By Peter Churchman* March 2005

THE recent decision of the Employment Court in Heinz Wattie's Limited v National Distribution Union Inc and others is attracting attention among those involved in the field of employment law, as it provides further clarity in regard to the relatively recently enacted Holidays Act 2003.

The Holidays Act 2003 replaced its often criticised predecessor, the Holidays Act 1981, which, by the end of its life, was responsible for approximately 25% of all calls to the Employment Relations Information Service.

The 2003 act has unfortunately not been without its problems and some issues regarding its interpretation were dealt with a matter of months after its enactment via the Holidays Amendment Act. The amendment act clarified issues relating to medical certificates for sick leave, the payment for sick leave on public holidays and the payment of penal rates on public holidays. It highlighted that public holidays remain an issue for both employees and employers.

Accordingly, it is little surprise that the Heinz Wattie's case involved the Employment Court being asked to interpret the word "day" for the purposes of determining what amounts to a public holiday under the Holidays Act 2003. In particular, the issue was whether a public holiday is a "day" from midnight to midnight on an actual calendar day or whether the "day" of any public holiday can be agreed as being any 24-hour period; in particular, a period which is not a calendar day but is in line with the shifts normally worked by an employee. The conventional wisdom contained in existing case law was that "day" meant a 24-hour period from one midnight to another.

Heinz Wattie's operated several factories nationwide either on a 24/7 or 24/5 basis. There were several shifts that overlapped days, such as shifts that began at 10pm and finished at 6am the following day. Accordingly Heinz Wattie's included a clause in their various collective agreements to make it clear to employees how their shifts would affect public holidays and vice versa. That clause was:

Where a shift overlaps into a public holiday, the work of the shift may be completed and paid for at the rate appropriate to that shift: provided that the next shift be allowed as the employee’s public holiday.

The rationale behind this clause was to ensure that a public holiday was treated as one shift - not one shift being part public holiday and part not. This made things easier in terms of employees working, not working and being paid for public holidays. It is also worth noting that the clause was popular with Heinz Wattie's employees who appreciated the fact that it ensured there was no disruption to their already potentially disruptive shift work schedules.

Once the Holidays Act 2003 was enacted, Heinz Wattie's sought the opinion of a Labour Inspector in regard to whether their clause amounted to contracting out of the Holidays Act. The opinion of the Labour Inspector (who no doubt relied on the existing case law relating to the definition of "day") was that, while the statutory holiday could be transferred, with agreement, to another day, that day must be a calendar day and must run from midnight to midnight. The Labour Inspector also referred to section s44(2):

However, an employer and employee may agree (whether in an employment agreement or otherwise) that any public holiday specified in subsection (1) is to be observed by the employee on another day.

He noted that while s44(2) of the act provided for the transfer of a public holiday, it was still the transfer of a day in the sense of a calendar day and could not be used to transfer the timing of a statutory day. The Labour Inspector went on to advise that he considered that if an employee brought a claim in regard to the non-payment of time and a half for hours worked on a statutory holiday and failure to provide an entitlement to an alternative holiday (on pay), that claim was likely to be upheld.

As a result of the Labour Inspector’s opinion, Heinz Wattie's ceased production on statutory holidays ending shifts at 12pm and not resuming them until 12pm the following day. This disrupted continuous production and accordingly increased the overall cost of production. The issue was to be determined by the Employment Relations Authority but was moved to the Employment Court.

That court ultimately found in favour of Heinz Wattie's and determined that the company’s clauses pertaining to public holidays were not unlawful and did not in any way infringe the prohibition in s6(3) against excluding, restricting or reducing an employee’s entitlements under the act.

The court adopted what is being referred to as a "common sense approach" in interpreting the statute and held that, as the act does allow for the observance of public holidays on another day (pursuant to s44(2)), it was common sense to allow to the public holidays to be transferred in a way which allowed the public holidays to coincide with shifts.

The court made an express declaration that the expression "another day", as set out in s44(2) may be defined by employers and employees as a continuous 24-hour period running to and from a time other than midnight to midnight, provided that it is consistent with legislation and compliant with s44(3) so that it does not diminish the total number of paid holidays that would otherwise be available to an employee in a year. This is recognition of a move away from the traditional Monday-Friday 9-5 working week.

Most of those involved in employment law have welcomed this decision and its common sense approach as signalling that the Holidays Act 2003 will be interpreted in a practical and constructive manner. Others have expressed concern that the decision does not go far enough and merely advises employers to ensure a definition of "day" is included in their employment agreements as best practice.

However, regardless of debate as to its merits or otherwise, this decision represents another step towards understanding the Holidays Act 2003, which can only be positive for those who need to advise on employment law.

*Peter Churchman is a partner at Kensington Swan in Wellington and Convener of the NZLS Employment Law Committee. Originally published at lawyers.org.nz