21.09.2023

Time is money – availability provisions in employment agreements and the requirement to compensate

What happens when an availability provision is non-compliant because it does not allow for compensation, but the employee is not “required” to work additional hours?  Can the employee still be said to have suffered an unjustifiable disadvantage in his or her employment? 

This issue was considered by the Employment Court last year in AFFCO New Zealand Ltd v Stewart [2022] NZEmpC 200 (AFFCO case), which offers helpful insights into how availability provisions will be treated by the employment institutions.

What are availability provisions? 

An availability provision requires an employee to be available to perform work when the employer directs it.  

Section 67D of the Employment Relations Act 2000 (the Act) places restrictions on the use of availability provisions.  The section was originally introduced to address “zero hour” contracts where an employee had no guarantee of work or minimum hours but was required to remain available should they be required.

Under the Act, availability provisions are allowed but only if they meet certain requirements:

  • The employment agreement specifies agreed hours of work, including guaranteed hours;
  • The provision relates to a period where the employee is required to be available in addition to their guaranteed hours;
  • The employer has genuine reasons based on reasonable grounds for including the provision and the number of hours of work specified in that provision; and
  • The provision provides for payment of reasonable compensation to the employee for making themselves available. For salaried employees, availability compensation can be part of their salary.  For waged employees, availability compensation must be a separate amount.

Further, s 67E of the Act states that employees are entitled to refuse additional work if the availability provision does not allow for reasonable compensation for making themselves available to perform the additional work.

When can employees bring personal grievance claims for non-compliant availability provisions?

Under s 103 of the Act, an employee may have a personal grievance against the employer where the employee has been unjustifiably disadvantaged by their employment agreement not complying with certain statutory provisions, including s 67D of the Act.

This means that a non-compliant availability provision may give rise to a personal grievance, but only where the employee has been disadvantaged by the non-compliance.

The AFFCO case

Mr Stewart worked as a meat processor.  His employment agreement contained an availability provision which stated that he may be required to work extra hours during the week and on weekends as required by his employer, and must work such extra hours as required. 

The availability provision did not include compensation for availability and was non-compliant with s 67D.  The employer offered compensation at a later stage, but the offer was rejected by Mr Stewart as he believed the level of compensation offered was insufficient.  No further negotiation between Mr Stewart and his employer took place.  Mr Stewart continued to work overtime, as he had done for many years, because he felt that there was an “absolute expectation” he would do so.

Mr Stewart subsequently brought several personal grievance claims in the Employment Relations Authority (the Authority), including in respect of the non-compliant availability provision.  While Mr Stewart successfully argued that the availability provision did not comply with s 67D of the Act, the Authority determined that he had not suffered an actual disadvantage because his employer had not tried to enforce the availability provision.  There was also no evidence of a disadvantage having been suffered.

The determination was appealed.  The sole issue on appeal before the Employment Court (the Court) was whether Mr Stewart had suffered any disadvantage because of the non-compliant availability provision. 

Key insights

The Court decided that Mr Stewart had suffered disadvantages that arose by the inclusion of the non-compliant availability provision.  Specifically, there was no value attributed to Mr Stewart’s availability, and the employer did not share the cost of Mr Stewart making himself available. 

The key point from the decision is that non-compliant availability provisions can amount to a disadvantage where no compensation is given to the employee for making themselves available.  The underlying rationale of this outcome is the same as that of the reason for reform in this area in the first place: availability provisions materially constrain an employee’s ability to plan their life away from work, and employees should be compensated for this.

The AFFCO case offers several other helpful insights.  In particular, even where the employer has not enforced an availability provision as such, the Court will consider the nature of the employment relationship as well as how and why additional work is offered and accepted.

