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Wood VS TVNZ
The recent despite between Ms Susan Wood and Television New Zealand (“TVNZ”) should serve as a stern warning to all employers of the consequences of failing to ensure that their employment agreements comply with the relevant legislation.
Ms Wood is the presenter of TVNZ’s “Close-Up at 7” current affairs programme. The terms of Ms Wood’s employment were set out in a written employment agreement, which was expressed to be for a fixed-term commencing on 1 January 2005 and expiring on 31 December 2005. She was employed on an annual salary of $450,000.00.
TVNZ sought to decrease her salary from 1 January 2006 to $350,000.00 per annum, but employ her on a “permanent” basis. Ms Wood objected to the attempt to reduce her salary and commenced proceedings in the Employment Relations Authority seeking a declaration that she was employed on an indefinite basis and that TVNZ could not take any steps to unilaterally decrease her salary. TVNZ took the position that as Ms Wood was employed for a fixed-term, it was entitled to negotiate an entirely new employment agreement and salary with Ms Wood. The issue therefore was whether or not Ms Wood was employed on a fixed-term agreement.
The provisions of the Employment Relations Act
The Employment Relations Act (“the Act”) expressly permits fixed-term agreements provided the strict requirements of the Act are met or else the employee may elect to treat the fixed-term as being ineffective (but the agreement otherwise remains valid).
The requirements of the Act are as follows:
- The employer must have genuine reasons based on reasonable grounds for having a fixed-term employment agreement.
- The employer must advise the employee of when or how their employment will come to an end and their reasons for that.
- The employee’s employment agreement must state in writing the way in which the employment will end and the reasons for that.
The employment agreement
Ms Wood’s employment agreement contained an acknowledgement by Ms Wood that she had been advised by TVNZ when her employment would end and the reasons for that and further, that she acknowledged that TVNZ had a genuine reason based on reasonable grounds for the fixed-term and specified the reason as being that she had been employed to host “Close Up at 7” “…and that when she finishes on air in that role, it is appropriate that her employment with TVNZ end”.
These provisions were described by counsel for TVNZ as being “inelegant” and by the Authority as “defective”. The Authority held provisions of the agreement were ineffective because:
1. TVNZ did not in fact bring to Ms Wood’s attention the relevant reasons for the employment being for a fixed-term (notwithstanding the apparent acknowledgement in the agreement that it had done so).
2. The provisions of the agreement did not specify sufficiently clearly the reasons why Ms Wood’s employment would end on 31 December 2005.
Therefore Ms Wood was entitled to treat the fixed-term provision of her employment agreement as being ineffective.
Implications of the decision
The outcome of the case is not particularly surprising in view of the Authority’s findings about TVNZ failures to comply with the Act. The Authority did however express surprise that an organisation of the size and resources of TVNZ had not taken more care to ensure that it complied with the requirements of the Act. This should serve as a warning to all employers. In this case, TVNZ were found to have employed Ms Wood on a permanent basis when, at least from TVNZ’s perspective, it only intended to employ her for a fixed-term. Therefore the importance of ensuring that employment agreements are drafted to reflect what is intended by the parties and comply with the relevant legislation cannot be over-emphasised. We can assist employers in this regard.