In a judgment released on 4 August 2017, the Employment Court refused to declare that the rostering system operated by McDonald's Restaurants (New Zealand) Limited and one of its franchisees (McDonald's) amounted to an unlawful availability arrangement.
The much anticipated decision confirms that, provided that employees are not required to work more than their minimum guaranteed hours, an employer may lawfully operate a rostering system (whereby employees do not have certainty as to their times and days of work) without including an "availability provision" in the relevant employees' employment agreements.
The recent decision Fraser v McDonald's Restaurants (New Zealand) Limited concerned two McDonald's employees who claimed that their employment agreements contained unlawful availability provisions.
The plaintiffs brought personal grievance claims on the grounds that they had been disadvantaged by their employment agreements not complying with the availability provision requirements under section 67D of the Employment Relations Act 2000 (ERA). This is the first case in which section 67D has been considered by the Employment Court.
To cope with the peaks and troughs of demand in operating restaurants, McDonalds and its franchisees employ a large number of workers, the majority of whom are young and transitory. In order to maintain flexibility and keep wage overheads low, McDonald's introduced a system whereby new employees were required to indicate their 'agreed availability', i.e. the times during the week that they were available to work.
McDonald's gave employees the security of a minimum number of hours (i.e. guaranteed hours) and rostered them to work at least their guaranteed hours within their indicated periods of availability. However, employees would also be rostered to work additional hours above their guaranteed hours within their indicated periods of availability.
The question was whether the employees were required to be available for the additional rostered hours beyond their guaranteed hours. If they were required to be available for the additional rostered hours, their employment agreements would need to contain an availability provision which meets the requirements of section 67D.
Relevant contractual provisions
The employees' employment agreements contained the following key provisions:
From time to time you may be requested to work hours in addition to [your] work schedule.
Following the posting of your schedule by Tuesday,
if your schedule includes hours over and above your security of hours number, you have 24 hours from the posting of your schedule to advise you are not able to work these additional hours. If you are unable to work these additional hours, we may either reduce these additional hours or reissue your schedule at our discretion. We will continue to ensure that your security of hours conditions are met and that all shifts offered meet with your pre-agreed availability.
Also relevant were the provisions prescribing how the employees' guaranteed hours would be determined. In essence, the employees' guaranteed hours of work were calculated on a quarterly basis and were set at 80 per cent of the average of the previous fixed quarterly worked hours. Unless otherwise agreed, new employees' guaranteed hours were set at 80 per cent of the minimum hours agreed at the time of hiring. For example, if an employee worked an average of 20 hours in a quarter, their guaranteed hours for the following quarter would be 16 hours.
The employees' position
The employees argued that these provisions were unlawful because they meant that they were required to be available to accept any work the employer made available and could not turn down additional rostered hours above their guaranteed hours.
The employees also claimed they were compelled to work additional hours because of the operation provisions, which provided that employees' guaranteed hours would be 80 per cent of their average hours worked for the previous quarter. The employees argued they would need to work 20 per cent more than their guaranteed hours in order to keep their guaranteed hours the same for the next quarter, which introduced an element of compulsion.
The Court's analysis
The Court accepted that effect of the clauses could not be considered in a vacuum and that regard must be had to the parties' conduct and how the clauses were applied. The Court relied on evidence as to the practice adopted by McDonald's or franchise holders. The majority of the evidence suggested that although McDonald's employees were offered extra work above their stated minimum hours, they were not penalised if they turned down extra work. The Court found that:
- The word "requested" meant employees could be asked but not compelled to be available for the hours rostered beyond the guaranteed minimum hours (compared with the word "required").
- "Reduce those additional hours" meant that where the employees were unable to work the additional hours, the employer could reduce those additional hours which were over and above the guaranteed minimum hours.
- "Reissue your schedule at our discretion" meant reissuing the extra work to another employee, reducing the hours depending on the extent of the inability to work, or possibly reissuing the hours to the same employee to be performed on another occasion. "Reissue" did not mean "reconfirm" (which would have introduced an element of compulsion or requirement).
- The 24 hour notice period for rejecting additional hours was not unreasonable in view of the fact that the employer needed to arrange alternative employees to perform the work.
- The method of reviewing the rosters and the flexibility arising from the "agreed availability" benefitted both the employer and the employees.
- The arrangement whereby employees' guaranteed hours would be 80 per cent of their average hours worked for the previous quarter may have incentivised the employees to work additional hours, however, it did not require or compel them to work the additional hours. The Court commented that in other circumstances, this method of reducing rostered hours could amount to adverse treatment.
In summary, the Court declined to make the declaration sought by the employees. The Court found that the individual employment agreements did not contain an availability provision based on its interpretation of the employment agreements.
Learnings for employers
The case does not provide the answers that many employers were hoping for. While the Court's analysis was limited to the specific contractual terms and factual matrix applying to these employees, the case does provide some insight into the Court's approach to these challenging statutory provisions:
- The case serves as a reminder of the importance of ensuring that managers understand an employee's right to turn down any hours of work that fall outside their guaranteed hours of work - unless the employee's employment agreement contains an availability provision which meets the requirements of the ERA.
A manager may ask an employee to work additional hours from time to time and may even incentivise the employee to accept those additional hours. However, managers cannot compel additional work or treat an employee adversely if they turn down additional work. Adverse treatment is not limited to taking disciplinary action to "punish" an employee for turning down additional work and may include indirect adverse treatment, such as reducing the employee's hours in the future.
- Employers who operate irregular and variable rostering systems may wish to consider whether there is a fair balance in the way their system operates. In this case, the Court acknowledged that there was a mutual benefit to both employer and employee in the flexible rostering arrangement operated by McDonald's, and was complimentary of the fact that employees were able to dictate when they would be available to be rostered to work their guaranteed hours.
- Finally, the Court made a clear distinction between the word "requested" and "required". Employers should be aware of the importance of wording these clauses correctly. Employment agreements that purport to require additional hours of work above any guaranteed hours of work must:
- meet the stringent availability provision requirements (including providing compensation for the employee's availability for those additional hours), or
- clarify that additional hours are voluntary (i.e. that additional hours may be requested, but not required).
Our experienced employment team regularly advises employers on how to comply with the ERA amendments. If you or your business have any questions regarding any of the issues raised in our article, please contact one of our team or your usual Bell Gully adviser.
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.