June 2010 Issue 16

EMPLOYMENT LAW NEWS

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Long Time Coming! June 2010

Issue No: 16

It has been a long time coming, but it is now time to follow up on our last newsletter which focused on the 90 day trial period.

The 90 day trial period has been in place for over a year now and despite the initial uproar from the critics, there have not been any cases before the Court testing the new legislation, until now (Smith v Stokes Valley Pharmacy (2009) Ltd). On 22 April 2010, the Employment Relations Authority transferred a case up to the Employment Court on a number of important questions of law. The main question is whether an employer can rely on a 90 day trial period clause if the employment agreement was signed by both parties one day after the employment commenced.

Another question of law posed is whether paying in lieu of notice is in fact giving notice. This question was posed to the House of Lords in the case of Delaney v Staples. In that case the law lords said: “if a man is dismissed without notice, but with money in lieu, what he receives is, as a matter of law, payment which falls to be set against, and will usually be designed by the employer to extinguish any claim for damages from breach of contract.”

Further, the meaning of the words “in lieu” in the dictionary mean “instead of something else already mentioned or that is usual in the current situation”. We will be interested to see what the Employment Court has to say on that matter and whether a shift in the precedent will eventuate.

Like many employers in New Zealand, the employment agreement in this case was not signed by both parties before the employment commenced. There had obviously been acceptance of the terms but they were not signed off.

So the question will be; was the trial period term agreed to before the employment began but simply not recorded in writing until after? Or, was the written agreement presented to the employee after she began working, of no legal effect? If it was the latter, then it may follow that the term was not agreed to before employment, therefore the term may not be valid and cannot be relied on. However, in either case, the fact remains that the term on offer was still agreed to by the employee.

What does this mean for variations to existing employment agreements? Are they valid and enforceable?

On that note, there was a Judgment of the Employment Court in 2009 (Jinkinson v Oceana Gold Limited), that dealt with an employee who had a very specific hours of work clause, that clearly stated that she was employed on an ‘hour by hour’ basis with no guaranteed hours of work. That employee was found by the Court to have been a permanent full time employee.

The reason for this is a finding by the Judge that there was a different agreement described as an ‘implied variation’. This occurs when the day to day conduct of the parties varies the original agreement. The Judge’s comments were “…changes occur in day to day conduct which justify the conclusion that the parties have implicitly agreed to vary their original agreement.”

If this is the case, then when does this variation occur? Surely a variation would have to happen at a specific point in time? This Judgment suggests that those questions do not require an answer to make such finding. Other terms of the employment agreement considered by the Court that assisted in this decision, were the clauses that required the employee to give notice to take annual leave and notice of termination.

However you look at these areas of law, it is clear that an agreement of terms of employment should not only be in writing before the commencement of employment, but they should be reviewed regularly to ensure that the conduct of the parties match the agreement itself, to avoid having the judicial system tell you what terms you have or have not agreed to at a later time.

Based on these judgments, we suggest that amendments to existing and new employment agreements are of great importance, so give us a call for guidance in that regard. While awaiting the Court’s decision in Smith, a diligent employer will ensure that the agreement is signed before the employment commences.

Our services also include:

Restructuring/ Redundancies
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Drafting employment agreements
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Data recovery, useful when staff leaves employment and delete vital files
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