TOURISM HOLDINGS LIMITED v A LABOUR INSPECTOR OF THE MINISTRY OF BUSINESS, INNOVATION AND EMPLOYMENT [2021] NZSC 157

TOURISM HOLDINGS LIMITED v A LABOUR INSPECTOR OF THE MINISTRY OF BUSINESS,INNOVATION AND EMPLOYMENT [2021] NZSC 157 [15 November 2021]IN THE SUPREME COURT OF NEW ZEALANDI TE KŌTI MANA NUISC 15/2021[2021] NZSC 157BETWEEN TOURISM HOLDINGS LIMITEDAppellantAND A LABOUR INSPECTOR OF THEMINISTRY OF BUSINESS, INNOVATIONAND EMPLOYMENTRespondentHearing:FurtherSubmissions:1 July 202120 July 2021Court: William Young, Glazebrook, O'Regan, Ellen France andWilliams JJCounsel: P G Skelton QC, S C Langton and S L Mudafar for AppellantA E Scott-Howman and S P Connolly for RespondentJudgment: 15 November 2021JUDGMENT OF THE COURTA We amend the answer given by the Court of Appeal to thefirst of the questions submitted for determination by thatCourt so that it reads:Payments are "a regular part of the employee's pay" if they are ofa kind made regularly when assessed against the standard of afour-week period.That apart, the appeal is dismissed.B The appellant must pay the respondent costs of $15,000plus usual disbursements.____________________________________________________________________REASONS(Given by William Young J)Table of ContentsPara No.Overview [1]What the case is about [1]The factual context [3]The issues [7]Legislation [10]How the different approaches work out [18]The judgments of the Courts below [21]Main issue: regularity of payments under s 8(2) [30]Tourism Holdings [30]Labour Inspector [32]The purpose of the scheme [34]Section 8(1) [36]Why s 8(1) is not applicable [38]Section 8(2) [40]"Substantive" and "temporal" regularity [43]Secondary issue: the particular week to which commission shouldbe allocated [46]Disposition [54]OverviewWhat the case is about[1] The Holidays Act 2003 confers on employees the right to a minimum offour weeks of paid holidays each year after 12 months of continuous employment.1The Act stipulates how these entitlements may be exercised.2 More importantly forpresent purposes, it also provides for the calculation of holiday pay. Under s 21, theemployee is entitled to holiday pay based on the greater of the employee's ordinaryweekly pay as at the beginning of the annual holiday and the employee's averageweekly earnings for the 12 months immediately before the end of the last pay periodbefore the annual holiday.[2] This appeal concerns the calculation of holiday pay for a tour company bus"driver guide" whose (a) work pattern was dictated by the length of tours rather than1 Holidays Act 2003, s 16(1).2 See ss 16–20.the calendar week; and (b) remuneration included commission which varied in amountfrom tour to tour and was paid after the conclusion of each tour. In issue in this appealis how commission payments paid shortly before commencement of annual holidaysare taken into account in calculating ordinary weekly pay.The factual context[3] The appellant, Tourism Holdings Ltd, operates bus tours over different routesand of varying duration to destinations throughout the country. Passengers can"hop on and hop off". So they will not necessarily finish on the bus on which theystarted. The driver guides are paid a daily rate of pay during a trip and can earncommission on the sale of activities booked by them for passengers. For activitiessupplied by Tourism Holdings, driver guides receive commissions on bookings butwith later adjustments for cancellations. For activities supplied by third parties, theright to commission depends on the activity being both paid for and taken. At the endof each trip, driver guides generally attend a paid debriefing. Ahead of the debriefing,the driver guide completes commission documentation providing information aboutthe trip and calculating the commission payable to them. Once agreed, commission ispaid.[4] The case focuses on one particular employee and holiday pay for two periodsof leave which she took, the first commencing on 4 August 2015 and the second on26 July 2016. On 3 August 2015, that is, just before the first period of leave, theemployee received a commission payment of $4,237.72. And on 11 July 2016, justover two weeks before the second period of leave commenced, she received acommission payment of $2,681.65. The dispute is primarily about how the first ofthese payments should be allowed for in the calculation of holiday pay.[5] Commission payments of this kind were a significant component of theemployee's remuneration. The pay figures we have for her cover 11 February 2014 to22 August 2016, a period of just over 30 months.3 Over that time she received29 commission payments (covering 31 commission periods). The pay per commission3 The date range of the spreadsheet we have is through to 26 September 2016 but the last paymentrecorded was on 22 August 2016.period ranged from $186.28 to $5,514.16. The average amount paid per commissionperiod was $2,571.93.