IN THE EMPLOYMENT COURT WELLINGTON [2015] NZEmpC 109 EMPC 289/2014. WELLINGTON CITY TRANSPORT LIMITED TRADING AS "GO WELLINGTON" Plaintiff

Transcription

1 IN THE EMPLOYMENT COURT WELLINGTON IN THE MATTER OF BETWEEN AND AND [2015] NZEmpC 109 EMPC 289/2014 a challenge to a determination of the Employment Relations Authority WELLINGTON CITY TRANSPORT LIMITED TRADING AS "GO WELLINGTON" Plaintiff NEW ZEALAND TRAMWAYS AND PUBLIC PASSENGER TRANSPORT EMPLOYEES UNION (INC) WELLINGTON BRANCH First Defendant GLORIA DAUE Second Defendant Hearing: 30 April 2015 (heard at Wellington) Appearances: R McIlraith, counsel for the plaintiff T Kennedy, counsel for the defendants Judgment: 13 July 2015 JUDGMENT OF JUDGE A D FORD Introduction [1] The second defendant, Ms Gloria Daue, was a bus driver in Wellington for over 33 years. She retired from full-time work with Wellington City Transport Limited (the plaintiff) on 8 November Given her years of service, she was entitled to be paid a retirement gratuity of 26 weeks pay. The issue in this case related to how a week's pay was to be calculated for the purpose of determining her retirement gratuity. WELLINGTON CITY TRANSPORT LIMITED TRADING AS "GO WELLINGTON" v NEW ZEALAND TRAMWAYS AND PUBLIC PASSENGER TRANSPORT EMPLOYEES UNION (INC) WELLINGTON BRANCH NZEmpC WELLINGTON [2015] NZEmpC 109 [13 July 2015]

2 [2] The case for the plaintiff is that a week's pay, for the purpose of calculating the retiring gratuity payment, should be based on 40 hours a week at the employee's applicable hourly rate of pay. Ms Daue's applicable hourly rate of pay was $ The plaintiff, therefore, calculated and paid Ms Daue a gratuity of $18, made up as follows: 26 (weeks) x 40 (hours) x $17.76 (pay rate) = $18, [3] The first defendant, Ms Daue s Union, New Zealand Tramways and Public Passenger Transport Employees Union (the Union), disagreed with that approach and raised a dispute in the Employment Relations Authority (the Authority) over the plaintiff's interpretation of a week's pay. It argued that the calculation should be based on the greater of 40 hours a week at the employee's applicable hourly rate or the employee's average weekly earnings over the previous 12 months. [4] In a determination dated 8 October 2014, the Authority upheld the approach contended for by the Union. 1 It found that Ms Daue's average weekly pay over the 12-month period immediately before she retired was $1, gross and, on that basis, it concluded that her retirement gratuity should have been $26, made up of 26 (weeks) x $1, (average weekly pay). It ordered the plaintiff to pay Ms Daue the difference of $8, together with interest at five per cent from November 2013 to the date of payment. (There is a minor arithmetical error in the Authority s figures. The retirement gratuity should have totalled $26, and the payment ordered should have been $8, ) [5] The plaintiff has challenged the whole of the Authority's determination in this Court seeking a declaration that it had correctly calculated Ms Daue's retiring gratuity. Background [6] The terms and conditions of Ms Daue's employment were covered by a collective employment agreement between the plaintiff and the Union which came 1 New Zealand Tramways and Public Passenger Transport Employees Union (Inc) Wellington Branch v Wellington City Transport Ltd t/a Go Wellington [2014] NZERA Wellington 98.

3 into effect on 15 January 2013 and expires on 16 January 2016 (the Collective). The Collective is the latest in a series of collective agreements and industrial awards going back many years. It applies to operators (bus drivers), engineers and coach workers. [7] One of the general terms that applies to all of the plaintiff's employees covered by the Collective is cl 71, which is the clause in dispute in the present case. It provides: 71. RETIRING GRATUITIES FOR EMPLOYEES EMPLOYED PRIOR TO 1 JULY 1991 On retirement of any employee who had continuous service with Wellington City Council up to 30 June 1991, the Company may pay to that employee by way of a gratuity, an amount calculated in accordance with the following scale: Three weeks' pay increasing by one week for each additional year's service after 10 years until a maximum of twenty six weeks' pay is reached after thirty three years' service. In lieu of payment by way of gratuity, an employee on retirement shall have the option of taking special leave on full pay in accordance with the above scale and on the same conditions. [8] Although the retiring gratuity did not appear in the New Zealand Public Passenger Transport Authority s Workers Award dated 5 February 1975 (which applied to the Wellington City Corporation), Mr Kevin O'Sullivan, the current Secretary of the Wellington Branch of the Union, was able to confirm that a similar provision had been included in a document intituled, "Wellington City Council Wages Employees Approved Provisions Relating to Employment", dated April Those provisions were said to apply to all employees of the Wellington City Corporation except insofar as they were incompatible with any award or industrial agreement. [9] Clause 7 of the Employees Approved Provisions of April 1974 was virtually identical to cl 71 of the Collective confirming that there has been a long history to the retirement gratuity provision.

