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March 2007

Court of Appeal Criticises Holidays Act 2003

In a less than enthusiastic commentary on the Holidays Act 2003, the Court of Appeal recently observed:

“The explanatory note to the Holidays Bill which, when passed, became the 2003 Act, begins with the confident statement “The Holidays Bill implements government policy by providing entitlements that are easy to understand and apply”. In this case, we have before us three different interpretations of the public holidays provisions of the 2003 Act: that of the union, that of the airline, and that of the Employment Court. All of them can fairly be said to be credible interpretations. The fact that three credible interpretations are available would tend to suggest that the objective of providing for entitlements that are easy to understand and apply has not been met.” – Air New Zealand Limited v New Zealand Airline Pilots’ Association Industrial Union of Workers Inc.

Background

The case concerned the interpretation of a collective employment agreement between Air New Zealand and the majority of its pilots who are covered by the collective agreement. The collective agreement provided for a rostering system for pilots pursuant to which pilots can be rostered to work on public holidays. The way in which the roster operated made it likely that during the course of the year a pilot would work on some of the 11 public holidays specified in the Holidays Act, but not all of them. Pilots did not receive additional remuneration for working on a public holiday but instead the collective agreement provided pilots with 11 additional days’ leave, which were added to a pilot’s annual leave, regardless of the number of public holidays on which they have actually worked.

The Competing Arguments

The Union argued that the agreement did not comply with the Holidays Act 2003 because employees who work on public holidays are not only entitled to an alternative day’s holiday, but also to be paid time and a half for the hours worked on the public holiday. The Union accepted that the entitlement to 11 additional days’ leave met the requirement for the alternative day’s leave when a pilot worked on a public holiday, but argued that the time and a half requirement was a minimum requirement of the Holidays Act 2003, which always applies to employees whose agreements provides for them to work on a public holiday.

The Airline’s position was that the effect of the provision in the collective agreement was to transfer the public holiday (and the entitlements for working on a public holiday that go with it) to another day on which the employer will observe the public holiday. In other words, the public holiday is transferred to one of the additional days’ leave added to the annual leave entitlement. The Airline argued that as pilots do not work on the additional day on which they observe the public holiday, the time and a half requirement did not arise.

The Outcome

The Court of Appeal held that the provisions of the Holidays Act required the observance of a public holiday on a particular identifiable day and therefore the agreement did not comply. The Court of Appeal endorsed the conclusion of the Employment Court that an agreement to exchange a public holiday must have a genuine element of exchange and the specified day relinquished and agreed exchange day must be identified or at least be able to be identified with certainty.

On the other hand, the Court of Appeal disagreed with the position taken by the Union that employees must always be paid time and half whenever they work one of the days specified in the Holidays Act as being a public holiday. The Court of Appeal thought that it was unlikely that Parliament intended that an employer agreeing to an employee’s request to swap a public holiday for a day with more religious significance to the employee would trigger an obligation to pay time and a half if the employee then worked on the original public holiday.

Conclusion

The Court of Appeal emphasised that the purpose of allowing public holidays to be exchanged was not to allow the parties to contract out of the entitlement regime, but merely as a means of specifying the public holiday to be observed on a different day to that specified in the Act. However, in order for any alternative regime to be compliant, the day for which the specified public holiday was exchanged must be identified or clearly able to be identified.