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Supreme Court decision set to cause headaches

By Dean Kilpatrick, Associate and Josephine Toop, Solicitor

First published in the NBR, 22 February 2008

A Supreme Court decision is set to cause headaches for those involved with shift work – both employers and workers.

Until recently, employers and employees could agree to treat the shift straddling a public holiday as an ordinary shift and treat the next shift as the public holiday.

But the recent Supreme Court decision involving the NZ Airline Pilots Union and Air New Zealand has changed the public holiday landscape. 

The pilots took a case against the airline challenging its position that if pilots worked on a public holiday, they were not entitled to payment at time and a half. Under the collective agreement, the pilots had agreed to transfer the public holiday to another day.

The collective agreement set out 11 holidays a year (on top of the 11 public holidays provided under the Holidays Act). The agreement said that pilots could be asked to work public holidays on a roster sytem. The airline said that the pilots had agreed that when they were required to work a public holiday, they would observe the public holiday on one of the additional 11 days provided for.

The Supreme Court looked at the meaning of ‘public holiday’ under the Holidays Act 2003 and decided that it is always a day, i.e. a 24 hour period from midnight to midnight.  So, while a public holiday can be transferred to another day, employers are still required to pay time and a half to anyone who works on the actual public holiday. 

The effect is that there is now little advantage in transferring the holiday.  Where a shift straddles a public holiday, an employer is obliged to pay workers time and a half from midnight until the end of a shift or from the start of the shift until midnight.

The Air New Zealand case has other implications too.  In light of the decision, a large number of employers will be faced with the administrative hassle of paying workers time and a half for only those hours worked after midnight on the morning of the holiday, and before midnight on the evening of the holiday.  No doubt some employees will also view the law as impractical, especially those with rotating shifts, who could potentially lose out on time and a half payments. This could occur if, for example, their shift starts at a later time than the previous shift.

It may also mean that some employers restructure shifts around public holidays to minimise the administrative impact.  For instance, they may not require employees to work on a public holiday, but may instead ask them to work on the ordinary days. So employees might be required to start a shift at 8pm, finish at midnight and then start the next shift at midnight and finish at 5am.  Obviously this would also impact on an employee’s potential to receive time and a half entitlements, not to mention the potential disruption to the worker.

Given the potential impracticality of implementing the law following this judgement, many employers and employees may well hope that Parliament will legislate to override the effect of the decision. 

The Air New Zealand decision overturns the previous ruling set in 2005 in Heinz Watties v National Distribution Union. The Employment Court said there might be several reasons for employers and employees to transfer a public holiday. One of these is that employees might work a shift that straddles a public holiday.  Sometimes one shift will begin in an ordinary day and end in a public holiday.  Alternatively, a shift may start on the public holiday and end in an ordinary day.  Some employees will work twice on the public holiday.  An employee might, for example, work a nine hour shift from 8pm on 5 February until 5am on 6 February (Waitangi Day) and then another nine hour shift from 9pm on 6 February (Waitangi day again) until 6am on 7 February.

Where employees essentially worked twice on the holiday, as in the example above, this meant that the first shift could be treated as an ordinary shift and the second as the public holiday shift.  If the employee worked the public holiday shift they were entitled to be paid time and a half, and if they didn’t then they would be paid what they would ordinarily receive.  In Heinz Watties, the Court decided that, for the purpose of public holidays, a “day” was not confined to a 24 hour period.  The Employment Court said it was commonsense for the public holiday to coincide with the employee’s shifts.