4 [10] Mr O'Sullivan explained in evidence that up until 1991 bus drivers in Wellington were employed by the Wellington City Council but in early 1991 there were changes in the transport industry and in the role of local government in relation to that industry. One result of those changes was that Wellington City Council set up a commercial entity, Wellington City Transport Limited, which took over the running of the bus service. Mr O'Sullivan said that the Wellington City Transport Limited has been bought and sold over the years but since around 2006 all its shares have been owned by New Zealand Bus Limited. Principles of interpretation [11] There was no dispute over the principles of contractual interpretation applicable to the interpretation of collective employment agreements. Reference was made by both counsel to the recognised leading authorities on the issue. Of particular relevance was the Court of Appeal decision in Silver Fern Farms Ltd v New Zealand Meat Workers and Related Trade Unions Inc, 2 which was a case concerned with the correct approach by this Court to the interpretation of collective employment agreements. [12] The Court of Appeal in Silver Fern Farms 3 noted that the summary provided by McGrath J in Vector Gas Limited v Bay of Plenty Energy Limited, 4 of Lord Hoffmann's five principles of interpretation in his judgment on behalf of the majority in Investors Compensation Scheme Limited v West Bromwich Building Society 5 was helpful: 6 In summary, Lord Hoffmann said that interpretation of a commercial agreement is the ascertainment of the meaning it would convey to a reasonable person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of contract. The language the parties use is generally given its natural and ordinary meaning, reflecting the proposition that the common law does not easily accept that linguistic mistakes have been made in formal Silver Fern Farms Ltd v New Zealand Meat Workers and Related Trade Unions Inc [2010] NZCA 317, [2010] ERNZ 317. Silver Fern Farms Ltd v New Zealand Meat Workers and Related Trade Unions Inc, above n 2, at [36]. Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 44. Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28, [1998] 1 All ER 98, [1998] 1 WLR 896 (HL) at Vector Gas Ltd v Bay of Plenty Energy Ltd, above n 4, at [61].

5 documents. The background, however, may lead to the conclusion that something has gone wrong with the language of an agreement. In that case the law does not require the courts to attribute to the parties an intention which they clearly could not have had. The natural and ordinary meaning should not lead to a conclusion that flouts business commonsense. [13] Reference was also made to the following passages from the majority judgment of the Supreme Court in the recent case of Firm Pl 1 Limited v Zurich Australian Insurance Limited t/a Zurich New Zealand: 7 It is sufficient to say that the proper approach is an objective one, the aim being to ascertain "the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract". This objective meaning is taken to be that which the parties intended. While there is no conceptual limit on what can be regarded as "background", it has to be background that a reasonable person would regard as relevant. Accordingly, the context provided by the contract as a whole and any relevant background informs meaning. [63] While context is a necessary element of the interpretive process and the focus is on interpreting the document rather than particular words, the text remains centrally important. If the language at issue, construed in the context of the contract as a whole, has an ordinary and natural meaning, that will be a powerful, albeit not conclusive, indicator of what the parties meant. But the wider context may point to some interpretation other than the most obvious one and may also assist in determining the meaning intended in cases of ambiguity or uncertainty. Submissions [14] The plaintiff contended that its approach to the interpretation of cl 71 was consistent with the plain and ordinary meaning of the language used in the context of the document as a whole. Mr McIlraith, counsel for the plaintiff, submitted that the Collective had no universal meaning of the word "pay" but it set out the appropriate rate of pay for an employee's various entitlements. [15] For example, in the context of its various statutory obligations under the Holidays Act 2003, reference is made in different clauses of the Collective to "ordinary weekly" and "average weekly" pay as well as to "relevant daily pay". In recognition of its obligations under the Parental Leave and Employment Protection 7 Firm Pl 1 Ltd v Zurich Australian Insurance Ltd t/a Zurich New Zealand [2014] NZSC 147, [2015] 1 NZLR 432, at [60] and [63]. Footnotes omitted.

