Supreme Court clarifies meaning of “redundancy entitlements”

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A long sought clarification of what exactly “redundancy entitlements” mean, under New Zealand employment law, was recently handed down by the Supreme Court in its decision on Service and Food Workers Union Nga Ringa Tota Inc and others v OCS Ltd.

According to a bulletin on the decision from law firm MinterEllisonRuddWatts, the Supreme Court found that the reference to “redundancy entitlements” in Part 6A of the Employment Relations Act means more than just monetary compensation. It means that an employment agreement which expressly excludes the right to redundancy payments will not prevent an employee attempting to bargain for other, non monetary, entitlements.

Further, although the Supreme Court’s decision involved the entitlements of employees who had transferred to a new employer via operation of the “vulnerable employee” provisions of Part 6A of the Act, MinterEllisonRuddWatts said the decision could have a wider impact for all employees faced with redundancy. 

In the Service and Food Workers Union Nga Ringa Tota Inc and others v OCS Ltd case, the plaintiff employees were cleaners at Massey University sites. When the University awarded its cleaning contract to OCS Ltd over the cleaners’ former employer, the employees elected to transfer their employment to OCS under the “vulnerable employee” provisions in Part 6A of the Act.

After the transfer, the employees were informed that their work would cease for redundancy unless they were prepared to accept different, less beneficial terms and conditions of employment from OCS. This led to various law suits, supported by the Service and Food Workers Union (SFWU), but it was the issue of entitlements [under section 69N of the Act] that reached the Supreme Court.

The employees’ employment agreement had expressly excluded redundancy payments due to downsizing, or the loss, of the client contract, and the Supreme Court ruled that exclusion prevented the employees from bargaining for monetary compensation relating to the redundancy. However, the Supreme Court also concluded that the express exclusion of monetary compensation did not mean that other [non monetary] redundancy entitlements were excluded.

According to the MinterEllisonRuddWatts bulletin, the Supreme Court’s decision meant that, where an employment agreement excluded a particular form of redundancy entitlement, employees couldn’t bargain for that form of entitlement - but they could bargain for other forms of entitlement not expressly excluded by the employment agreement. Also, where this situation occurs under the Part 6A provisions involving “vulnerable employees”, such employees could apply to the Employment Relations Authority to determine those “non-excluded” redundancy entitlements.

Key HR takeaway:

This judgment could have significant implications for employers and employees alike, the MinterEllisonRuddWatts bulletin said, adding that both groups might now have to adjust their expectations. For example, a right to bargain for outplacement assistance or retraining upon redundancy could be of substantial benefit to employees as well as an unexpected cost to employers. The decision ultimately meant that employers should consider reviewing the redundancy provisions in their employment agreements to ensure they were sufficiently comprehensive to reflect the parties’ intentions, the MinterEllisonRuddWatts bulletin advised.

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