Posted on: Apr 24, 2014

Court of Appeal confirms the Employment Court’s position

Employers can agree with employees that they will pay KiwiSaver contributions on a “total remuneration” approach whereby their wages are inclusive of the employer’s contribution.

However, there is an important exception to that rule, and that is when the gross wages after such contributions are made are less that the statutory minimum wage.

The Employment Court’s stance was unequivocally endorsed by the Court of Appeal in TerraNova Homes and Care Limited v Faitala and Goff (2013) 10 NZELC.

 

Disclaimer

This article, and any information contained on our website is necessarily brief and general in nature, and should not be substituted for professional advice. You should always seek professional advice before taking any action in relation to the matters addressed.

Posted on: Apr 24, 2014

Ms Balmaceda was employed by Amphibian Swimming Academy Limited (the respondent) as a swimming instructor on 10 June 2013 until she was dismissed on 15 August 2013 pursuant to a 90 day trial provision in her employment agreement. Ms Balmaceda filed a personal grievance alleging unjustified action by the respondent which caused her disadvantage. The unjustified action was the refusal to pay her wages.

Background facts leading up to the dismissal

Ms Balmaceda was approached by the respondent company to work as a swimming instructor. They were a new venture and she was excited and interested in promoting their business. She left a good job to work for the respondent.

Ms Balmaceda was provided with an employment agreement containing a legally binding 90-day trial period provision, which she signed and agreed to.

Between 11 June and 15 August 2013 she was under-paid wages as set out in her employment agreement, or not paid wages at all.

She raised non-payment several times during her employment.  Non-payment of her wages put significant financial stress and pressure on Ms Balmaceda’s family, she could not afford to do her usual family activities or to purchase clothing for her children. She raised these concerns with Amphibian Swimming Academy Limited (ASAL) but was ignored.

On 15 August 2013 prior to starting work, Ms Balmaceda raised non-payment again with the ASAL director, Debra Roach. It was a tense discussion. The parties argued. Ms Roach gave no assurances Ms Balmaceda would be paid and when. Ms Balmaceda went to start her work.

When she finished work she was called into the respondent’s offices by Ms Roach and her partner, Simon Terry. Mr Terry spoke to her telling her she had been terminated and provided her with a letter dated 15 August 2013 stating ASAL was giving notice of termination of her employment under the 90 days trial period. It did not require her to work out her referred to a notice period of 7 days. Ms Balmaceda was not paid for her notice period.

Ms Balmaceda tried to discuss the termination, however she was told to listen to what they had to say and then leave.

Events that followed the dismissal

Ms Balmaceda suffered from tension headaches, anxiety and stress as a result of her termination from work.  On 2 September 2013 she notified the respondent of her personal grievance, and on 13 November 2013 she filed an application by way of statement of problem with the Authority. ASAL never filed a statement in reply.

On 9 January 2014 the Authority directed the parties to attend mediation, however despite attempts made by the Mediation Services to contact the respondent there was no response.  The  Authority member set the matter down for an investigation meeting on 24 March 2014 and couriered notice to ASAL.

ASAL failed to appear in the Authority, so given the circumstances, the investigation meeting proceeded in the absence of the respondent company.

Should the trial provision prevent Ms Balmaceda from raising a grievance?

Section 67A(2) defines a trial provision, including what it is and what it does. In short if the trial provision in an employment agreement complies with s.67A “the employee is not entitled to bring a personal grievance or other legal proceedings in respect of the dismissal.” (s.67A(2)(c)).

The Authority said:

[24] This personal grievance is not about a dismissal. The personal grievance is about unjustified disadvantage arising from the non-payment of her wages. Parties are required to be active and constructive under the duty of good faith. This must include the way an employer deals with employee concerns raised about non-payment of wages.

 

[25] Section 67A does not preclude Ms Balmaceda in these circumstances from bringing a personal grievance for unjustified action arising from events other than dismissal.

Ms Balmaceda’s personal grievance was about her employer’s action/or lack thereof about her concerns over non-payment of her wages during employment causing her unjustified disadvantage.  An unjustified disadvantage claim usually arises when an employer’s action leads to the breach of express or implied term of employment.

The Authority’s determination

The Authority determined Ms Balmaceda was unjustifiably disadvantaged by ASAL’s actions.  She was awarded lost wages owed totalling $3,745.10 plus interest of 5% per annum from 15 August 2013 until the date of payment, compensation for hurt and humiliation of $5,000*, reimbursement of the filing fee of $71.65 and $39.00 towards her doctor’s fees occurred in obtaining the evidence of the medical certificate she provided to the Authority.

*We note that while a $5,000 award to hurt and humiliation for a disadvantage grievance is unusually high – Ms Balmaceda provided evidence that showed she was impacted significantly (financially, emotionally and physically) as a result of this grievance, resulting in an increased level of compensation awarded.

What’s a ‘disadvantage’ and how do employers avoid them?

Ms Balmaceda’s personal grievance was about her employer’s action, or lack thereof about her concerns over non-payment of her wages during employment, causing her unjustified disadvantage.

Common examples of disadvantage claims occur when:

• the employee receives a formal disciplinary warning which they believe is unjustified;
• the employee is suspended – either when the correct suspension process is not followed, when the    employment agreement or policy does not provide for suspension, or when a suspension is not justified    in the circumstances;
• the employee is demoted, regardless if their pay is reduced or not; or
• when an employer’s action leads to the breach of express or implied term of the employment agreement.

In order to be successful in claiming a personal grievance for disadvantage, the employee must show that the employer’s action was unjustifiable. It is therefore necessary to determine on an objective basis, by considering the employer’s actions and how the employer acted, whether what the employer did was what a fair and reasonable employer could have done in all the circumstances at the time the action occurred.

The best advice we can give employers on how to avoid claims such as these, is to always abide by your employment agreements and policies, and follow your own established processes.

Following a simple checklist like the one below, before you take any action that may impact on an employee, will help you stay out of trouble:

• check the employment agreement and abide by its terms and conditions;
• check any relevant employer policy, handbook, rules etc;
• follow the established processes;
• consult before making any decision that may have an adverse effect on the employee – eg changing    hours of work etc;
• always act in good faith, and be open and communicative in your employment relationships.

If in any doubt, be sure to contact the team at Paul Diver Associates and we will be happy to assist.

 

Disclaimer

This article, and any information contained on our website is necessarily brief and general in nature, and should not be substituted for professional advice. You should always seek professional advice before taking any action in relation to the matters addressed.