6 Act 1987, Mr McIlraith noted that the Collective used the statutory formula of "average weekly earnings for the 12 months prior to the commencement of the parental leave" for calculating an employee's parental leave entitlement. [16] Mr McIlraith highlighted the distinction in the language used in the Collective between "pay" in relation to an employee's statutory entitlements and the use of the term in relation to the provision of what he referred to as other "contractual benefits" such as redundancy and long service leave. He submitted that the clauses dealing with contractual benefits were of greater assistance in interpreting cl 71 than the clauses providing for statutory entitlements because the parties were free to agree upon their own formula or rates of pay for contractual benefits. [17] In this regard, Mr McIlraith made special reference to cl 60 of the Collective which deals with redundancy, in particular, cl 60(c) which uses the same "week's pay" concept as cl 71. Cl 60(c) provides: (c) Employees employed by Wellington City Transport subsequent to 5 March 1992 will, if declared redundant, be entitled to four weeks' notice of redundancy or payment made in lieu, four weeks' pay for the first year of current continuous service and two weeks' for every full year employed and pro-rata for incomplete years. [18] In reference to another contractual benefit, namely long service leave, Mr McIlraith noted that the parties had expressly agreed on a different method of calculating long service leave for operations staff (bus drivers) from the formula used in respect of engineers and coach workers. Clause 14(b) of the Collective provides that operations staff: shall be paid on the basis of the employee's average earnings as defined in the Holidays Act 2003 [19] The formula provided for in cl 31(b) of the Collective for calculating the long service leave entitlements for engineers and coach workers is stated to be: on ordinary pay as defined by the Holidays Act 1981, Relevantly, s 4(1) of the Holidays Act 1981 defined "ordinary pay" as:

7 remuneration for the worker's normal weekly number of hours of work calculated at the ordinary time rate of pay, and, where the worker is provided with board or lodging by his employer, includes a cash value of that board or lodging as determined under section 5 of this Act. [20] In other words, as Mr McIlwraith noted, the parties have expressly agreed on a Holidays Act formula (albeit no longer in force) for this benefit. [21] In reference to the historical background to the wording of cl 71, Mr McIlraith said that "average weekly earnings", which was the expression applied by the Authority in its determination, was a statutory concept which was incorporated into the Annual Holidays Act 1944 by an amendment in November Counsel submitted that, as the formula in cl 71 pre-dated the statutory concept of "average weekly earnings", there could not have been any intention when the clause was first drafted to introduce the statutory concept of "average weekly earnings" into the interpretation of a week's pay. [22] Mr McIlraith submitted that the plaintiff's approach to the interpretation of cl 71 was consistent with its past practice of interpreting a week's pay in cl 71 as 40 hours a week at the employee's applicable pay rate for full-time employees and 20 hours a week for part-time employees. Counsel noted that a retirement gratuity had been paid out on that basis in other cases between 2006 and 2013 and the interpretation of the clause had only became an issue in November 2013 when the Union became aware of how the calculation was made. [23] Finally, Mr McIlraith made submissions about the purpose of a retirement gratuity and noted an important distinction between retirement gratuity/redundancy compensation and the concept of leave, such as annual leave and public holiday leave. With leave, there is an expectation that the employee will return to work but, as counsel put it: There is no purpose of preserving an employee's earnings where they are transitioning to a life without continued earnings. The importation of the average weekly earnings formula is therefore entirely unnecessary for the purpose of clause 71. [24] Counsel for the defendants, Ms Kennedy, submitted that the meaning of a "week s pay" in cl 71 should not be based on the subjective approach adopted by the

8 plaintiff in other relatively recent retirement cases. A table produced by the plaintiff showed that, excluding Ms Daue, seven other retirement gratuity payments had been made to full-time employees since 2006 based on the formula contended for by the plaintiff, namely a week's pay being the equivalent of 40 hours times the ordinary hourly rate of pay. [25] Ms Kennedy referred to the need for an objective test, citing the following passage from the judgment of Justice Tipping in Vector Gas: 8 In Gibbons Holdings Ltd v Wholesale Distributors Ltd, I expressed the view that evidence of subsequent conduct should be admissible, if capable of providing objective guidance as to intended meaning. I suggested that, in order to be admissible, post-contract conduct should be shared or mutual. I saw that as a way of emphasising the need to exclude evidence which demonstrated only a party's subjective intention or understanding as to meaning. [26] The uncontested evidence in the present case was that it was not until Ms Daue approached Mr O'Sullivan about the calculation of her retirement gratuity in November 2013, that the Union became aware of how the plaintiff had been calculating retirement gratuities. The plaintiff had never previously discussed the calculation of such payments with the Union prior to Ms Daue's case. [27] Perhaps the most forceful submission advanced by Ms Kennedy was that the plaintiff's approach of basing a week's pay on 40 hours times the ordinary hourly rate of pay was inappropriate because bus drivers do not work a regular 40-hour week. The uncontested evidence was that bus drivers work according to rostered shifts. The Collective provides that the working week runs from Sunday to Saturday and a day is defined as a period of 24 consecutive hours 12 midnight to 12 midnight. The Collective records how overtime and penal rates are to apply in respect of the various shifts. [28] Ms Kennedy submitted that the reality was that if the plaintiff's interpretation of a week's pay was to be adopted it would result in employees being paid less than their entitlement because, "full-time employees are generally and regularly paid more a week than 40 hours at the ordinary hourly rate of pay." No evidence was 8 Vector Gas Ltd v Bay of Plenty Energy Ltd, above n 4, at [30]. Footnotes omitted.