AFFCO argued that Mr Stewart had the right of refusal to perform additional work under s 67E of the Act, but had not exercised that right, nor was he or would he have been disciplined for declining additional work.  The Court rejected that argument on the basis that:

  • In practice, Mr Stewart could not realistically decline additional work. That was because Mr Stewart’s team was small, and to decline additional work would have meant a lot of stress would be placed on his co-workers.  There was also a power imbalance between the parties.  The Court found that these factors justifiably informed his reasonable belief that there was an “absolute expectation” he accepted additional work.
  • It was within the employer’s interests for Mr Stewart to accept additional work, and it made no attempts to dissuade Mr Stewart or make it clear to him that additional work was voluntary rather than expected.
  • There was no difference between the expectations for Mr Stewart to accept additional work versus other employees whose employment agreements did include availability provisions which allowed for compensation.

The AFFCO case also makes it clear that employers have an obligation to either engage in negotiations for the amount of compensation for the employee making themselves available (if it has not previously been agreed), or release the employee from the availability provision where the parties are unable to come to an agreement.

Finally, the Court in the AFFCO case noted that a non-compliant availability provision will not automatically give rise to a personal grievance.  Only where an employee has suffered a disadvantage as a result of a non-compliant availability provision will they have a personal grievance claim.

Summary

In conclusion, availability provisions are not straightforward and there are a number of statutory requirements that apply, including that the employee be adequately compensated for making themselves available. 

An availability provision can only be the basis for a personal grievance where an employee has suffered a disadvantage.  This will not be the case merely because an availability provision is non-compliant with the Act.  However, reasonable compensation in this context is a statutory requirement and failure to compensate employees for making themselves available can amount to a disadvantage. 

Ultimately, the employment institutions in deciding these issues will consider the nature of the employment relationship and how the availability provision operates in practice.

If you have any questions about availability provisions, or want to check whether your current practices are compliant, please get in touch with our Employment Law Team or your usual contact at Hesketh Henry.

 

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.

 

 

Do you need expert legal advice?
Contact the expert team at Hesketh Henry.
Kerry
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

Related Articles / Insights & Opinion

The Legal500 Construction Comparative Guide
The Construction team at Hesketh Henry is the exclusive New Zealand contributor to The Legal 500: Country Comparative Guide for Construction.  Partners Glen Holm-Hansen and Helen Macfarlane along wit...
21.05.2024 Posted in Construction
Government trumps Member’s Bill with the Contracts of Insurance Bill 2024
It now seems there is at least the possibility 2024 will be the year New Zealand finally sees the reform of insurance law with the Government’s own bill, the Contracts of Insurance Bill, now before ...
16.05.2024 Posted in Insurance
Computer Hand Wide
Privacy Commissioner releases draft biometrics privacy code
Biometrics is a trending issue and with the development of technology there are consistently more ways biometric data can be used, from replacing a password to identifying repeat shoplifters in a shop...
03.05.2024 Posted in Business Advice
Building Permit
Build-to-Rent (BTR) Basics
If the term Build-to-Rent is new to you, you are probably not alone.  Unlike countries such as the USA, UK and Australia where BTR is well established, the BTR sector is still emerging in New Zealand...
26.04.2024 Posted in Property
Insurance Contract Law – Parliament finally gets to consider long-awaited reforms
The Government’s Contracts of Insurance Bill was introduced on 30 April 2024.  See our article on this Bill. In February 2022, the Ministry of Business, Innovation and Employment (MBIE) released an...
24.04.2024 Posted in Insurance
Tower Troubles – Body Corporate 366567 (Harbour Oaks) v Auckland Council
Standing 40 storeys tall with 406 units, the Gore Street building in downtown Auckland (formerly known as “Harbour Oaks”) is presently the subject of New Zealand’s largest claim for residential ...
18.04.2024 Posted in Construction & Disputes
Construction Framework Wide BW
OIO Spotlight:  Government issues new directive on foreign investment for build-to-rent housing developments
Earlier this year, the coalition Government announced that it would be introducing a new streamlined consent pathway for build-to-rent developments by way of amendments to the Overseas Investment Act ...
16.04.2024 Posted in Business Advice & Property
SEND AN ENQUIRY
Send us an enquiry

For expert legal advice, please complete the form below or call us on (09) 375 8700.