Christmas Day ceased to be other than an ordinary working day and 17 July became that employee's "Christmas Day". In essence, "public holiday", wherever it appeared in the Act, meant, so far as that particular employee and that particular day were concerned, "17 July", not "Christmas Day". The consequence would be that that employee would not be entitled to time and a half for working on Christmas Day. [57] Dr Harrison QC, for the New Zealand Airline Pilots' Association Industrial Union of Workers (ALPA), strongly disputed that interpretation. The issue arising from this dispute may be summarised as follows: In circumstances where parties have entered into an agreement under s 44(2) by which the designated public holiday is to be observed on another day, does the expression "public holiday" wherever it appears in the Act refer to the other day? [58] Dr Harrison submitted that the answer to that question is "no": the expression "public holiday" in the Act is always referring to the designated public holidays in s 44(1), as potentially modified by s 45. Mr Toogood submitted the answer was"yes". The majority in their reasons agree on this point with Mr Toogood, although that answer did not immediately assist Air New Zealand, as the majority found that the pilots' collective employment agreement did not comply with s 44(2) because the "other day" for observance of the designated public holiday could not be identified. Notwithstanding that, the "yes" answer will be of great significance (and advantage) to Air New Zealand downstream, and indeed to all employers. [59] My answer to the issue is "no". I accept ALPA's argument and I now want to explain why. In so doing, I shall also explain why, in my view, Air New Zealand's stance on the questions of law it raised is wrong.How the Holidays Act 2003 works[60] There can be no doubt that the Holidays Act 2003 is bold social legislation quite different from the Holidays Act 1981, which it replaced. I agree wholeheartedly with both the Employment Court and the majority in this court in their view that the 2003 Act is so different from the earlier legislation that there is nothing to be gained by trawling through cases decided under the 1981 Act. The 2003 Act is much more detailed than the legislation it replaced. As originally enacted, Subpart 3 contained no fewer than 19 sections. That is to be contrasted with the "public holidays" part of the 1981 Act, containing just four sections. [61] The Act's fundamental purpose, as set out in s 3, is "to promote balance between work and other aspects of employees' lives and, to that end, to provide employees with minimum entitlements to [among other things] annual holidays to provide the opportunity for rest and recreation [and] public holidays for the observance of days of national, religious, or cultural significance". It is important to observe that Parliament has decreed that annual holidays have a different purpose from public holidays. The essence of the Act is that the particular public holidays recognised in the Act are of such significance that employees should generally be permitted to observe them and not to work on them. No equivalent purpose section is to be found in the 1981 Act.[62] The scheme of the Act, as set out in s 4, is to provide certain "minimum entitlements" to, among other things, public holidays. The precise entitlements are set out in different parts of the Act. In the case of public holidays, the entitlement is conferred by s 46(1). (See too s 43(a).) The Act similarly confers minimum entitlements to annual holidays, sick leave, and bereavement leave. These minimum entitlements are protected and cannot be contracted out of. Section 6(3) provides that an employment agreement which excludes, restricts, or reduces an employee's entitlements under the Act has no effect to the extent that it does so. That does not prevent an employer, however, from providing an employee with enhanced or additional entitlements: s 6(2). [63] Subpart 3 is the subpart dealing with public holidays. Section 43, the first section in the subpart, sets out the subpart's purpose: see above at [8]. Paragraph (a) states that one of the purposes of the subpart is to provide employees with an entitlement to 11 public holidays. What the 11 public holidays are is fixed by s 44(1), as potentially modified by s 45. (I shall refer to these days as "designated public holidays".) Because these designated public holidays are "an entitlement", they are caught by s 6, which limits employers' and employees' powers to agree a different regime. [64] Parliament of course recognised that many businesses now operate on designated public holidays, some of necessity and others by choice. It accordingly had to make provision for employers and employees to be able to enter into agreements permitting work on public holidays. Section 44(2) is that provision. It permits only a limited deviation from the entitlement: if the employee agrees to work on the designated public holiday, the employer must give him or her a day off in lieu and other provisions in the subpart confer enhanced benefits on those who do end up working on the designated public holidays. [65] As the legislative history shows, this part of the Holidays Bill was considerably altered at Select Committee stage. It is perhaps inevitable when that happens, as it often does, that the drafting of the finished product is not as clear as it would have been had the legislative policy remained static and been clearly presented to the Parliamentary drafter at the start. It is true that the