APN NEW ZEALAND LTD V NZ AMALGAMATED ENGINEERING PRINTING & MANUFACTURING UNION INC CA CA62/04

APN NEW ZEALAND LTD V NZ AMALGAMATED ENGINEERING PRINTING & MANUFACTURING UNION INC CA CA62/04 21 December 2004IN THE COURT OF APPEAL OF NEW ZEALAND CA62/04BETWEEN APN NEW ZEALAND LIMITED Appellant AND NZ AMALGAMATED ENGINEERING PRINTING & MANUFACTURING UNION INC Respondent Hearing: 29 June 2004 Court: McGrath, Hammond and William Young JJ Counsel: R L Towner for Appellant J A Wilton for Respondent Judgment: 21 December 2004JUDGMENT OF THE COURT The appeal is dismissed. The respondent is awarded costs of $6,000 together with reasonable disbursements (including travelling and accommodation expenses of counsel, if any) to be agreed or, in default of agreement, to be fixed by the Registrar. REASONS(Given by William Young J)Introduction[1] This is an appeal by APN New Zealand Limited ("the employer") against a judgment of the Employment Court delivered on 14 November 2003.[2] The employer is the publisher of the New Zealand Herald newspaper. The respondent is the New Zealand Amalgamated Engineering Printing and Manufacturing Union Incorporated ("the union"). [3] The case concerns the interpretation and implementation of a collective employment agreement known as the New Zealand Herald Journalists Collective Agreement 2001-2003 ("the CEA").Background[4] In 2001, the employer and the union entered into the CEA. It expired on 23 September 2003, but continues in force under s 53(1) of the Employment Relations Act 2000 ("the Act") because the parties have not yet signed a new collective agreement. [5] By way of background, the employer employs approximately 189 editorial staff, of whom 106 are not members of the union and are employed under individual employment agreements. A live issue between the employer and the union has been the extent to which the CEA should cover employees of the employer. [6] Clause 2 of the CEA is headed "Coverage". It provides:2.1 This Collective Employment Agreement shall only cover the employees listed in Schedule One and shall only cover them while they do not hold any of the positions in listed clause 2.2 or excluded by the operation of clause 2.3. 2.2 This Agreement shall not cover employees in the positions of editor in chief, editor, deputy editor, assistant editors, editorial manager, systems editor, news editor, night editor, chief sub-editor, chief of staff, head of news, head of information, Business Herald editor, associate Business Herald editor, Business Herald news editor, sport & racing editor, picture editor, head archivist, weekend editor, head of features. Nothing in clause 3 shall apply to new employees in these positions. 2.3 The parties agree that when the company establishes what it considers is a new managerial or supervisory position, the parties will meet and discuss in good faith the responsibilities of the position. Provided that this provision is not used for the purpose ofexcluding from coverage employees with casual or insignificant managerial or supervisory responsibilities, compared to the positions that are expressly excluded in clause 2.2, the new position shall be excluded from coverage of this agreement.[7] Schedule 1 contains a list of employees by name in alphabetical order of surnames. It does not specify the positions those employees held at the date of the CEA. Part III (Classes of Work) of the CEA includes clause 25 which creates a number of definitions of "Employees" specifying that:This clause is inserted to identify positions and does not in any way restrict the flexibility of employees or the rights of the company to allocate work.The balance of the clause provides definitions of 10 work positions, including sub-editor, reporter, photographer, archivist and image handler. [8] New employees are provided for by clause 3:3.1 New employees engaged by the company during the term of this agreement in the NZ Herald editorial department, whose positions are specified in clause 25 of this agreement, shall be engaged for the first 30 days of his or her employment on the terms and conditions of the collective in accordance with the Employment Relations Act. The employer shall inform the new employee: (i) that the collective agreement exists (ii) that they have the right to join the union (iii) that if they join the union during the first 30 days of their employment they will be bound by the collective (iv) of the name and contact details of the union's workplace representative The employer shall also notify the union's workplace representative that the new employee has been engaged and in which position.[9] Clause 4 concerns the position of existing employees. It provides:4.1 Existing employees of the New Zealand Herald editorial department who are not specifically named in Schedule One, but who work in positions specified in clause 25 of this agreement, shall not be covered by this agreement and shall have no right to claim cover while this agreement is in force. This provision shall not prejudice the union's or the employee's right to claim coverage in bargaining for a future collective employment agreement.4.2 An existing employee who is specifically named in Schedule One and who elects to resign from the union while this agreement remains in force shall cease to be covered and his or her name shall be deemed to be removed from Schedule One. Clause 4.1 shall then apply to him or her while this agreement remains in force. 4.3 An existing employee who is specifically named in Schedule One any who elects to withdraw from coverage of this collective agreement may do so by advising the employer and the union in writing. His or her name shall then be deemed to be removed from Schedule One. Clause 4.1 shall then apply to him or her while this agreement remains in force. The employee's election to withdraw from coverage shall not prejudice his or her right to belong to the union.