NEW ZEALAND TRAMWAYS AND PUBLIC TRANSPORT EMPLOYEES UNION INCORPORATED AND ANOR V TRANSPORTATION AUCKLAND CORPORATION LIMITED AND CITYLINE (NEW ZEALAND) LIMITED CA186/07

NEW ZEALAND TRAMWAYS AND PUBLIC TRANSPORT EMPLOYEES UNION INCORPORATED AND ANOR V TRANSPORTATION AUCKLAND CORPORATION LIMITED AND CITYLINE (NEW ZEALAND) LIMITED CA186/07 11 June 2008IN THE COURT OF APPEAL OF NEW ZEALAND CA186/07 [2008] NZCA 159BETWEEN NEW ZEALAND TRAMWAYS AND PUBLIC TRANSPORT EMPLOYEES UNION INCORPORATED First Appellant AND NATIONAL DISTRIBUTION UNION INCORPORATED Second Appellant AND TRANSPORTATION AUCKLAND CORPORATION LIMITED AND CITYLINE (NEW ZEALAND) LIMITED Respondents Hearing: 20 May 2008 Court: Glazebrook, Chambers and Baragwanath JJ Counsel: P Cranney for Appellants C H Toogood QC and P A Caisley for Respondents Judgment: 11 June 2008 at 11amJUDGMENT OF THE COURT A The appeal is allowed. B The case is referred back to the Employment Court for reconsideration in the light of this judgment. C There is no order as to costs.REASONS Para NoGlazebrook and Baragwanath JJ [1] Chambers J (dissenting) [28]GLAZEBROOK AND BARAGWANATH JJ(Given by Baragwanath J)The issue[1] Prior to 1 April 2007 virtually all employees were entitled by statute to three weeks annual holiday. By cl 20.2 of their collective employment agreement bus drivers employed by the appellant Unions were entitled to a further holiday of one week "in recognition of the nature of the work", which entails long and irregular hours. The issue on this appeal is whether a statutory change increasing the entitlement of employees generally to four weeks' annual holiday entailed an increase in bus drivers' entitlement to five weeks or whether it remained at four. [2] Leave was given to the appellant Unions to appeal from a decision of the Full Court of the Employment Court in favour of the respondent employers on the question:Whether additional holidays which are agreed to be in recognition of the nature of work are absorbed by or are in addition to minimum annual leave conferred by Subpart 1 of Part 2 of the Holidays Act 2003, when such annual leave moves to four weeks from [1] April 2007?It had adopted the former interpretation.Holidays Act 2003[3] The Holidays Act 2003 came into force on two dates. For the most part it did so from 1 April 2004. Section 3 states its purpose:3 PurposeThe purpose of this Act is to promote balance between work and other aspects of employees' lives and, to that end, to provide employees with minimum entitlements to— (a) annual holidays to provide the opportunity for rest and recreation: (b) public holidays for the observance of days of national, religious, or cultural significance: (c) sick leave to assist employees who are unable to attend work because they are sick or injured, or because someone who depends on the employee for care is sick or injured: (d) bereavement leave to assist employees who are unable to attend work because they have suffered a bereavement.[4] Subpart I of Part 2 states:15 Purpose of this subpart―The purpose of this subpart is to―(a) provide all employees with a minimum of 3 weeks' annual holidays to be paid at the time the holidays are taken; and (b) require employers to pay employees at the end of their employment for annual holidays not taken; and (c) enable employers to manage their businesses, taking into account the annual holiday entitlements of their employees. 16 Entitlement to annual holidays―(1) After the end of each completed 12 months of continuous employment, an employee is entitled to not less than 3 weeks' paid annual holidays. [Schedule 1 substitutes 4 for 3 from 1 April 2007][5] Section 6 stated:6 Relationship between Act and employment agreements(1) Each entitlement provided to an employee by this Act is a minimum entitlement. (2) This Act does not prevent an employer from providing an employee with enhanced or additional entitlements whether specified in an employment agreement or otherwise on a basis agreed with the employee.(3) However, an employment agreement that excludes, restricts, or reduces an employee's entitlements under this Act―(a) has no effect to the extent that it does so; but (b) is not an illegal contract under the Illegal Contracts Act 1970.As the Employment Court noted, s 6(1) refers to the four benefits listed in s 3. [6] The Act provided from the outset that Subpart II of Part 2 and Schedule 1 were to come into force three years later – on 1 April 2007. With effect from that date there was added to s 15:(d) to ensure that, on and from 1 April 2007, when an employee next becomes entitled to annual holidays, the employee's minimum entitlement is increased from 3 weeks' annual holidays to 4 weeks' annual holidays.