Act as finallypassed is to some extent repetitive and in illogical order, but it would be unfair to blame the Parliamentary drafters for that. [66] Notwithstanding the rather clumsy drafting which ultimately emerged from the Parliamentary process, I think the intent of the Act is reasonably clear. This is my overview of the Act's intent, an overview which I think is fully supported by the Transport and Industrial Relations Committee's report back on the Holidays Bill and by the Parliamentary debates at first, second, and third readings: 606 NZPD 3700- 3718; 614 NZPD 10,453-10,471; 614 NZPD 10,702-10,704, 10,736-10,750. In essence, the Act sets up the following regime: (a) if a public holiday falls on a day that would not otherwise be a working day for the employee, s 46 (the minimum entitlement section) is complied with if the employee does not work on the day (s 48(1)(a)); (b) if a public holiday falls on a day that would not otherwise be a working day for the employee, but the employee and the employer agree that the employee will work on it, s 46 is complied with if the employer pays time and a half (ss 48(1)(a) and 50). The employee does not get a day off in lieu (s 56(1) and (4)); (c) if a public holiday falls on a day that would otherwise be a working day for the employee, s 46 is complied with if the employee does not work on the day and the employer pays the employee his or her normal pay (ss 48(2)(a) and 49); (d) if a public holiday falls on a day that would otherwise be a working day for the employee, the employer may require the employee to work if that is provided for in the employee's employment agreement and the employer pays time and a half and gives a day off in lieu (ss 47, 48(2)(b), 50, and 56).[67] Where the employee is entitled to a day off in lieu, the "alternative holiday" regime (ss 56-61) applies. The parties must attempt to agree on what the day off will be. If the parties cannot agree on the alternative day, then s 57(2) specifies how the impasse is to be resolved. [68] There are a number of other specific provisions relating to, among other things, what happens to those who are on call on public holidays and how "daily pay" is determined (for the purposes of the time and a half calculation). There are also transitional provisions, but they have no bearing on the essential issue in this case.Why I differ from the majority[69] The fundamental difference between the majority and me – and indeed between the Employment Court and me – turns on the effect of an employer and employee agreeing (under s 44(2)) that the employee will work on a designated public holiday and take a day off in lieu. Because of the importance of s 44(2), I set it out again:However, an employer and employee may agree (whether in an employment agreement or otherwise) that any public holiday specified in subsection (1) is to be observed by the employee on another day.[70] The majority see that provision as entitling parties to transfer designated public holidays to other days. If such agreement is made, then the Act is thereafter to be read as if any reference to "public holiday" is a reference to the transferred day. The consequence of such interpretation is that the designated public holiday ceases to have any significance whatever for that employee. He or she is not paid time and a half for working on it. [71] There is, in my view, nothing in the legislative history or the Parliamentary debates supporting the view that the new holidays regime could be avoided by the simple expedient of an agreement to transfer the public holiday.[72] I just cannot accept that the majority's interpretation is consistent with the Act and its intent. It effectively renders irrelevant many of the remaining sections in the subpart. All the detailed provisions as to penal rates and the very detailed "alternative holiday" regime (ss 56-61) will scarcely ever apply. The only time the regime will apply is in the unlikely event that the employee, having agreed to transfer the designated public holiday to another day, was then required to work on that alternative day. Indeed, if a transfer can be agreed once, there seems no reason why that agreement should not be varied again in the event that the employer later wanted the employee to work on the, say, "transferred Christmas Day", and the employee agreed to transfer his or her Christmas Day entitlement to yet another transfer day. The consequence would be, if that is right, that the penal rates regime and the alternative holiday regime will never bite. It seems very unlikely to me that Parliament developed such a detailed regime only to have it easily bypassable by an agreement to transfer the day on which that employee will observe the public holiday. [73] If that were Parliament's intention, then surely, at the very least, there would be some restraint on employer coercion as to how the transfer power was to be exercised. Yet s 44(2), which on the majority's reasoning is the provision which enables effective side-stepping of the penal rates and alternative day regime, is bereft of any such protections. The majority appears in part to recognise that particular problem. For instance, in [25], there is reference to whether a particular provision in an employment agreement "can fairly be categorised as a valid exchange agreement under s 44(2)" (my emphasis) and, in [45], there is reference to the agreement having to have "a genuine element of exchange". But no explanation is given as to how fairness and genuineness is to be determined. And certainly those qualifications do not