NZ AMALGAMATED ENGINEERING, PRINTING AND MANUFACTURING UNION INC V AIR NELSON LTD CA CA206/2008

NZ AMALGAMATED ENGINEERING, PRINTING AND MANUFACTURING UNION INC V AIR NELSON LTD CA CA206/2008 7 August 2009IN THE COURT OF APPEAL OF NEW ZEALAND CA206/2008 [2009] NZCA 349BETWEEN NEW ZEALAND AMALGAMATED ENGINEERING, PRINTING AND MANUFACTURING UNION INC Appellant AND AIR NELSON LIMITED Respondent Hearing: 30 April 2009 Court: Glazebrook, Chambers and Ellen France JJ Counsel: R E Harrison QC and J A Wilton for Appellant C H Toogood QC and D J France for Respondent Judgment: 7 August 2009 at 3 pmJUDGMENT OF THE COURT A The appeal is allowed. B The Employment Court's construction of s 97 of the Employment Relations Act 2000 was erroneous for the reasons set out herein and inFinau v Atlas Specialty Metals Limited [2009] NZCA 348. C Costs are reserved. REASONS OF THE COURT(Given by Chambers J)A strike at Air Nelson[1] In June 2007 some of the staff employed by Air Nelson Limited, the respondent, went on strike. During the strike, Air Nelson, which is a wholly owned subsidiary of Air New Zealand Limited, engaged contractors and some Air New Zealand employees to carry out some work which would otherwise have been done by its striking employees. [2] The striking employees were members of the New Zealand Amalgamated Engineering, Printing and Manufacturing Union Inc, the appellant. The union complained that Air Nelson's strike-breaking tactics were contrary to s 97 of the Employment Relations Act 2000. That section sets out the circumstances in which an employer, faced with a lawful strike, can employ or engage others as strike-breakers. The union filed proceedings against Air Nelson, one set in the Employment Relations Authority, the other in the Employment Court. The authority ordered the removal of the proceeding filed with it to the court (under s 178), with the consequence that both proceedings were eventually heard together in the Employment Court. [3] Many of the issues ventilated in the Employment Court are no longer in issue. They need no mention here. We are concerned with only two incidents and with the legality of Air Nelson's response to them. [4] The first incident occurred on 21 June. One of Air Nelson's Saab A340 aircraft was due for a routine inspection known as an LC2 check. Air Nelson engaged a contract engineer to carry out that check. The engineer concerned was either John O'Donnell, Ron Potts or Andrew Judd: neither the pleadings nor the Employment Court's judgment makes clear which of them did the check. For ease of discussion, we shall call the contract engineer involved Mr O'Donnell, and apologise if we have the wrong man. The check revealed that the plane had five defective cabin lights. Mr O'Donnell replaced those lights. At the same time, he also replaced two reading lights. The union complained that Air Nelson's act of engaging Mr O'Donnell to replace the cabin light bulbs was unlawful in terms of s 97.[5] The second event occurred the following day. Air Nelson, as one can imagine, has a routine maintenance programme for its aircraft. Part of that programme involves engine compressor washes from time to time. On 22 June, Air New Zealand engaged a contract engineer to perform an engine compressor wash. Again, it is unclear from the pleadings which of the three named contract engineers performed this work; we shall assume it was Mr O'Donnell. The union complained that Air Nelson's act in engaging Mr O'Donnell to undertake the wash was unlawful in terms of s 97. [6] The Employment Court (Chief Judge Colgan and Judges Travis and Couch) found in Air Nelson's favour: [2007] 1 ERNZ 725. For reasons we shall explain more fully below, the court found that what Air Nelson had done was not caught by s 97 at all. Accordingly, Air Nelson's acts of engagement were not unlawful and Air Nelson was not liable to penalties in terms of s 97(6). Subsequently, this court granted leave to the union to appeal from this decision: [2008] NZCA 69.Issue on this appeal[7] We heard this appeal at the same time as another appeal which challenged the Employment Court's interpretation of s 97: Finau v Atlas Specialty Metals LimitedCA600/2008. We are delivering our decision in that appeal today: [2009] NZCA 348. For reasons we explain in that decision (at [11]), we have treated Finauas the lead decision. We are assuming that readers of this decision will first read our decision in Finau. (A copy of it will be given to the present parties. In fact, the appellants in the two cases are effectively the same, as Mr Finau and his co-appellants were all members of the Engineering Union, which brought the Finauappeal on behalf of its members who had been suspended by Atlas.) The Employment Court in the present case adopted a similar tactic. They expressly said they were applying the law as they had recently pronounced it in Finau: at [16]-[18]. The reference to the Employment Court's Finau decision is Finau v Southward Engineering Co Limited [2007] 1 ERNZ 522. [8] The issue on the present appeal is whether the Employment Court's construction of s 97 was correct. Anyone who has read our decision in Finau willimmediately know the answer: the error which, in our respectful view, permeated the court's approach in Finau is also apparent in their decision currently under review.Why we think the Employment Court's