[6] The commission payment of $4,237.72 was larger than usual. Taking it intoaccount in calculating the employee's ordinary weekly pay means that the holiday payto which she is entitled in respect of the first of the two holidays is appreciably higherthan it would be if calculated on her weekly earnings (including commissions)averaged over a year.The issues[7] Everything that the employer is required to pay to the employee under theemployee's employment agreement is taken into account in calculating an employee'saverage weekly earnings.4 The averaging out of all pay earned over a 52-week periodsmooths away the significance of lumpy remuneration. But, as noted, employees areentitled to holiday pay calculated on the higher of their average weekly earnings andtheir ordinary weekly pay at the start of the holiday. When it comes to the calculationof ordinary weekly pay, lumpiness of remuneration is dealt with by reference towhether payments of the kind in question are "a regular part of the employee's pay".5If they are, they must be taken into account in assessing ordinary weekly pay.[8] As will become apparent, the main issue in the case is whether regularity mustbe assessed against a standard period of a week, which is what Tourism Holdingsmaintains, or whether it can also be assessed against a longer time period, mostplausibly four weeks or, as was suggested in the Court of Appeal and contended forby the Labour Inspector of the Ministry of Business, Innovation and Employmentbefore this Court, against the pattern of the trips.6[9] There is a secondary issue which we must also address. This requiresdetermining the particular week to which commission should be allocated.4 Holidays Act, s 5(1) definition of "average weekly earnings"; and s 14. Section 14(b) excludespayments that the employer is not bound, by the terms of the employee's employment agreement,to pay the employee—for example, discretionary payments.5 Section 8(1)(b)(i)–(ii) and (c)(i)–(ii).6 Labour Inspector v Tourism Holdings Ltd [2021] NZCA 1, [2021] ERNZ 1 (Cooper, Brown andClifford JJ) [CA judgment] at [37].Legislation[10] Section 21 of the Holidays Act provides:21 Calculation of annual holiday pay(1) If an employee takes an annual holiday after the employee'sentitlement to the holiday has arisen, the employer must calculate theemployee's annual holiday pay in accordance with subsection (2).(2) Annual holiday pay must be—(a) for the agreed portion of the annual holidays entitlement; and(b) at a rate that is based on the greater of—(i) the employee's ordinary weekly pay as at thebeginning of the annual holiday; or(ii) the employee's average weekly earnings for the12 months immediately before the end of the last payperiod before the annual holiday.[11] The case is focused on "ordinary weekly pay" under s 21(2)(b)(i).[12] Ordinary weekly pay is defined in s 8 in this way:8 Meaning of ordinary weekly pay(1) In this Act, unless the context otherwise requires, ordinary weeklypay, for the purposes of calculating annual holiday pay,—(a) means the amount of pay that the employee receives under hisor her employment agreement for an ordinary working week;and(b) includes—(i) productivity or incentive-based payments (includingcommission) if those payments are a regular part of theemployee's pay:(ii) payments for overtime if those payments are a regularpart of the employee's pay:(iii) the cash value of any board or lodgings provided by theemployer to the employee; but(c) excludes—(i) productivity or incentive-based payments that are not aregular part of the employee's pay:(ii) payments for overtime that are not a regular part of theemployee's pay:(iii) any one-off or exceptional payments:(iv) any discretionary payments that the employer is notbound, under the terms of the employee's employmentagreement, to pay the employee:(v) any payment of any employer contribution to asuperannuation scheme for the benefit of the employee.(2) If it is not possible to determine an employee's ordinary weekly payunder subsection (1), the pay must be calculated in accordance withthe following formula:a – bcwhere—a is the employee's gross earnings for—(i) the 4 calendar weeks before the end of the pay periodimmediately before the calculation is made; or(ii) if the employee's normal pay period is longer than4 weeks, that pay period immediately before thecalculation is madeb is the total amount of payments described insubsection (1)(c)(i) to (iii)c is 4.(3) However, an employment agreement may specify a special rate ofordinary weekly pay for the purpose of calculating annual holiday payif the rate is equal to, or greater than, what would otherwise becalculated under subsection (1) or subsection (2).[13] Gross earnings is defined by s 14:14 Meaning of gross earningsIn this Act, unless the context otherwise requires, gross earnings, inrelation to an employee for the period during which the earnings arebeing assessed,—(a) means all payments that the employer is required to pay to theemployee under the employee's employment agreement,including, for example—(i) salary or wages:(iv) productivity or incentive-based payments (includingcommission):(v) payments for overtime:[14] It is common ground that it is not possible to determine the employee'sordinary weekly pay under s 8(1), albeit there is some dispute as to why this is so. Wewill revert to this shortly.