Implications of two recent court cases for business owners and directors

We wanted to alert members to a few things that happened this week as part of our work to keep you up to date with important information.  

Firstly, some good news from Parliament with the welcome introduction of the Fast Track Approvals Bill and its referral to the Environment Select Committee for public submissions. This Bill would fast-track the consenting of projects of national significance, potentially reducing years of problematic red tape. The need for infrastructure development to expand the New Zealand economy is critical. Find more information about the legislation

Two court cases to be aware of  

The Wellington Chamber of Commerce is aware of two recent court cases that have significant implications for business owners and directors in New Zealand that we wanted to highlight today.  

Mt Cook Airlines case

First, some encouraging news. Many members will be aware of the high-profile court case relating to holiday pay, which is sometimes called the ‘Mt Cook Airlines’ case. The Chamber is relieved that the Court of Appeal has avoided a situation that would have had repercussions for every business in New Zealand employing people part time and may have made many businesses untenable. The background to the case follows. 

The Court of Appeal had issued a decision on the calculation of holiday pay for part-time employees who work variable hours.  

Background  

The collective agreement between Mount Cook and E tū provides for part-time cabin crew to perform two-thirds of the work of full-time cabin crew over a fortnightly pay period, in exchange for a pro rata salary (two-thirds of a full-time salary). Their union challenged this pro rata approach to calculating the salary of part-time cabin crew employees in the Employment Court, on the basis that it breached the requirements of Minimum Wage Act 1983.  

The Employment Court agreed, holding that the Minimum Wage Order 2021 (which contains the amounts to be paid) required that Mount Cook’s part-time cabin crew be paid at least the full fortnightly minimum wage rate specified in the Order (a sum equating to 80 hours of work at the minimum hourly wage) regardless of the number of hours they actually work per fortnight.  

If upheld, this would have subjected many employers to huge arrears of wages. 

Decision on appeal 

Yesterday the Court of Appeal overturned the Employment Court’s decision. It found that the Employment Court erred in its interpretation of the Minimum Wage Order as it applied to part-time salaried employees. It said that “the amount set out in cl 4(d) of the Order is a rate of payment per fortnight, based on a full-time worker who works 80 hours over a two-week period. The minimum wages entitlement of a part-time salaried employees must be pro-rated. Specifically, the entitlement of a part-time salaried employee will be x/80 multiplied by the relevant sum specified in cl 4(d) of the Order, where x equals the number of hours of work the employee has either: (a) performed during the relevant fortnight; or (b) agreed to perform, but did not perform due to a direction by their employer, whichever is greater.” 

This will be a huge relief for many employers who employ part time staff on pro-rated salaries.  

BusinessNZ was influential in bringing this case to this conclusion, including successfully arguing via affidavit evidence that Mt Cook Airlines should be given leave to appeal the Employment Court’s decision to the Court of Appeal. 

Seizure of assets from directors 

More concerning is the matter in dispute at the Court of Appeal where police are using proceeds of crime legislation to seek forfeiture of property from a business that committed hazardous substances and health and safety offences. 

Police are attempting to confiscate millions of dollars’ worth of asserts from a company director, using a law that is usually relates to the forfeiture of stolen assets or profits from drug dealing, money laundering, or similar criminal activity. When the legislation empowering the police to exercise forfeiture powers was enacted, the intention was that criminals could not serve a jail sentence yet retain the benefits of criminal activity in asset form. 

Applying the forfeiture powers to an ordinary company will have a chilling effect that will be felt across New Zealand business. Any director of a business will be seriously questioning their directorship if their total asset base is vulnerable to seizure for the failure of a company under any legislation, even if the seizure is disproportionate to the actual loss or if a plethora of mitigating circumstances exist.  

The Chamber understands that the hearing is set down for a seven-week period in the High Court in October 2024 and we will follow it closely. 

2024-NZCA-6.pdf (courtsofnz.govt.nz).   

We strongly urge the Government to urgently look into this legislation and curtail its scope to target criminals rather than directors and ensure that it does not unintentionally penalise directors who act in good faith. 

The Chamber will continue to monitor and advocate on behalf of our members on these and other issues that affect your business. If you have any questions or feedback, please contact us at Jason.carpenter@businesscentral.org.nz.