construction of s 97 was wrong[9] The Employment Court held that what the contract engineers had done on 21 and 22 June came within the description of line maintenance. The court found that 98 to 99% of line maintenance was undertaken by employed staff. The balance (1 to 2%) was performed by contract engineers: at [12]-[14]. Contract engineers, on average, spent about five hours of each of their working weeks undertaking line maintenance; the balance of their working time was on heavy maintenance. [10] The Employment Court held that Air Nelson's engagement of the contract engineers who carried out the work on 21 and 22 June was lawful because s 97 did not apply. Line maintenance work was "within the range of work which [contract engineers] routinely performed" for Air Nelson: at [28]. The court went on to say:Their performance of such work was standard practice and unexceptional. Adopting and applying the conclusions reached in Finau, we find that this limited amount of line maintenance can properly be regarded as the contract engineers' own work rather than that of striking employees.[11] For the reasons we have given in our decision in Finau, the Employment Court's conclusion is wrong as they asked themselves the wrong question. The focus should not have been on what contract engineers engaged by Air Nelson normally did but rather on whether Mr O'Donnell was, on 21 and 22 June, performing work which, but for the strike, a striking employee would have been performing. [12] The parties have not supplied us with the evidence which was before the Employment Court. We suspect that Air Nelson runs a roster system, probably prepared weeks, if not months, in advance. We suspect that that roster would reveal that, but for the strike, the line maintenance work on 21 and 22 June would probably have been done by one of the striking employees. Certainly, that was the union's allegation in its amended statement of claim. This is the first thing the court should have made a finding on. If the work probably would have been done by a strikingemployee, then s 97 would have applied. In that event, the engagement of Mr O'Donnell (or Mr Potts or Mr Judd, as the case may be) to do this work would have been unlawful unless Air Nelson could show its engagement of Mr O'Donnell was justified under s 97(4). Section 97(3) could not apply as it permits utilisation only of existing employees, as we explained in Finau. [13] Section 97(4) reads as follows:(4) An employer may employ or engage another person to perform the work of a striking or locked out employee if – (a) there are reasonable grounds for believing it is necessary for the work to be performed for reasons of safety or health; and (b) the person is employed or engaged to perform the work only to the extent necessary for reasons of safety or health.[14] It was actually subs (4)(a) on which Air Nelson relied in its amended statement of defence. It pleaded that "the work the contractors were performing was necessary to ensure the safety of the aircraft they were working on and the safety of passengers who would fly on the aircraft". That is a matter with which the Employment Court should have grappled. The court never considered this, however, as they erroneously concluded s 97 did not apply at all, since contract engineers "routinely performed" line maintenance, with the consequence that Mr O'Donnell was doing his own work. [15] In Finau, we referred to Dr Harrison's submission that the Employment Court's interpretation of s 97 involved "a leap in reasoning": at [36]. We think, with respect, that the court's decision in this case reveals a further leap. At least in Finauthe court was considering specific employees and what those specific employees normally did: what Messrs Iaveta and Ngati, the striking workers, normally did and what Messrs Smith and Makara, the workers who refused to do the work of Messrs Iaveta and Makara, normally did. In this case, however, the court has shifted ground. There has been no attempt to analyse what Mr O'Donnell (or Mr Potts or Mr Judd) normally did for Air Nelson. Rather, the focus has shifted to what "contract engineers" as a group normally did. For all we know, Mr O'Donnell had never worked for Air Nelson before, and yet, because he is assumed by the court to be a member of a group called "contract engineers", he apparently gets the benefit ofwhat that group "normally" does for Air Nelson. By this means, at least inferentially, he can be said to "normally" perform line maintenance for Air Nelson. [16] What is more, this group of "contract engineers" can apparently be said to "normally" perform line maintenance for Air Nelson even though only 1 to 2% of Air Nelson's line maintenance is done by contract engineers. This suggests that the Employment Court's concept of "work normally done" by an employee or contractor (or, now, a group of employees or contractors) is an extremely elastic term, much more elastic, indeed, than the court's explanation of the term in Finau would have suggested: see Finau at [31]. The Court's decision, if allowed to stand, would effectively rob s 97 of its efficacy. The section would hardly ever apply. [17] On the interpretation we favour, of course, these difficulties do not arise. Neither employer nor employee is required to evaluate what the striking worker or the potential strike-breaker normally