[15] Under s 8(2), commissions are included in a, as part of the employee'sgross earnings. The issue concerns b, and whether commissions are withins 8(1)(c)(i), "productivity or incentive-based payments that are not a regular part ofthe employee's pay". If so, it means that they are not included in the a – b numerator.The primary point in issue is whether s 8(1)(c)(i) should be construed as if it read "arenot a regular part of the employee's pay for an ordinary working week".[16] As will be apparent, the language of s 8 is, in some respects, indeterminate andthus leaves some scope for legitimate differences of opinion. Recognising this, theAct provides a bespoke mechanism for resolving such differences. This is by s 11,which relevantly provides:11 Labour Inspector may determine ordinary weekly pay, relevantdaily pay, and average daily pay(1) This section applies if an employer and employee cannot agree on theamount of the employee's—(a) ordinary weekly pay under section 8; or(2) A Labour Inspector may determine the amount of the employee'sordinary weekly pay, (3) In making a determination, a Labour Inspector must apply theprovisions of section 8, to the circumstances of the employee asdetermined by the Labour Inspector.[17] It is common ground that the "average weekly earnings" approach unders 21(2)(b)(ii) takes into account commissions.How the different approaches work out[18] On the Tourism Holdings approach, commission is allocated to the period inwhich all steps that it says are required to earn commission have been completed,including debriefing and reconciliation (which occur after the trip). On the basis ofthis approach and its argument that regularity must be assessed against a standardperiod of one week, the commission in this case is excluded from the final figurerepresenting ordinary weekly pay reached using the s 8(2) calculation.7 This meansthat the average weekly earnings figure (which takes into account commission earnedover a yearly period) is always higher than ordinary weekly pay as calculated byTourism Holdings.[19] On the approach proposed by the Labour Inspector, commissions are includedin the final figure calculated through s 8(2). This is on two alternative bases:(a) One basis (Labour Inspector 1) treats commission as earned on the dayit was paid.(b) The other (Labour Inspector 2) is based on an averaging process. Theaverage daily commission for a trip is determined by taking the totaltrip commission and dividing it by the number of driving days in thetrip. That average is then multiplied by the number of driving days inthe relevant four-week period to produce an average daily commissionfigure. Underlying this alternative approach is the proposition thatcommission is earned once the driver guide has completed the activitieswhich generated the commission.On both bases, commission is included in the final figure calculated under s 8(2),having not been subtracted through b. In respect of Labour Inspector 1, this is becauseregularity should be assessed against the pattern of the trips. In the case of LabourInspector 2, this is because the frequency of the driving days to which commission is7 There were three commission payments which Tourism Holdings accepts may have been earnedand payable within a one-week period, but these would not, on Tourism Holdings' approach, besufficiently regular to be regarded as a "regular part of the employee's pay for an ordinary workingweek".allocated is sufficient to satisfy even the regularity requirement argued for byTourism Holdings.[20] Labour Inspector 1 produces holiday pay figures that are on the whole morefavourable to the employee than Labour Inspector 2. This is because LabourInspector 2 tends to push back in time commission payments received just before aholiday was taken; thus reducing their significance in holiday pay calculations.8The judgments of the Courts below[21] In his judgment in the Employment Court, Judge Smith commented:9[30] As is apparent from the heading of s 8 its function is to define"ordinary weekly pay" so that the mandatory calculations of holiday pay,required by s 21(2), can be completed. The text indicates that the words"ordinary weekly pay" are intended to mean what an employee receives underan employment agreement for an "ordinary working week"; that is for thework performed in that week. That is why s 8(1)(a) links the two. Furtherrefinement of what must be regarded as pay for an ordinary working week isprovided by the deliberate selection of types of payment that must fall withinthat week and those that are outside it.