106 – Workplace Law Newsletter

In this edition:

“Loss of a Chance” – Employee Ordered to Pay Substantial Damages to Previous Employer

Sunair Aviation Limited v Walters [2017] NZERA Auckland 91

Sunair Aviation Limited (Sunair) is an airport services company which held various contracts at Tauranga Airport.  One of these contracts was between Sunair and the Tauranga City Council (Council) to provide fire rescue services (RFS) at the airport.  Sunair had provided this service from 1988 until 2015.  Mr Walters, an employee of Sunair, worked on the RFS contract.

In January 2015 the Council invited tenders to operate the RFS. While employed by Sunair, Mr Walters submitted a successful tender for the RFS contract under “Advanced Aviation Services” (AAS), a partnership between Mr Walters and his wife.  Sunair also submitted a tender for the contract.  The Council awarded the RFS to AAS.

Mr Walters was found by the Employment Relations Authority (Authority) to have breached a clause in his employment agreement dealing with conflicts of interest and non-competition, and the implied duty of fidelity in submitting the tender for the RFS contract.

In assessing remedies, the Authority was required to assess the likelihood Sunair would have won the RFS contract in the absence of the AAS tender, and whether Mr Walters’ breaches gave rise to damages for “loss of chance”. Sunair sought damages of $350,000.00 for “loss of profit under the RFS contract”.

The Authority found Sunair was unable to demonstrate on the balance of probabilities that Mr Walters’ breaches caused the loss it had suffered, as Council was not obliged to accept any of the tenders submitted.  However, Sunair was entitled to an evaluation of damages for “loss of chance”, that is, the chance Sunair would have had if Mr Walters had not tendered.

Loss of a Chance

Loss of a chance damages allows an applicant who is unable to prove on the balance of probabilities a causal link between a breach of contract and their loss, to recover a proportion of that loss based on the value of the chance of a different outcome.

The Authority found Sunair had established it had a real or substantive chance in the absence of Mr Walters’ breaches based on three reasons. Firstly, the AAS tender was a “vehicle of convenience” as, by awarding AAS the tender, the Council was not required to risk the tender going to an unknown party or develop an in-house solution or approaching other interested parties.  Secondly, the practical realities were persuasive as the other tenders were unsuitable and/or too expensive, and Sunair was already mobilised to perform the RFS contract. Finally, the issues with Sunair’s tender were not raised until the tender had been unsuccessful, causing unfairness to Sunair. Failing to provide an opportunity to address the concerns meant Sunair lost the chance to submit a more acceptable tender.

Having found Sunair had a real or substantive chance in the absence of AAS’s tender; Sunair was entitled to an evaluation of the value of the chance and the consequent damages.  The Authority assessed the loss of chance damages at 30% of the loss of profits from the RFS contract. Mr Walters was ordered to pay Sunair $66,682.00 plus interest.

$20,000.00 Hurt and Humiliation Compensation Awarded to Employee for Questionable Redundancy

The Employment Relations (Allowing Higher Earners to Contract out of Personal Grievance Provisions) Amendment Bill

Weir v Kinloch Lodge Holdings Limited [2017] NZERA Auckland 73; 20/03/2017; V Campbell

Ms Weir was employed as Sales Manager for the Kinloch Club.  While the Kinloch Club did not open for business until 23 January 2016, Ms Weir began working for Kinloch in October 2015.

On 9 November 2016, the director of Kinloch, Mr Sax, advised Ms Weir she should be working towards achieving sales targets of approximately 380 rooms per month.  On 10 December 2016 Mr Sax raised concerns with Ms Weir about the forward booking rates for the first quarter of 2017.  As a result, Ms Weir suggested marketing initiatives to increase sales, such as an incentive package of free upgrades promoted directly to the market.  Mr Sax rejected her suggestions and reiterated his concerns about the lack of reservations.  In January 2016 Mr Sax again raised his concerns in relation to the bookings and asked Ms Weir to brainstorm ideas and make recommendations.  Ms Weir advised that agents had provided feedback concerning the number of changes to the published opening dates, as well as reiterating her previous suggestions of incentives.

On 24 February 2016 Mr Sax advised Ms Weir by email that he had undertaken a “detailed review” of her role and that due to lack of forward bookings, retaining her position was uneconomical.  Ms Weir asked for more information about the proposal; however Mr Sax was not forthcoming.  Mr Sax requested Skype or Facetime to discuss the proposal on 22 March 2016.  While Ms Weir was reluctant speaking in the workplace, the Facetime call went ahead, with other employees hearing the conversation.  It was during this call that Ms Weir expressed her concern that given the short amount of time the Kinloch Club had been open, disestablishing her role was premature.  She also pointed out that Mr Sax had either ignored or rejected her earlier suggestions regarding sales targets. Ms Weir also requested the proposal and financial considerations be put in writing.  Mr Sax responded by stating that he had thoroughly reviewed her performance in her first 90 days.  The call ended with Mr Sax confirming that Ms Weir would summarise her suggestions and that he would consider them.  One week later, on 29 March 2016, Ms Weir was made redundant.

Authority’s Findings

The Authority found Ms Weir’s dismissal to be unjustified for a number of reasons.  Mr Sax never provided Ms Weir with a copy of his “detailed review” and there had been no discussions regarding her performance which he claimed to have reviewed.  Mr Sax never responded to Ms Weir’s questions on various occasions about the proposal nor did he provide information relating to his consideration of Ms Weir’s suggestions.

Overall, the Authority found it more likely than not that Ms Weir’s role was disestablished because of performance concerns and that the redundancy was not for genuine business reasons.  Further, there was no evidence of financial deterioration of the company.  Ms Weir was awarded lost wages of $25,692 plus interest, and $20,000 in compensation for hurt and humiliation. 

