New year, new law? Significant employment law developments likely in 2021

19 January 2021

​Given the ongoing COVID-19 pandemic and Labour's comprehensive 2020 election win, we expect this year to feature many important new employment law developments.

We summarise below some of the key areas of focus for employment case law and legislative reform in 2021.

COVID-19 case law: treatment of pay during lockdowns

On 21 December 2020, the Employment Court issued its first COVID-19 related judgment in Gate Gourmet New Zealand Limited v Sandhu.1​

The majority of the Full Court found that employees of Gate Gourmet were not entitled to receive the minimum wage for their contractual hours in circumstances where they were not actually carrying out that work during the 2020 lockdown period. In particular, the Court found that “when the [employees] stayed home, they were not working for the purposes of the Minimum Wage Act 1983 (MWA), the MWA was not engaged, and no statutory minimum wage entitlements arose."

However, the Chief Judge of the Employment Court issued a dissenting judgment and found that the MWA was breached when Gate Gourmet failed to pay its employees the minimum wage for their contractual hours even when the employees were not actually performing work during those hours.

This majority judgment reversed the earlier determination of the Employment Relations Authority (Authority), which had found in the employees' favour. Given the dissenting judgment and the precedent value of the case, and the possibility of future lockdowns as the pandemic continues, the employees and their union may apply for leave to appeal the Employment Court's judgment to the Court of Appeal. We will update you if such an application is made.

The Employment Court is due to hear the case of Eastern Bays Hospice Trust v Raggett in early 2021. This involves a challenge by the employer to the Authority's 2020 determination. The Authority's determination found (among other things) that the employer had breached its obligation to pay salary and wages to employees during the 2020 lockdown period, without deduction, in circumstances where the employer had reduced pay to 80% once it received the government wage subsidy without having obtained the employees' agreement. This case will no doubt provide further guidance to employers as to the validity or otherwise of the approach that they took to employee pay during the 2020 lockdowns, and the approach that should be taken in any future COVID-19 lockdowns.

Employee or contractor: employment status disputes

2020 featured several cases testing the “employee vs contractor" question, and this trend is likely to continue in 2021.

In Leota v Parcel Express Limited, the Employment Court found that Mr Leota, a courier driver, was “in reality" an employee of Parcel Express despite being engaged on an independent contractor agreement. While the decision is based on its own particular facts, the outcome is notable given the long-standing industry practice of courier drivers being treated as independent contractors.

In Arachchige v Rasier New Zealand Limited & Uber BV (the “Uber" case), the Employment Court found that an Uber driver was not an employee and had properly been treated as an independent contractor. This was based on the Employment Court's assessment of the services agreement between Uber and the driver, as well as how the arrangements operated in practice which included substantial control and flexibility for the driver as to how and when he performed services under the services agreement.

We expect further cases testing the boundaries of independent contractor status into 2021. This is likely to include other industries in which individuals are commonly engaged on an independent contracting basis, but are heavily dependent upon (and/or under the control of) one principal as their source of income. We expect this case law to continue to develop in tandem with any legislative reform proposed in relation to “dependent contractors" (see further below).

Holidays Act 2003: the saga continues

While there is a reasonable prospect of the Government proposing a substantially new Holidays Act in 2021 (as we note further below), the enactment of any new legislation will not remove employers' obligations to comply with the current Act unless and until it is repealed – nor would it extinguish liability for any historical underpayment. We expect that issues of compliance with the Holidays Act 2003 (Holidays Act) will continue to feature prominently until new legislation is enacted, given the significant uncertainty in so many areas.

At the start of this year we were awaiting decisions from the Court of Appeal on aspects of the Holidays Act which, it was hoped, would provide assistance to employers on various working arrangements.

The Court of Appeal's decision in one of these cases was delivered on 18 January 2021. In that case, the Court of Appeal upheld an appeal by the Labour Inspectorate against the Employment Court's judgment regarding Tourism Holdings Limited, which found that certain commission payments made to tourist bus drivers were not a “regular part of the employee's pay" and therefore could be excluded from ordinary weekly pay when determining pay for annual holidays. The Court held that a payment was a “regular part of the employee's pay" if it was made systematically and according to rules, or if it was made uniformly in time and manner.

We are still waiting for a decision from the Court of Appeal on an appeal by Metropolitan Glass against the Employment Court's judgment requiring the inclusion of payments made under a discretionary short-term incentive scheme within “gross earnings" (see our previous publication on this decision here).

Pay equity claims

During 2020, substantial amendments were made to the Equal Pay Act 1972 to create a process to make it easier for workers to raise pay equity claims. That is, claims that there is systemic sex-based pay undervaluation in an occupation that is currently, or has been, predominantly performed by women.

Now that the process for raising pay equity claims is defined in legislation, we expect to see more cases testing various aspects of the new legislation which are uncertain. We expect this to include claims which will involve more detailed consideration of the practical questions regarding how an employer, employee and/or union can actually determine whether different work is of the “same value", and applying the relevant factors listed in the amended Act.

There are also a number of interpretation issues that we expect to arise under the Act, including the meaning of whether a pay equity claim is “arguable" (before the claim either moves into a pay equity bargaining process or proceeds to the Authority), and what may amount to a “genuine reason based on reasonable grounds" for an employer to opt-out of a multi-employer pay equity bargaining process.

Likely legislative reform in 2021

The Labour Party's election manifesto promised employment law reform in many areas. In light of its comprehensive victory in the 2020 election, it is highly likely that it will be in a position to implement many of these changes during the current term.

Changes for 2021 include:

  • a minimum wage increase, from NZ$18.90 to NZ​$20.00 per hour, effective on 1 April 2021,
  • an increase to sick leave entitlements under the Holidays Act 2003, from five to 10 days' paid sick leave per 12 month period (which will apply from two months after the date on which the current Holidays Act (Increasing Sick Leave) Amendment Bill receives royal assent, with transitional arrangements in place for existing employees),
  • the creation of a new public holiday on Te Rā o Matariki (Matariki Day), which will be the subject of an amendment to the Holidays Act in 2021, that will take effect in and from 2022, and
  • security guards are to be recognised as protected employees for the purposes of Part 6A of the Employment Relations Act 2000, which is likely to take effect by mid-2021.

Other changes that are likely, based on bills already before Parliament and the Labour Party's election manifesto, include:

  • the proposal of legislation to implement Fair Pay Agreements (although we expect further public consultation to occur before legislation is drafted),​
  • substantial changes to the operation of the Holidays Act (and potentially the introduction of an entirely new statute) to strengthen and simplify the Act, taking into account the recommendations of the Holidays Act Tripartite Taskforce,
  • the proposal of legislation to recognise and create protections for “dependent contractors" (i.e. contractors who are self-employed, but rely on and/or work exclusively for a single principal/employer),​
  • changes to the “passing on" provisions in the ERA, to make it harder for collective agreements to be undermined, and
  • further reforms specific to workplace relations in the screen and film production industry.

In short, there are plenty of developments to watch out for in 2021; quite apart from any changes that are needed to respond to COVID-19 as the pandemic continues to evolve.

We will continue to produce articles on any key developments; please get in touch with the contacts listed if you would like to discuss anything addressed in this article.

1 [2020] NZEmpC 133.


Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.