[32] The text of s 8(1)(a) indicates that "regular" in the subsequentsubsections is intended to mean what is received under the employmentagreement for an ordinary working week. It is the entitlements to pay earnedunder the agreement for that week. The heading, referring to "ordinary weeklypay", read with the balance of the section, shows the intention was to capturecontractual entitlements earned and payable over an ordinary workingweek. [35] The text of ss 8(1) and (2) indicate that what is intended is to establishwhat is payable to an employee for an ordinary working week. The purposeof s 8 supports that conclusion. It is to enable mandatory holiday paycalculations where the employee's entitlement to annual holidays is to whathas been accrued and measured in weeks. Both the text and purpose of s 8(2)indicate that the reference to "ordinary weekly pay" is to what is usuallypayable to the employee having been earned in an ordinary working week.8 This is particularly so in the present case, where the employee took four days of annual leave andone day of leave without pay for each week she was away, meaning that calculations had to bedone at the start of each new week as it amounted to a new period of annual leave. The largecommission payment was made just before the first period of annual leave began, so is includedin whole under Labour Inspector 1 for the first four weeks of leave. However, under LabourInspector 2, a smaller proportion of it is included when the calculation is redone each week.9 Tourism Holdings Ltd v Labour Inspector, Ministry of Business, Innovation and Employment[2019] NZEmpC 87, [2019] ERNZ 239 [EmpC judgment] (footnote omitted).[22] He concluded that commission was not earned by the driver guide, in the senseof being payable under the employment agreement, until the debrief and reconciliationprocess was completed at the end of each trip.10 There being only three occasions onwhich this process may have been completed in the same week as commission hadbeen generated, commission was not a sufficiently regular part of the employee's payfor an ordinary working week to be taken into account under s 8.11[23] For these reasons, he held that the commission payments did not form a regularpart of an employee's pay for an ordinary working week, and therefore they comeinto b of s 8(2), with the result that they are subtracted in the s 8(2) calculation.12[24] The effect of his judgment is that regularity is to be assessed against thestandard of a one-week period.[25] The Court of Appeal disagreed with this approach:13[34] the purpose of the alternative approach found in s 8(2) is to providefor the calculation of "ordinary weekly" pay where the definition found ins 8(1) cannot be applied. One of those circumstances is, as here, where thereis no "ordinary working week". It would be surprising if a central element ofthe definition that does not fit, namely that of an "ordinary working week",was in those circumstances to be reintroduced into the alternative calculationunder s 8(2) as regards included and excluded commission.[35] Nor do we think the possible outcome of that interpretation, namelythat the rate calculated under s 8(2) may produce a higher holiday pay baserate than the "gross earnings" calculation, is inconsistent with the operationof s 8. If an employee who is paid hourly and works seasonal or fluctuatinghours takes an annual holiday after a busy four-week period in which theyhave worked somewhat more than usual, then they will already enjoy thebenefit of those hours accrue when calculating their holiday pay under s 8(2).14We do not see why employees regularly paid by commission should not enjoyan equivalent benefit, which is itself consistent with the scheme and purposeof the Act. After all, s 21 is drafted to give employees the benefit of the greaterof the "ordinary weekly pay" and "average weekly earnings" calculations.It is at least implicit in this approach that regularity under s 8(2) can be assessed on afour-weekly basis.10 At [38].11 At [41].12 At [40]–[42].13 CA judgment, above n 6.14 Excluding, of course, overtime or other special payments deducted by s 8(1)(c)(i)–(iii).[26] The Court went on to say:15[36] The dictionaries give us a number of meanings for the wordregular. As relevant, the word means both (i) "conforming to a rule orprinciple; systematic", or what might be called substantive regularity; and(ii) "acting or done or recurring uniformly or calculably in time or manner;habitual, constant, orderly", or what might be called temporal regularity.[37] In our assessment, both those meanings apply to commission as earntby the Company's driver guides. Commission is provided for as part of the"rule" represented by the individual's employment contract for promoting andorganising bookings for additional activities as a specific duty of an employee.The terms for payment of commission, the "rules" for payment ofcommission, are set in that employment agreement. Moreover, and on thebasis of the pattern of driver guides' employment—that is the pattern of the"trips" (albeit of varying lengths) they are responsible for—commission is aregular and habitual part of their pay. While it is not part of the payment ofdaily rate compensation for each week of a tour a guide receives during thetour, it does form the part of their pay in the week after the tour in which it [is]paid, and regularly—that regularity fitting the pattern of the tours a driverguide is responsible for over time.