[10] Tensions arose in the administration of the CEA. [11] The union considers that the employer has adopted a policy of only agreeing to remuneration increases if the employees concerned withdraw from the CEA and accept individual employment agreements. There was evidence of instances where this had happened and this resulted in the union lodging an application with the Employment Relations Authority for resolution of an employment relationship problem.The legal issue[12] The legal issue arises in this way. [13] Section 54 of the Act provides that a collective agreement must contain a coverage clause: see s 54(3)(a)(i). Under s 54(3)(b), it must not contain anything contrary to law or inconsistent with the Act. [14] The expression "coverage clause" is defined by of s 5 of the Act:coverage clause,— in relation to a collective agreement, means a provision in the agreement that specifies the work that the agreement covers, whether by reference to the work or type of work or employees or types of employees:[15] On this point we note comments made by the Employment Court in the judgment under appeal as to what constitutes a "coverage clause":[39] [C]ounsel for both parties addressed us on the question of whether a reference only to a list of names of employees would be sufficient to meet the statutory requirements for a coverage clause. Both parties agreed that a list of employee names alone would not meet that requirement of the definition of "coverage clause" in s5. In this case, however, counsel for the defendant argued that the agreement does not contain a bare list alone but must be read to also incorporate in its coverage clause the position descriptions contained in the agreement. [40] The Act does require a coverage clause to specify "the work that the agreement covers" which may be by reference to "the work or type of work" or "employees or types of employees". We accept that a reference or references to employees must be directed at, and achieve, the purpose of specifying the work covered by the agreement. Mr Wilton accepted that there was reference to the work covered because both clauses 3.1 and 4.1 refer to "positions specified in clause 25".[16] The argument that a "list of names" coverage clause is invalid was noted by this Court in Australasian Correctional Management Ltd v Corrections Association of New Zealand (Inc) [2002] 3 NZLR 250 and left open. [17] Section 56 of the Act provides:56 Application of collective agreement(1) A collective agreement that is in force binds and is enforceable by— (a) the union and the employer that are the parties to the agreement; and (b) employees— (i) who are employed by an employer that is a party to the agreement; and (ii) who are or become members of a union that is a party to the agreement; and (iii) whose work comes within the coverage clause in the agreement.[18] So s 56 provides that a collective agreement that is in force binds and is enforceable by the union and employer parties to it and employees who are employed by the employer party, are or become members of the union party and whose work comes within the agreement's coverage clause. [19] Section 58 deals with the situation of an employee who resigns as a union member but does not resign as an employee. Such employee may not, ineffect, be the subject of bargaining for another collective agreement during the life of the original collective agreement to which he or she was bound. [20] Section 61 allows an employee bound by a collective agreement to have additional individual terms and conditions of employment that are not inconsistent with those of the CEA. [21] Section 62 addresses the obligations of employers in respect of new employees who are not members of the relevant union. [22] Section 63 defines the parameters of the terms and conditions of employment of new employees who are not members of such unions. [23] Finally, s 238 states that the provisions of the Act have effect despite any provision to the contrary in any contract or agreement. [24] The broad position adopted by the union is that clause 4.3 of the CEA is inconsistent with s 56 to the extent that it purports to allow employees to opt out of coverage notwithstanding that their work remains covered and they remain union members. [25] The broad position adopted by the employer is that clause 4.3 simply permits a method of withdrawing from coverage other than that provided for in the Act but that this is not inconsistent with the Act. In this Court the argument developed along the lines that clause 4.3 was, in effect, part of the coverage clause, so that an employee who exercised a right of withdrawal conferred by clause 4.3 was no longer subject to the "coverage clause" in the CEA and thus automatically no longer subject to the CEA for the purposes of s 56. In the Employment Court the argument presented by the employer did not take this precise form.The proceedings below[26] As earlier noted, the union lodged an application with the Employment Relations Authority for resolution of an employment relationship problem. TheEmployment Relations Authority, in turn, resorted to its jurisdiction under s 177 to refer four questions of law to the Employment Court for its opinion. [27] The first question is no longer material and the fourth question was amended by the Court. The questions ultimately answered by the Employment Court are as follows:(2) Whether clause 4.3 of the CEA is inconsistent with any provision of the Employment Relations Act 2000. (3) Whether employees who fall within the coverage clause of the CEA may withdraw from coverage of the CEA, during its term, pursuant to clause 4.3 of the CEA. (4) Whether employees who fall within the coverage clause of the CEA may withdraw from coverage of the CEA during its term by entering into an individual employment agreement.