[7] Section 74 provides:74 Who can enforce Act(1) The provisions of this Act may be enforced in accordance with this Act by— (a) an employee: (b) an authorised representative: (c) a representative of a union of which the employee is a member: (d) an employer: (e) a Labour Inspector. (2) An employee's entitlement to annual holidays, public holidays, sick leave, or bereavement leave that are in addition to entitlements under this Act may be enforced only by the persons listed in subsection (1)(a) to (c).Subsection (2) reflects the policy of s 6(2).The collective employment agreement[8] On 21 July 2005 the parties executed a combined collective employment agreement for 2005 - 2007. The following clauses are material:5 GENERAL PRINCIPLES5.1 The parties acknowledge that this agreement was negotiated fairly and in good faith and with knowledge of information relevant to the terms agreed. 19 STATUTORY LEAVE PROVISIONSEmployees are entitled to leave in accordance with the Holidays Act 2003 and the terms of this Agreement. 21 ANNUAL LEAVE21.1 Three weeks annual holidays shall be allowed each year in accordance with the provisions of the Holidays Act 1981 and its amendments. 21.2 In addition to the holidays provided for in clause 21.1, employees shall be entitled to a further holiday of one week per annum in recognition of the nature of the work making a total of four weeks leave per year. It may be noted that cl 21.1 referred to the repealed Holidays Act 1981 rather than to the then current Holidays Act 2003.The change on 1 April 2007[9] When Subpart II of Part 2 and Schedule 1 came into effect on 1 April 2007, their principal effect was to increase from three weeks to four weeks the minimum three weeks paid annual holidays for essentially all employees in New Zealand. [10] The appellants contend that the change effectively increased from three weeks to four "three weeks' annual holidays" referred to in cl 21.1 of the combined employment agreement, and that cl 21.2 adds a fifth week to the statutory four week minimum. [11] The respondents contend that, on its true construction, the combined employment agreement, executed well after the 2003 Act had come into force andwith its 1 April 2007 change already accepted by Parliament, was for a total of four weeks' annual holidays per annum: until 1 April 2007 three weeks in terms of cl 21.1, plus the fourth week provided by cl 21.2. The agreement contained no provision for increase on 1 April 2007, nor did the statutory change on that date require any different result, since the total of four weeks conformed with the statutory entitlement now increased to four weeks.Jurisdiction[12] The jurisdiction of this Court is conferred by s 214 of the Employment Relations Act 2000:214 Appeals on question of law(1) A party to a proceeding under this Act who is dissatisfied with a decision of the Court (other than a decision on the construction of an individual employment agreement or a collective employment agreement) as being wrong in law may, with the leave of the Court of Appeal, appeal to the Court of Appeal against the decision; and section 66 of the Judicature Act 1908 applies to any such appeal. (5) In its determination of an appeal, the Court of Appeal may confirm, modify, or reverse the decision appealed against or any part of that decision.[13] Section 215 provides:215 Court of Appeal may refer appeals back for reconsideration(1) Despite anything in section 214, the Court of Appeal may in any case, instead of determining an appeal under that section, direct the Court to reconsider, either generally or in respect of any specified matters, the whole or any specified part of the matter to which the appeal relates. (2) In giving a direction under this section, the Court of Appeal must— (a) advise the Court of its reasons for so doing; and (b) give the Court such directions as it thinks just as to the rehearing or reconsideration or otherwise of the whole or any part of the matter that is referred back for reconsideration. (3) In reconsidering the matter, the Court must have regard to— (a) the Court of Appeal's reasons for giving a direction under subsection (1); and (b) the Court of Appeal's directions under subsection (2)(b).Employment Relations Authority determination[14] The Employment Relations Authority recorded in its determination:[11] At their last negotiation round the parties could not agree how the 2007 amendments would impact on the CEA [(collective employment agreement)] and agreed to leave the clause as it was and seek a determination from the Authority. It is safe to say then that wording of clause 21 of the CEA was agreed between the parties prior to the passing of the 2007 amendments which will see all employees in New Zealand receive minimum annual leave entitlements of four weeks.