[27] We do not read [36] and [37] of the reasons as holding that substantiveregularity alone is sufficient to bring commission into the final figure reached throughs 8(2). To treat say the "substantive regularity" of an annual performance bonus paidjust before a holiday is taken as coming into holiday pay calculated under s 8(2) wouldbe inconsistent with the scheme of the provisions. We would be surprised if the Courtof Appeal thought differently.[28] The formal orders of the Court included answers (which we have placed inbold) to the questions of law before them as follows:16We answer the questions of law submitted for determination by the Court:(a) What is the meaning of "not a regular part of the employee's pay" ins 8(1)(c)(i) of the Holidays Act 2003 for the purpose of calculatingordinary weekly pay under s 8(2) of the Holidays Act?Payments are "a regular part of the employee's pay" if they aremade (i) substantively regularly, being made systematically andaccording to rules; or (ii) temporally regularly, being madeuniformly in time and manner.(b) If productivity or incentive-based payments are a regular part of theemployee's pay, do those payments have to be "pay the employee15 Footnote omitted.16 Order B (emphasis added).receives under his or her employment agreement for an ordinaryworking week" for the purpose of calculating ordinary weekly payunder s 8(2) of the Holidays Act?No.We see the "or" in the first answer as a slip. It should read "and".[29] The Court also addressed the pay period to which commission should beallocated. It considered that the commission was relevantly earned when everythinghad occurred between the driver guide and the passenger and, where necessary,between the passenger and the supplier of the activity, that generated an entitlement topayment.17 On this basis, commission would be earned prior to debriefing,reconciliation and payment and, presumably, should be allocated to the period inwhich it was earned. The Court commented in a footnote as to the significance of thisconclusion:18As we understand the practical implications of this appeal, noting thecomplexities of the Holidays Act, this would only appear to be material whena driver guide takes holidays immediately following the completion of a tour,and before the reconciliation of commission earnt during that tour has beenable to be calculated. In those circumstances, appropriate "good faith"arrangements would appear to be possible to address any issue arising.As will be noted, this takes an approach to allocation of commission to pay periodswhich differs from those advanced by the parties. We revert to it later in thesereasons.19Main issue: regularity of payments under s 8(2)Tourism Holdings[30] On the approach of Tourism Holdings:(a) The employee had an "ordinary working week" even though her patternof work is based around trips and not the calendar.17 At [38].18 At [38], n 14.19 See below at [46]–[53].(b) Section 8(1)(a) is the "general" definition of ordinary weekly pay,defining it as "the amount of pay that the employee receives under hisor her employment agreement for an ordinary working week". Itinforms the meaning of the next two subparagraphs, s 8(1)(b) ands 8(1)(c).(c) Section 8(1)(b)(i) should therefore be construed as if it read"productivity or incentive-based payments (including commission) ifthose payments are a regular part of the employee's pay for an ordinaryworking week".(d) Section 8(1)(c)(i) should be read in the same way as s 8(1)(b)(i), andthus as referring to "productivity or incentive-based payments that arenot a regular part of the employee's pay for an ordinary working week".(e) Because the entitlement to commission arises only after the post-tripdebrief and reconciliation (which normally occurs after the week inwhich the commission is generated), such commission is generally notpay for an ordinary working week and is thus not included bys 8(1)(b)(i), is excluded by s 8(1)(c)(i) and, by virtue of that exclusion,is not included in the s 8(2) numerator.(f) In any event, because commissions are "not a regular part of theemployee's pay for an ordinary working week", the s 8(1)(c)(i)exclusion applies.[31] Associated with this argument is the contention that commission is not"earned" until debriefing and reconciliation has occurred. The appellant's argumentas to this focused primarily on s 8(1)(a), where the statutory expression is "pay foran ordinary working week". The appellant's position is that commission in this case:(a) is not included by s 8(1)(b)(i) because it is not "pay for" the week inwhich it is generated, as the employee has not carried out in that weekall prerequisites to the entitlement to be paid; and(b) is therefore excluded from the end result of the s 8(2) calculationbecause s 8(1)(c)(i) is to be construed as if it referred to "productivityor incentive-based payments that are not a regular part of theemployee's pay for an ordinary working week".Labour Inspector[32] The Labour Inspector's argument proceeds on the basis that commissionpayments are a regular part of the employee's pay and therefore are not subtracted inthe equation in s 8(2) which determines ordinary weekly pay.