Addressing Pay Equity for Workers

The Government entered into a $2 billion pay equity settlement for approximately 55,000 workers in care services on 18 April 2017.

The $2 billion settlement, described as providing the largest pay increase in New Zealand’s history, arose out of a pay equity claim bought by E tū (previously the Service and Food Workers Union) on behalf of care worker Kristine Bartlett.

The settlement recognises that workers in the aged and disability residential care and home and community support services have been paid less because women primarily undertake these jobs.

The Government has undertaken to significantly increase the remuneration care workers over the next five years. The settlement’s broad reaching effects include:

  1. Pay for around 20,000 care workers currently on minimum wage of $15.75 per hour will increase to at least $19 per hour from 1 July 2017, a 21% pay rise
  2. Wages for around 55,000 workers will increase to between $19 and $27 per hour in the next five years
  3. Existing workers will be transitioned to positions on the new pay scale which will reflect skills and experience
  4. Wages for workers employed after 1 July will reflect the individual’s qualifications

In addition to the above, the Government released the draft Employment (Pay Equity and Equal Pay) Bill for public consultation on 20 April 2017.  The Bill promotes settlement of pay equity claims by establishing a bargaining framework and re-enacts, in an up-to-date and accessible form, the provisions of the Equal Pay Act 1972 relating to claims for equal pay and unlawful discrimination.

The Bill intends to provide guidance on pay equity claims and provide a practical and fair process for employees to follow if they feel they are not being paid what their job is worth due to gender discrimination. It also provides principles for, and gives guidance on, how to choose comparable jobs and roles to judge Pay Equity claims.

Consultation closes on 11 May 2017 and legislation is to be introduced soon after.


Immigration – Enforcing Minimum Employment Standards

Immigration New Zealand (INZ) has introduced some major changes to the Immigration instructions that all employers need to be aware of.

New minimum employment standards have been introduced as a requirement for the issue of visas.  This is to force employers to adhere to these standards, because if they don’t they will not be able to sponsor employees for work visas or residency.

Below are the enforcement actions that will result in visa banning:

Infringement Notice

Labour inspector may issue infringement notice if there are reasonable grounds for believing an employer is committing, or has already committed an infringement offence.  These include offences such as the employer failing to retain intended or signed employment agreement, failing to retain wage and time records, failing to retain holiday and leave records, or is in breach of the Employment Relations Act 2000 (Act) prescribed by the regulations.

Employers that receive a single infringement notice will face a visa stand-down period of six months and each subsequent infringement notice will incur a further six month stand-down. The maximum stand-down period for multiple infringement notices issued at one time is 12 months.

Declaration of Breach ordered by the Employment Court

The Court will order a declaration of breach when an employer has breached, or been involved in a breach, of the minimum entitlement provision.

The employer will face a minimum of 12 month instant stand-down period upon issue of the declaration of breach. The stand-down period will be adjusted upwards to reflect the resulting penalties ordered (up to a total of 24 months).

Penalties ordered by the Employment Relations Authority or by the Employment Court

The Court and the Authority can make penalty orders (including pecuniary and non-pecuniary orders) against an employer when a declaration of breach is made or being determined.

If a pecuniary penalties order is made against an employer, a 24 months stand-down period will apply.

If a non-pecuniary penalty order is made against an employer, a six month stand-down period will apply when the total amount of penalties ordered in a case is up to and including $1,000 for individuals and companies. The stand-down period will increase to 12 months when the amount is between $1,000 and $10,000 for individuals and between $1,000 and $20,000 for companies. It is 18 months for individuals between $10,000 and $25,000 and for companies between $20,000 and $50,000 while it is 24 months for individuals with $25,000 and above and for companies with $50,000 and above.

It is noted that the Authority and the Court take the approach of looking at the totality of penalties for a group of breaches without necessarily identifying a penalty for a breach. Therefore the above stand-down periods are set according to the total dollar amount for penalties ordered for a particular case. If an individual or company incurred several penalties in one determination they would only attract the maximum of 24 month stand-down period at this time, but the individual or company would be eligible for an additional stand-down period if they continued to fail to comply.

Banning Order

A banning order can be made if the Court has made a declaration of breach against the employer; or the Court is satisfied that the employer persistently breached/been involved in the breach of one or more employment standards; or when the employer is convicted of the offence of exploitation of unlawful employees and temporary workers.

When an employer is been issued with a banning order of less than five years, the employer will face a 12 month stand-down period at the conclusion of the ban period. When a banning order of more than five years is issued, a 24 months stand-down period at the end of the ban period will apply.

All HR Managers should become familiar with the breach enforcement actions and the serious consequences this could mean for their employees on existing work visas as well as prospective hires.  It is important to seek immigration advice at an early stage when penalties are a possibility, as that will be material as to how the matter is progressed and negotiated with the Labour Inspectorate.

Workplace Law Team

If you have any queries in respect of the above, or any other workplace law issues, please contact a member of Lane Neave’s Workplace Law Team:

Employment: Andrew Shaw, Fiona McMillan, Julia Hurren, Siobhan Rastrick, Gwen Drewitt; Holly Struckman; Anna Needham
Immigration: Mark Williams, Rachael Mason, Nicky Robertson, Hetish Lochan, Daniel Kruger, Lavinia Shanks, Winnie Chen, Caroline Edwards, Ken Huang, Laura Hamilton
ACC: Andrew Shaw
Health and Safety: Andrew Shaw, Julia HurrenFiona McMillan, Gwen Drewitt

Disclaimer: Our aim is to assist our clients to be proactive in ensuring statutory compliance and best risk management in the area of employment law. This publication is, however, necessarily brief and general in nature. You should therefore seek professional advice before taking any action in relation to the matters dealt with in this publication.