[15] It recorded the reasons for its acceptance of the employer's argument:[12] The difficulty for the respondent unions' interpretation of the clause is that the parties have agreed that the total annual leave to be enjoyed by employees covered by the CEA will be four weeks (clause 21.2). Their stated intention is to provide all employees covered by the CEA with an annual leave entitlement of four weeks. The 2007 amendments will render the parties' expressed desire for a week's leave in addition to the statutory minimum obsolete because the statutory minimum will meet their stated goal.Employment Court decision[16] The Unions' appeal to the Full Court of the Employment Court was dismissed. The Court found it necessary in its reasoning to consider s 6 of the 2003 Act, which it described as "the pivotal section for present purposes" as setting the standards by which holiday entitlements in employment agreements were to be measured against the legislative entitlements. [17] The Employment Court reasoned: (1) section 6(1) picks up the four entitlements listed in s 3; (2) the terms "enhanced" and "additional" in s 6(2) relate to different and discrete topics;(3) "enhance[ment]" is used only in relation to the four s 3 entitlements; "addition" has no application to them and refers to some fifth or further different kind of entitlement; (4) since holiday pay falls within s 3 the increase from three to four weeks is an "enhancement" not an addition; (5) the fourth week of cl 21.2 is an enhancement of the three weeks of cl 21.1 (the reference to the repealed 1981 Act ensures that only three weeks is the fundamental entitlement); (6) from 1 April 2007 the agreement still provides four weeks annual leave, which following the change accords with minimum requirements of the 2003 Act stated in s 6(3). [18] In our view the Court erred in its construction of s 6 and that appears to have influenced its interpretation of the agreement. [19] The Holidays Bill 2003 had referred only to "additional entitlements". The term "enhanced" was added to the Bill when reported back from the Select Committee. [20] The concept of enhancement is a form of improvement, essentially as the Employment Court held. But so too, in terms of an employee's conditions of employment, is an additional entitlement. The terms in fact overlap; an addition of an advantage will be an enhancement; an enhancement may well be expressed as an improvement. In our judgment, by confining "enhanced" to the four entitlements of s 3, including the three week annual holiday, and holding that "additional" can have no application to them (contrary to the Bill's original effect), the Employment Court over-analysed Parliament's language and drew an absolute distinction that the Act does not in fact make. [21] It is unclear just how significant to the Employment Court's process of reasoning was that erroneous distinction between the two concepts. That the Courtsaw it as important is apparent from its discussion of the point, which it described as "pivotal", over four paragraphs. During the process of construction of the agreement it spoke of there being "merely an enhancement to the minimum entitlement" employed. It may therefore be that an addition would have been seen as more significant. We are unable to say that the error was necessarily immaterial. [22] The document does not state clearly what is the position after 1 April 2007. Clause 21.1 contains a misnomer. Its reference to the repealed 1981 Act is simply inaccurate: the three weeks could not be "in accordance with the provisions of the Holidays Act 1981". It could mean: "there will be a contractual three weeks holiday (being of the same length as the 1981 statute formerly provided)". But that would make the "recognition of the nature of the work " in cl 21.2 meaningless after 1 April 2007. Or it could mean: "this clause acknowledges the statutory entitlement which in 1981 was three weeks". But that is not what cl 21.1 says. [23] There are two arguable constructions. One is that, viewing the terms of the statute as at July 2005 with some 21 months to run before the statutory change, the parties accepted that the former three weeks of cl 21.1 (equivalent to the statutory three weeks) plus the additional week of cl 21.2, making four weeks in all, did not require any change part way through the term of the agreement. So they left both cl 21.1 and cl 21.2 unaltered, regarding the former total (and now statutory minimum) of four weeks as sufficient to accommodate the disadvantageous nature of the shift work performed by bus drivers. [24] The competing argument is that the cl 21.1 refers to whatever is the minimum statutory entitlement of the time. It is to be construed as an allusion to the statutory entitlement of all employees to three weeks under the 1981 Act to which it refers, as under the 2003 Act prior to the change, and as increasing automatically to four weeks on 1 April 2007. Clause 21.2 is a recognition of the adverse working conditions which justify an increase above the general minimum (whether the increase is described as enhancement of or addition to the statutory entitlement). Bus drivers