[33] This approach is premised on the following propositions:(a) It is not possible to determine the employee's pay under s 8(1) becauseshe does not have an ordinary working week.(b) The commission payments:(i) fall within a of the s 8(2) calculation as part of her grossearnings for the four calendar week period (a proposition whichis not disputed by Tourism Holdings); but(ii) are not within b as they are "a regular part of the employee'spay", and so do not come within s 8(1)(c)(i).As explained,20 on Labour Inspector 1, this is on the basis that regularity should beassessed against the pattern of the trips. On Labour Inspector 2, it is because thecommissions, by an averaging process, are attributed to the periods of time when theywere generated by the driver guide, which results in them being sufficiently regular tomeet the regularity standard postulated by Tourism Holdings.20 See above at [19].The purpose of the scheme[34] Holiday entitlements are calculated primarily in weeks. Presumably for thisreason, so too is holiday pay. In a very broad sense, the purpose of the holiday paycalculations is that an employee on holiday is paid an amount which is at least similarto what would have been earned if the holiday had not been taken. The more specificpurpose of the s 8 ordinary weekly pay calculation is to enable the employee to tieholiday pay reasonably closely to what was earned immediately before the holiday istaken. It is in this context that s 8 allows for assessment of holiday pay againsttwo comparator periods:(a) an ordinary working week (s 8(1)); and(b) if s 8(1) does not apply, the four calendar weeks preceding the takingof leave (s 8(2)).As well, as noted above, there is provision under s 21(2)(b)(ii) for assessment byreference to the preceding 12 months, if that produces a figure which is morefavourable for the employee.[35] An obvious aim of the legislative scheme is the avoidance of artificial inflationof holiday pay entitlements that might result from the inclusion in the firsttwo comparator periods of atypical remuneration payments, say for instance an annualbonus paid just before a holiday is taken. As we have noted, this concern does notapply in the case of the preceding 12-month comparator period; this because anylumpiness of remuneration should be averaged out over that time. On the other hand,a corollary of an employee's right to the more favourable of the ordinary weekly payor the average weekly earnings figure is that the legislature envisaged that employeesmay be entitled to the benefit of some lumpiness in remuneration, an entitlementwhich, in the case of commission, depends on whether such payments are a regularpart of remuneration.Section 8(1)[36] Where there is a pattern of work and pay which does not vary on aweek-by-week basis, there will be no difficulty with the calculation under s 8(1). Wedo not, however, see the s 8(1) exercise as necessarily confined to that situation. Thisis because some variation is implicit in s 8(1)(b)(i) and (ii), as they encompass typesof pay that are likely to differ from week to week. So, some averaging may beappropriate.[37] We see the scope for averaging under s 8(1) as limited. This is because thereference to "the amount" in s 8(1)(a) indicates a reasonable measure of specificity.In this context, "regular part" in s 8(1)(b)(i) is to be applied as denoting a regularitythat enables sensible assessment of "the amount of pay for an ordinary workingweek".Why s 8(1) is not applicable[38] As noted, it is common ground that a s 8(1) assessment was not possible inrelation to the employee. There was not, however, consensus as to why this is so.Mr Skelton QC argued that, notwithstanding the trip-based nature of her employment,the employee nonetheless had an "ordinary working week". On his argument, thereason why s 8(1) did not apply was simply the extent to which her weeklyremuneration varied. Although the reason why s 8(1) does not apply might be thoughtto be something of a side issue, it is not. This is because Mr Skelton had to argue thatthe employee had an ordinary working week in order to bring her remuneration intothe s 8(1)(c)(i) exclusion as he would have us construe it.[39] We do not accept Mr Skelton's argument on this point. Section 8(1) addressesordinary weekly pay by reference to an ordinary working week. The employee'svariable working pattern meant that she did not have an ordinary working week. Itwas this variable working pattern, in conjunction with the unevenness of herremuneration (partly consequential to her working pattern), which precluded sensibleassessment of "the amount of pay for an ordinary working week".Section 8(2)[40] For the purposes of the s 8(2) calculation, it is common ground thatcommission received in the relevant preceding four-week period comes into a. For b,there is an exclusion in respect of payments referred to in s 8(1)(c)(i), "productivity orincentive-based payments that are not a regular part of the employee's pay".