Posted on: Nov 23, 2012

Posties have been successful in a case relating to how the unrostered overtime performed by them should be factored into the calculation of their holiday pay. The overtime was expected to be performed and paid for if something occurred — unexpectedly high volumes of mail, injury, shortage of staff and the like — that meant that they could not carry out their rounds in the allocated time.

In issue were the provisions pertaining to “relevant daily pay” that were in force before 1 April 2011. Though the Court deliberately refrained from commenting on how its decision might affect interpretation of the post-1 April 2011 provisions, the strong similarity of those provisions should certainly make this case of interest to those whose workers have elements of remuneration that they do not invariably receive.

Before 1 April 2011, the definition of “relevant daily pay” included, among other things, overtime payments if those payments “would have otherwise been received on the day concerned” (section 9(1)).  Section 9(3) said that if it was not possible to determine it thus, the pay must be calculated using an averaging formula based on gross earnings for the preceding four calendar weeks or the employee’s normal pay period. New Zealand Post was not including unrostered overtime in its calculation of relevant daily pay.

The Employment Court had considered that an employee was required to establish on the balance of probabilities that he or she would have worked overtime on the day in question and the actual amount he or she would have received for overtime on that day. Unless that could be established, there was no room for the operation of section 9(3).

The Court of Appeal rejected this approach.

First, the onus was not on the employee to establish the pay he or she would have otherwise received. The onus was on the employer to meet the statutory obligation to pay the minimum entitlement which included the obligation to establish or attempt to establish (retrospectively) the pay the employee would have received on the day in question.

Secondly, section 9(3)’s averaging calculation was intended to be used (and must be used) in situations in which it was not possible to establish that overtime would have been worked. To find otherwise would effectively render that subsection redundant.

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