[28] The Employment Court addressed the case in these terms:[43] we conclude that a collective agreement purporting to provide that an employee can withdraw from its coverage simply by giving notice to that effect to the employer and the union, is inconsistent with the specific and general provisions of the Act. Had it been the intention of the Act that employees could withdraw from coverage by means other than resigning from the union, the Act would surely have said so explicitly in the same manner as it has addressed the consequences of resignation from a union. [46] The underlying question is whether an employer, as a condition of agreeing to such additional terms and conditions as increased remuneration, can insist upon the employee leaving (by the only means available, namely resignation from the union) the coverage of the collective agreement. While the circumstances may have some bearing, it is difficult to see how the respondent could, conformably with the Act, insist upon such a stipulation. The collective agreement contemplates in Schedule 3 that a salary structure can exist under the agreement in lieu of the wage scale contained in Part IV. There is therefore no impediment of a structural nature to employing staff on a salary basis outside the terms of the collective agreement applicable to waged employees. Thus, insistence upon salaried employees leaving the coverage of the collective agreement would fall down on a number of counts. It would be inimical to promoting observance of the principles of ILO Convention 87 on freedom of association. It would not promote collective bargaining. It would at least indirectly undermine the effect of ss8 and 9 providing that membership of unions should be voluntary and prohibiting any arrangements that confer any preference on employees turning on whether the particular employee is or is not a member of a union. We answer the second question in the positive and the third in the negative.[47] It follows that the answer to the fourth question must also be in the negative although, in so answering it, we point out that the collective agreement in question is a minimum rate agreement and it is open to employees under it, while remaining bound and entitled to the benefits of the agreement, to enter into agreed additional terms and conditions, including terms and conditions superior, from the employees' point of view, to those of the collective agreement. This is authorised by s61.The questions answered - Summary[48] The questions are therefore answered as follows: 2. Yes. 3. No. 4. No.Evaluation[29] As indicated, the argument on behalf of the employer before us shifted - indeed substantially – from the way the case was argued in the Employment Court. [30] The primary argument of Mr Towner before us was that an employee who exercised the clause 4.3 option of withdrawing from the CEA was, by that fact, outside the scope of the coverage clause and, as a result, by virtue of the operation of s 56(1)(b)(iii), not subject to the CEA. On this basis, clause 4.3 and s 56 are complementary to each other and there is no inconsistency. [31] Mr Towner noted the comments by the Department of Labour on the policy underlying the Act in its Report to the Employment and Accident Insurance Legislation Select Committee (2000) at 64:An underlying policy of the Bill is that employees are entitled to join a union and thereby be covered by a collective agreement. If employees do not wish to be so covered (despite being union members), then this can be managed in the collective agreement's coverage clause.[32] He stressed the absence of any specific provision in the Act which prohibited a clause permitting an employee to withdraw from a collective agreement.[33] Mr Wilton for the union noted the different approach taken by the employer in this Court. He stressed the requirement under s 5 for a "coverage clause" to specify "the work that the agreement covers". He maintained that where this is to be effected by reference to "employees or types of employees", this must still be addressed to a specification of the type of work covered. His broad position was that a personal opt out provision for employees is not fairly and properly addressed to the work which is subject to the coverage clause and thus cannot fairly be regarded as part of the coverage clause. [34] We accept that: 1. The definition of "coverage clause" in s 5 and the language of ss 56(1)(b)(ii) and 62(2)(a)(i) require a primary focus on the "work" which is covered. 2. There is nothing in the definition of "coverage clause" or s 56(1) to suggest that the legislature contemplated a right for employees whose work is subject to a collective agreement to opt out of the collective agreement otherwise than by leaving the union. We do not regard the interpretation of the relevant sections to be controlled by Department of Labour's report to which Mr Towner referred. Indeed we doubt if the authors of the report contemplated individual opting out by union members as part of a coverage clause. 3. A "list of names" clause could not, in itself, be a "coverage clause" for the purposes of ss 5 and 54(3)(a). This is for the reasons just given and because such a clause would not permit the effective operation of ss 62 and 63 in relation to new employees. We note that amendments to s 5 which would permit coverage clauses to proceed on the basis of named employees are proposed. These, however, are associated with proposed amendments to ss 62 and 63 of the Act: see clauses 21 to 23 of the Employment Relations Amendment Bill 2003, as reported from the committee of the whole House. [35] In those circumstances we take the view that clause 4.3 was rightly seen by the Employment Court as inconsistent with the Employment Relations Act.[36] We regard the answers given to the questions by the Employment Court as right, albeit that we treat the answer to question 4 as simply being a consequence of the earlier answers and, in any event, self-evident. On that basis it is not necessary to address the broader considerations referred to by the Employment Court in relation to this question.Result[37] The appeal is dismissed. [38] The union is awarded costs of $6,000 together with reasonable disbursements (including travelling and accommodation expenses of counsel, if any) to be agreed or, in default of agreement, to be fixed by the Registrar.Solicitors: Bell Gully, Auckland for Appellant J A Wilton, Lower Hutt for Respondent