[41] As we have noted, the appellant argues that in s 8(1)(b)(i), the words "for anordinary working week" should be read in. The language of s 8(1)(c)(i) is substantiallysimilar (in the sense of being the other side of the coin) to that in s 8(1)(b)(i). Thissimilarity is at the heart of the appellant's argument that, in s 8(1)(c)(i), the words "foran ordinary working week" should also be read in so that there is an exclusion forproductivity or incentive-based payments that "are not a regular part of the employee'spay for an ordinary working week".[42] We disagree with this line of argument:(a) In the context of a s 8(1) exercise, s 8(1)(b)(i) operates very much as ifthe suggested additional words were there.21 But this is primarilybecause s 8(1) is focused on the assessment of "the amount of pay" foran ordinary working week. For this purpose, commissions are onlyincluded if they have sufficient connection with, or regularity inrelation to, an ordinary working week to enable such an assessment tobe made.(b) The language of s 8(1)(b)(i) and (c)(i) is substantially similar. This isbecause, as we have said, each of the subparagraphs is expressed as theother side of the coin to the other. The combined effect of thetwo subparagraphs is that what is not included is excluded. That said,for the purposes of the s 8(1) calculation, s 8(1)(c)(i) is something of a21 In Schollum v Corporate Consumables Ltd [2017] NZEmpC 115, [2017] ERNZ 668, theEmployment Court interpreted and applied s 8(1)(b)(i) in this way. The employees in that caseearned commissions for exceeding monthly targets. The Judge accepted that the commissionsshould not be included when calculating ordinary weekly pay for the purposes of s 8(1) becausethey "were not a regular part of the pay received by [the employees] for an ordinary workingweek": at [26]–[27].fifth wheel. If commission is not included under s 8(1)(b)(i), therewould be no reason why it would be otherwise taken into account unders 8(1). The primary function of s 8(1)(c)(i) is thus in relation to s 8(2).(c) The function of s 8(1)(c)(i) under s 8(2) is different from the functionof s 8(1)(b)(i) in s 8(1). This is because the assessment of "the amountof pay for an ordinary working week" under s 8(1) involves a degreeof specificity not required for an averaging exercise in respect of actualremuneration received over a four-week period. Payments that areinsufficiently regular to be material to an assessment of "the amount"of pay for an "ordinary working week" may nonetheless be sufficientlyregular to be included in a calculation of earnings over a four-weekperiod. In this context, "regular part" is most sensibly construed inrelation to the time period under consideration—that is, a four-weekstandard.(d) Given that the function of s 8(2) extends to filling the gap where anemployee does not have "an ordinary working week", reading theadditional words into s 8(1)(c)(i) would have the effect of excludingcommission payments in circumstances in which their inclusion is partof the legislative purpose—to put an employee who takes a holiday inbroadly the same position as if they had been working."Substantive" and "temporal" regularity[43] The expression "regular part" implies a standard period against whichregularity is to be assessed. In the statutory context of s 8(2) – which is addressed tothe assessment of earnings over a four-week period – the appropriate standard periodis four weeks. What is required is regularity in terms of that standard. At least in itsapplication to this case, this approach is similar to that adopted by the Court ofAppeal—albeit that the Court of Appeal seems to have assessed regularity by referenceto the pattern of trips. The difficulty with the Court of Appeal's approach (which wasadopted by the Labour Inspector before this Court) is that if the trips resulted ininfrequent payments say of only three or four commission payments a year, inclusionof one such payment in the final figure calculated through s 8(2) would produce alumpiness in holiday pay which we see as inconsistent with the underlying policy ofthe statutory scheme.[44] As will be apparent, "regular part" is an expression of indeterminate meaning.This has the consequence that there will be scope for debate under both s 8(1) ands 8(2) as to what payments are to be taken into account, that is whether the frequencyof payments is sufficient to be relevantly a "regular part" of the employee's pay forthe purposes of those subsections. This is contemplated by s 11, which permits aLabour Inspector to determine the amount of an employee's "ordinary weekly pay".