appear in s 44(2) itself. Yet s 44(2) is on the majority's interpretation the provision which effectively allows contracting out. [74] No such conundrum arises, of course, on my (and ALPA's) interpretation of s 44(2). The subsection's purpose, as I see it, is to empower the parties to do what would otherwise not be permitted by s 6(2) and (3); it permits an agreement excluding an employee's entitlement not to work on a designated public holiday. But the power to contract out is constrained by the remaining provisions in thesubpart, which ensure that the alternative to observance on the designated public holiday is no worse because of substitute enhancements. The majority's interpretation, on the other hand, leads, in my respectful view, to a conflict with s 6(3), as observance of the holiday on a day in lieu with no substitute enhancementswould be considered by most New Zealanders to be at the least a restriction or reduction of the employer's minimum entitlements. [75] It is no answer to put up the example of the non-Christian employee who wants to work on Christmas Day and to celebrate his religious feast day instead, as the majority's interpretation will affect many more than him. It will catch, for instance, those employees who reluctantly agree to working on designated public holidays in the hope of advancement or from fear of being marked out as "difficult" or simply because they are accommodating by nature. Indeed, the majority's interpretation would have caught the pilots here (many of whom would prefer not to work on designated public holidays) if only the agreement had been worded so as to contain a formula by which the alternative day could be identified. [76] The majority's view, in my respectful opinion, leads to a rather strained interpretation of some provisions in the Act. For instance, in ss 47 and 48, there is reference to public holidays "falling on" a particular day. That terminology is entirely apt for a designated public holiday which will "fall on" what would otherwise be or not be a working day for an employee. But it is not apt terminology for an "exchange day", as the majority terms it. First, "exchange days" do not "fall on" a particular day; that day is agreed. Secondly, an exchange day could never "fall on a day that would not otherwise be a working day" as in s 48(1), because s 44(2) agreements can never diminish the total number of paid public holidays: see s 44(3). Accordingly, at least in s 48(1), the reference to "public holiday" must be exclusively a reference to a designated public holiday. It is certainly unusual for the word "public holiday" to have a different meaning in s 48(1) ("If a public holiday falls on a day that would not otherwise be a working day for an employee") from the meaning it bears in the counterpart s 48(2) ("If a public holiday falls on a day that would otherwise be a working day for an employee"). In the former case, on the majority's interpretation, "public holiday" means only designated public holiday while in the latter it includes exchange days.[77] Further, it seems odd that there are effectively on the majority's interpretation two regimes: (a) one stemming from an agreement under s 44(2) to a holiday "on another day", where the only restriction on the agreement is that provided for in s 44(3) and where apparently s 6(3) can be ignored; and (b) another regime for "another day's holiday" (s 56(1)), which again has arisen by agreement (s 48(2)(b)), where the protections and enhancements for employees are significant.Conclusion[78] In my view, while the pilots' collective agreement did comply with the 1981 Act (as both parties accept), it does not comply with the 2003 Act for two reasons. First, it does not provide the employee with an alternative holiday in accordance with the "alternative holiday" regime. It is perhaps not surprising that it does not comply with that regime, as ss 56-61 are new. The parties, if my view prevailed, would need to renegotiate their agreement and rostering system so that it complies. Secondly, the collective agreement does not provide for the pilots to be paid time and a half when they are required to work on designated public holidays. [79] It is for those reasons that I would dismiss the appeal and answer the two questions of law "no", though my "no" in each case is qualified: (a) Did the Employment Court err in holding that s 44(2) of the Holidays Act 2003 requires, in relation to any transferred public holidays, the observance of a specified public holiday on a particular day which is able to be identified? No. If parties to an employment agreement make an agreement under s 44(2) by which an employee agrees to work on a designated public holiday and to transfer the holiday to another day, that other day mustbe determined in accordance with the "alternative holiday" regime. Compliance with that regime means of necessity that the other day will be identifiable. (b) Did the Employment Court err in holding that the Collective Employment Agreement between the Appellant and the Respondent did not comply with the requirements of s 44(2)? No. The collective agreement currently does not comply with the 2003 Act because: (i) it does not comply with the "alternative holiday" regime; and (ii) it does not provide for the employees to be paid time and a half when they work on a designated public holiday.Solicitors: G L Norton, Air New Zealand, Auckland for Appellant R R McCabe, New Zealand Airline Pilots' Association, Auckland for Respondent Susan-Jane Davies, Business New Zealand Inc., Wellington for Intervener