endure more arduous conditions than workers generally and, to compensate, as cl 21.2 provides, in terms of holiday entitlement they enjoy a higher status than others. The contract is to be construed in the light of the contemplatedchange. The retention of cl 21.2 after that date entailed is continuing recognition that bus drivers should receive a week more than workers generally. [25] The former construction gives less weight than does the latter to the reasons for what is a major change of statutory policy: that four weeks is the minimum that may decently been given to any New Zealand worker, however agreeable the working conditions, and to the fact that bus drivers' conditions are less agreeable than others. The latter construction may be said to give greater effect to the specific considerations in [11] above. [26] Counsel for the Unions invited us to adopt our own construction. While it is open to this Court to do so, given the error of law (see Secretary for Education v Yates [2004] 2 ERNZ 313 (CA)) it is not appropriate for us in this case to adopt that course. [27] Because we cannot be sure of the effect of the error upon the Employment Court's interpretation of the agreement and that it would have reached the same construction had it interpreted s 6(2) correctly, we refer the case back to the Employment Court for reconsideration of its decision in the light of this judgment.CHAMBERS J[28] The majority have held that the Employment Court (Judges Travis, Shaw and Perkins) erred in drawing a distinction between "enhanced entitlements" and "additional entitlements". Because they think this might have affected the Employment Court's interpretation of the collective employment agreement, they have determined this matter be referred back to the Court for reconsideration. [29] The majority have found the Employment Court guilty of over-analysing Parliament's language: at [20]. I do not agree. The Employment Court was simply making the point, perhaps at somewhat excessive length, that, when determining the status of the week's leave provided by cl 21.2, one had to look at not only how theparties themselves had described the week but also its purpose. As to the former, there was, of course, no difficulty at all: the cl 21.2 entitlement was contained within a provision dealing with "annual leave" and the additional week was said to make "a total of four weeks' leave per year". As the Court recognised, however, the parties' own description was not necessarily decisive: one had to check whether the purpose of the fourth week was the same as the purpose of the three weeks' leave conferred by cl 21.1. The Court, at [2006] 1 ERNZ 1005 at [25], noted that the statutory purpose of annual holidays was "to provide the opportunity for rest and recreation": see Holidays Act, s 3(a). They considered the purpose of the leave conferred by cl 21.2 was "the same as the purpose set out in the Act": at [25]. From that, they concluded the agreement originally provided an enhanced entitlement to annual leave. The agreement continued to comply with the minimum entitlement for annual holidays after 1 April 2007. To my mind, that reasoning was not only open to the Employment Court, it was right. [30] Later in the reasons, the Court went on to consider the fact that the agreement in this case was more generous than the minimum entitlements for sick leave, bereavement leave, and public holidays. As well, the agreement provided for long service leave, the purpose of which, the Court thought, was different from the purpose of annual holidays: at [37]. The Court considered the longer periods of sick leave and bereavement leave and the more beneficial holiday provisions to be "enhanced entitlements", while the long service leave was "an additional entitlement". But it did not matter whether these other holidays were "enhanced entitlements" or "additional entitlements". The point the Court was making was those entitlements beyond the minimums were not available to top up any deficiency in annual holiday entitlements, as each of them had a different purpose from annual holidays. These observations were mere obiter dicta, however, as the employer had not sought to call them in aid: it did not need to. [31] With respect, the majority in this Court have over-emphasised the importance of the "enhanced-additional" dichotomy to the Employment Court's reasoning. The ratio of the decision was the importance of analysing the purpose of the particular holiday in terms of s 3 of the Act: if the holiday was described by the parties as part of "annual leave" and its purpose was consistent with the statutory purpose of annualholidays, then it was part of annual leave. That was the Court's essential reasoning and I agree with it. [32] I would have dismissed the appeal.Solicitors: Oakley Moran, Wellington for Appellants Kiely Thompson Caisley, Auckland for Respondents