[45] As will also be apparent, we do not see "substantive regularity" as postulatedby the Court of Appeal as material to the issue. The types of payments which fall tobe considered must be received "under [the] employment agreement".22 Providingthis test can be satisfied, we see no need for additional requirements as to "substantiveregularity".Secondary issue: the particular week to which commission should be allocated[46] Driver guide activities resulting in the generation of commission paymentsformed a regular part of their working days. So if commissions are to be attributed tothe weeks in which they were generated (on either the Labour Inspector 2 or the Courtof Appeal approach), there was a reasonable case to be made for the view that even onTourism Holdings' interpretation of s 8(1)(c)(i) and (2), commission was a regular partof the employee's pay for an ordinary working week. It was in this context thatTourism Holdings argued that commission is not "earned" until debriefing andreconciliation has occurred. In what may have been intended to be an adoption of thatargument, the Employment Court said that "commission was not earned by the driver,in the sense that it had become payable under the employment agreement, until thereconciliation was completed".23 In contradistinction, the Court of Appeal expressedthe view that the entitlement to commission arises (and is thus earned) earlier and22 This is the effect of s 8(1) in relation to holiday pay calculated under that subsection. In the caseof s 8(2), this is because of the adoption of the expression "gross earnings", which is defined ins 14 as meaning all payments required to be made under the employment agreement.23 EmpC judgment, above n 9, at [38].therefore ahead of debriefing, reconciliation and payment; that is, when the driverguide books the activity and the customer pays for it (and, for third-party activities,when the activity has also been undertaken).24[47] In relation to the primary question in the case – whether commission wassufficiently regular to be taken into account in calculating ordinary weekly pay – thesignificance of this issue has fallen away. This is because we have concluded thatcommission payments made monthly on average are sufficiently "regular" to beincluded in the final figure calculated through s 8(2) and that it does not matter whetherthey can also be said to be "regular" against the standard of an ordinary working week.But this notwithstanding, the weeks to which commission should be allocated willhave at least some, although probably not very much, effect on the final calculation ofthe amount owing to the employee.[48] This aspect of the case turns on the meaning of the phrase " gross earnings", inrespect of which s 14 relevantly provides: in relation to an employee for the period during which the earnings arebeing assessed,—(a) means all payments that the employer is required to pay to theemployee under the employee's employment agreement, [49] On our assessment of the Employment Court judgment, the Judge found, as amatter of interpretation of the employment agreement, that the right to commissiondid not arise until debriefing and reconciliation occurred.[50] Under s 214(1) of the Employment Relations Act 2000, a decision of theEmployment Court "on the construction of an individual employment agreement" isnot subject to appellate review. So, if allocation of commission to a period turned onwhen it became payable under the employment agreement, commission payments areto be allocated to the period in which debriefing and reconciliation occurred.24 CA judgment, above n 6, at [38].[51] Under s 14, the issue is whether the commission is "for the period" in which:(a) it becomes payable "under the employment agreement"; or(b) all preconditions to entitlement are satisfied, other than debriefing andreconciliation (which would appear to be the approach of the Court ofAppeal).We see this issue as one of statutory interpretation with the result that theEmployment Court Judge's conclusion as to when the commission became payable isnot necessarily controlling.[52] The point is a short one. With the qualification that the commissions hadbecome payable before the holidays had been taken, we see the periods to which theyrelated as determined by when the activities were sold and, in the case of third-partyactivities, taken. As explained, this seems also to have been the view of the Court ofAppeal.[53] This means that we reject the allocation approach contended for byTourism Holdings. And, for the same reasons, we reject the Labour Inspector 1approach (which operates on a payments basis rather than the accruals basis which wesee as implicit in the s 14 definition of "gross earnings") and the Labour Inspector 2approach (which, at least in substance, treats commission as earned before the activityhas even been paid for in some instances).Disposition[54] We amend the answer given by the Court of Appeal to the first of the questionssubmitted for determination by that Court so that it reads:Payments are "a regular part of the employee's pay" if they are of a kind maderegularly when assessed against the standard of a four-week period.That apart, the appeal is dismissed. Tourism Holdings must pay the Labour Inspectorcosts of $15,000 plus usual disbursements.Solicitors:LangtonHudsonButcher, Auckland for AppellantCrown Law Office, Wellington for Respondent