Gate Gourmet New Zealand Ltd v Sandhu and others [2020] NZEmpC 237.

The facts of this case are relatively straightforward as is the legal point at issue. The defendants were employed by Gate Gourmet New Zealand Ltd (Gourmet), a company that provides in-flight catering services to domestic and international airlines. The defendants’ employment agreements provided for full-time employment for a minimum of 40 hours per week. As a result of the Covid-19 lockdown Gourmet partially shut down its operations and advised its employees that if they had not been rostered on and not asked to come into work it meant that Gourmet had no work for them. Gourmet offered its employees a number of options relating to their pay including taking annual leave, possible payment of 80 per cent of normal pay if a wage subsidy was received and a combination of that and annual holidays.

This case is, however, concerned with only one issue arising out of this situation, that is whether the defendants were entitled to be paid the minimum wage for all contracted hours of work. The Court noted that other possible courses of action, for example breach of the employment agreement, did not arise in this judgement. The case concerns only the interpretation of s 6 of the Minimum Wage Act 1983 which provides that “every worker … shall be entitled to receive from his employer payment for his work at not less than that minimum rate.” This provision is subject to some exceptions, most notably for this case, s7(2) which provides that:

No deduction in respect of time lost by any worker shall be made from the wages payable to the worker under this Act except for time lost—

(a) by reason of the default of the worker; or

(b) by reason of the worker’s illness or of any accident suffered by the worker.

The key phrase of concern for the Court was “for his work” and whether this phrase meant that the Minimum Wage Act applied only in relation to work actually performed as opposed to contracted hours of work.

Majority decision

The majority of the Court (Judges Holden and Beck), in a relatively concise piece of reasoning, held that the phrase “for his work” related only to the period when an employee was actually working. The majority, referring to cases such as Idea Services and Dickson [2011] NZCA 14, considered that the meaning of ‘work’ had become more developed judicially and required consideration of factors such as the constraints placed on the freedom the employee, the nature and extent of the employee’s responsibilities, and the benefit to the employer of having the employer perform the role. In this case the employees remained free to do as they chose and owed no obligations to Gourmet. Accordingly, the majority held that work was not being performed and therefore the minimum wage is not payable. The majority also held that limits on deductions in s 7(2) only came into play if work was actually performed.

Minority decision

Chief Judge Inglis began her dissenting judgement by quoting the full Employment Court’s comment on in Faitala v Terranova Homes and Care Ltd [2012] NZEmpC 199 at [39], later endorsed by the Court of Appeal, that the Minimum Wage Act “is a statute of fundamental importance in the sphere of employment law in New Zealand.” Her Honour considered that the combined effect of sections 6 and 7 “is to reinforce the starting point, namely that payment of minimum wages is inviolable subject to very limited exceptions … the payment of minimum wages is a floor with carefully defined trapdoors which an employer must go through if they want to pay less within the prescribed minimum wage.”

The key paragraph in the Chief Judge’s opinion is the following

[57] In my view the correct approach to s6 is to ask whether, under the applicable terms and conditions, the employee has been engaged to perform work and, if so, does the agreement provide for the employee to be remunerated at a rate that equals or exceeds the applicable minimum wage under the Minimum Wage Act? The relevant question is not whether the employee is actually engaged in performing work at the particular point in time a claimed unlawful deduction is made, but rather whether their terms and conditions would have them do so.

The Chief Judge specifically distinguished Idea Services as authority for the proposition that an employee must actually be working at the point a deduction from their wages is made. She also placed particular significance on s 7 as strictly controlling allowable deductions and disagreed that advanced age had made them mute.

Comment

This decision is unlikely to be the final word on the meaning of ‘work’ and it is understood that the decision is being appealed. It is also important to note that the decision only applies in respect of the Minimum Wage Act. However, given the number or employees on the minimum wage, - 175,000 workers are expected to benefit from the most recent increase - a large number of employees may be vulnerable to deductions if actual work is not performed. For example, X is not given work for their full guaranteed hours under the zero-hours provisions in the ER Act, or Y is told to go home an hour early as there is no work needed to be done for the rest of the day. In such cases non-payment for full contracted hours may be recoverable as a breach of an employment agreement, although that remedy may be less convenient and more costly, and it also falls outside the enforcement powers of the inspectorate. As such actions are contractual it also means that the penalty provisions for a breach of statutory employment standards in Part 9A of the ER Act, will not apply. The ability to deduct an hour or so of pay is a temptation that some employers will find difficult to resist if enforcement is weakened.

Author: Professor Gordon Anderson, Faculty of Law, Te Herenga Waka - Victoria University of Wellington