does, with the attendant risks if the assessment is wrong. [18] The Employment Court's approach would be difficult to apply in practice. Take the present case. We do not know who within Air Nelson made the decision on 21 and 22 June to engage Mr O'Donnell for the LC2 check and the engine compressor wash. Let's call him Mr Jones. Mr Jones, on the Employment Court's test, would have been very uncertain as to whether he could engage Mr O'Donnell. For it to be lawful, he would have had to hope that the Employment Relations Authority would recognise a group comprising "contract engineers" of which Mr O'Donnell was a member. Mr Jones would then have to hope that the authority would treat this work as normally done by contract engineers, even though only 1 to 2% of line maintenance was in fact done by contract engineers and contract engineers as a group spent only a small portion of their time on line maintenance as opposed to heavy maintenance. At the very least, Mr Jones would have been uncertain as to whether he was breaching the law. [19] Compare that with Mr Jones's position under the test we favour. He would have easily been able to work out who would have done this line maintenance but for the strike. If it would probably have been done by a striking employee, then hewould have known s 97 was engaged. He would then have had to assess, before he engaged Mr O'Donnell, whether the work was necessary for reasons of safety. The fact that the interpretation we favour provides a much more certain outcome for employers making day-to-day managerial decisions is a strong pointer to that interpretation being the one Parliament intended. [20] We do not repeat here the other reasons we set out in Finau as to why the Employment Court's introduction of a concept of "work normally done" is inconsistent with the structure of the section and its Parliamentary history.Did Air Nelson breach s 97?[21] Although we are satisfied the Employment Court's approach was wrong, we cannot say whether Air Nelson's actions breached s 97. Because of its approach, the Employment Court did not make findings of fact on matters which are relevant under our approach. Nor have we been given the evidence that was before the court. In any event, we do not have jurisdiction to make findings of fact on appeals from the Employment Court. [22] We do not know, for instance, because the Employment Court made no finding on it, whether the LC2 check done by Mr O'Donnell on 21 June would, but for the strike, probably have been performed by a striking employee. Nor do we know whether the engine compressor wash done by Mr O'Donnell the next day would, but for the strike, probably have been performed by a striking employee. Nor do we know whether Air Nelson had reasonable grounds for believing that this work had to be performed at the time it was for reasons of safety. Without findings on those matters, it is simply not possible to know whether Air Nelson's actions were lawful. [23] It is also not possible, in the absence of evidence, to state categorically what "the work of [the] striking employee" would have been on the two days in question. So far as 21 June 2007 is concerned, the union pleaded "the work" at two levels of generality: "the replacement of cabin light bulbs" (the more specific categorisation) and "routine maintenance work" (the less specific categorisation). Air Nelson didnot attempt a categorisation in its pleadings, but, if asked, would no doubt have categorised "the work" as broadly as possible, perhaps as "line maintenance". With respect to the following day, the union categorised "the work" as, at one level, "an engine wash", and at a more general level as "routine maintenance work". [24] Without evidence, we cannot say which of those categorisations is the most appropriate. In Finau, we discussed how the parties, and the relevant courts in the event of dispute, should approach categorisation of "the work" the striking employee would have been doing but for the strike: at [24]-[25]. Applying what we said there to this case, we think it highly unlikely that "the replacement of cabin light bulbs" or "an engine wash" is the correct level of categorisation in this case.Result[25] Dr Harrison, if we accepted his submission as to the correct interpretation of s 97, as we have, asked us in this appeal to: (a) identify and declare the Employment Court's error or errors of law; and (b) declare that the aircraft maintenance performed for Air Nelson by self-employed maintenance contractors on 21 and 22 June 2007 was carried out in breach of s 97. [26] We have identified the Employment Court's error and a declaration to that effect is made as order B. [27] But we cannot take Dr Harrison's next step, for the reasons given at [21]-[24] above. Normally, in these circumstances, we would remit the proceeding to the Employment Court for it now to make the necessary findings of fact. The parties do not want us to remit it, however, as the union is no longer pressing for penalties under s 97(6). Its sole concern, with respect to this case, is to have the Employment Court's declaration as to the law corrected. It has achieved that objective.[28] We reserve costs. We refer the parties to what we said on costs in Finau at [55] and [56].Solicitors: John Wilton, NZEPMU, Wellington, for Appellant Kiely Thompson Caisley, Auckland, for Respondent