9 produced by the plaintiff to show that, in fact, any of their full-time bus drivers were paid on the basis of 40 hours a week at the ordinary hourly rate of pay. [29] Ms Daue told the Court that she had never worked 40 hours a week. Ms Kennedy said that if she had, in fact, worked 40 hours a week then her gross pay per week, based on her hourly rate of $17.76, would have amounted to $ With reference to Ms Daue's actual pay records, however, Ms Kennedy was able to show that her average weekly wage for the 12-month period prior to her retirement in November 2013, amounted to $1, Discussion [30] The common denominator in the submissions advanced by both parties was that the interpretation argued for by the other requires words to be imported into cl 71 which are not there at the present time. [31] Thus, the plaintiff argued that if the parties had intended to use the statutory concept of "average weekly earnings" in cl 71, which is the case for the defendants, then they would have expressly done so, as they did in cl 14 which relates to the calculation of long service leave. The defendants contend that had the parties intended the words "week's pay" in cl 71 to be a sum equivalent to 40 hours a week at the ordinary rate of pay, as the plaintiff contends, then the plain words of the clause or a definition of a "week s pay" in the Collective would need to expressly say so and it does not. [32] With due deference to those submissions, it seems to me that the words "week s pay" in cl 71 have an ordinary meaning which can be given effect to in the context of the Collective without the need to resort to the incorporation of additional words. In accordance with that ordinary meaning, a week's pay simply means a week's pay at the time the retirement gratuity falls to be calculated. [33] What constitutes a week's pay is recorded on the employee's payslip. Clause 9 of the Collective, which deals with general matters relating to all operators (bus drivers), provides in cl 9.1(m):

10 Details of the employee's wages, including ordinary, overtime and any other payments due, shall be supplied to each employee on their payslip. [34] A selection of Ms Daue's payslips were produced but they did not appear to include her final payslip. However, payslip No.4459, which covered the period ending 26 October 2013 showed the makeup of the wages component for that period (excluding a one-off annual leave advance), based on Ms Daue's hourly rate of $17.76, as follows: Ordinary hours Overtime T Overtime T Shift Allow Week Day $1, [35] The payslip shows that Ms Daue's gross pay for that particular pay period totalled $1, If that figure is consistent with the corresponding figure on her final pay slip then, in my view, that is what is meant by the term "week's pay" in cl 71. If, however, that particular pay or Ms Daue's final week's pay was artificially high or low for some special reason then I would expect the parties to be able to reach agreement on what the proper figure should be. Failing agreement, other options would be open to have the matter determined. [36] What can be seen from the breakdown above is that Ms Daue worked only 24 ordinary hours during the week in question and hours overtime at either double time or time and a half. As noted above, Ms Daue's evidence was that she never, in fact, in her 33 years worked 40 hours a week ordinary hours. [37] Had Ms Daue's retirement gratuity been based on 26 times her weekly pay of $1,120.47, her entitlement would have been more than the amount awarded by the Authority (which was based on a figure of $1, per week) but there has been no cross-challenge.

11 [38] The fact that such an interpretation may result in an increase in the retirement gratuities paid to employees under cl 71, as compared with what employees have apparently been receiving in recent times, should not be a factor in the interpretation exercise. As was stated in the majority judgment of the Supreme Court in Firm P1 1 Limited: 9 Conclusion However, it has also been accepted that the court is not justified in concluding that a contract does not mean what it seems to say simply because the court considers that, so interpreted, the contract is unduly favourable to one party. [39] For the reasons explained above, the plaintiff's challenge is dismissed. [40] Costs are reserved. My tentative view is that, as this is something of a test case, costs should lie where they fall but if the defendant takes a different view then Ms Kennedy should file submissions within 28 days and Mr McIlraith will have a like period of time in which to file submissions in response. A D Ford Judge Judgment signed at am on 13 July Firm Pl 1 Ltd v Zurich Australian Insurance Ltd t/a Zurich New Zealand, above n 7 at [89]. Footnotes omitted.