Zero-hour employment agreements, where employees are required to remain available without any guarantee of work, became unlawful in 2016 with the introduction of availability provisions into New Zealand’s legislative framework.
Since then, case law has evolved to help us understand the scope of these provisions and what has emerged is a willingness by the Employment Court to hold employers to account. Following the 2022 judgment of Stewart v AFFCO New Zealand Limited [2022] NZEmpC 200, it is clear that availability provisions may now have more bite.
The Employment Relations Amendment Act 2016 introduced a suite of changes to the Employment Relations Act 2000 (the Act) targeting unfair employment practices. These changes included the insertion of ss 67D–67F into the Act, which introduced the concept of availability provisions and established protections around their use.
The Act defines an availability provision as a provision in an employment agreement under which:
- the employee’s performance of work is conditional on the employer making work available to the employee; and
- the employee is required to accept any work the employer makes available.
Where an employer requires an employee to remain available for work outside his/her guaranteed and paid-for hours, the Act requires an availability provision to be included in the employment agreement. These provisions must meet the requirements of s 67D in order to be enforceable on the employee. An employer must:
- have a genuine reason based on reasonable grounds for an availability provision;
- ensure the employment agreement provides for guaranteed hours of work among agreed hours of work, with the availability provision relating to a period for which the employee is required to be available in addition to those guaranteed hours; and
- provide reasonable compensation to the employee for making him/herself available to work outside the guaranteed hours.
While a significant driver for the introduction of the availability provision sections was concern about zero-hour employment agreements, the application of the legislation has a wider reach.
The case law
The court’s first opportunity to consider the application of s 67D was the case of Fraser v McDonald’s Restaurants (NZ) Limited [2017] NZEmpC 95.
The employment agreement in question set out a complex scheme for employees to indicate their availability and to determine hours of work. The full court held that the clause in question did not amount to an availability provision and observed that wording in the employment agreement stating an employee could be “requested to work hours in addition to [your] work schedule” did not mean the employee was required to work those additional hours. Employees could be asked but not compelled, and this was supported by the evidence.
The court in McDonald’s observed that the employees’ claim for reimbursement of availability compensation appeared to be an attempt to have the court fix compensation. To do that would be to fix terms and conditions of employment which was outside its jurisdiction.
This meant the court’s ability to calculate and provide reimbursement of availability compensation as a remedy under s 123(1)(c) for any personal grievance established was restricted where the employment agreement did not provide for compensation.
Several years later, a full court was convened once again on an availability provision case.
In Postal Workers Union of Aotearoa Inc v New Zealand Post Limited [2019] NZEmpC 47, the court confirmed that the reach of availability provisions was not limited to zero-hour practices: it extended further, including to overtime practices.
The clause in question required employees to accept overtime hours when required if New Zealand Post made that work available on days when they were rostered to work.
The court made a declaration that the clause was an availability provision. The clause did not comply with the requirement to provide reasonable compensation for availability and employees were entitled to refuse to perform work in addition to their guaranteed hours on rostered days.
Late last year, another opportunity arose for the court to develop the jurisprudence on availability provisions in Stewart v AFFCO New Zealand Limited, including commentary about reasonable compensation.
In this case, James Stewart succeeded in establishing that he was unjustifiably disadvantaged by the inclusion of a non-compliant availability provision in his employment agreement.
The clause in question stated the employee might be required to work extra hours, including on weekends. Stewart felt he had little choice but to make himself available and AFFCO did nothing to dissuade him from that view.
The employment agreement Stewart signed did not provide for availability compensation but AFFCO later made an offer to pay availability compensation in the form of a 1.25% loading, which Stewart rejected as being “woefully inadequate”. A personal grievance for unjustified disadvantage arose because AFFCO gave no consideration to Stewart for keeping himself available to take on additional hours.
While the court adjourned the issue of remedies to give the parties an opportunity to resolve this between themselves, it made observations about the correct approach to calculating remedies.
It referred to the court’s statement in McDonald’s, that setting reasonable compensation under s 67D would amount to fixing the terms of employment. However, it found that the court could consider a quantum meruit claim for compensation; that is, a claim for the reasonable value of, or reasonable remuneration for, services performed.
Compensation assessed on a quantum meruit basis would amount to a benefit under s 123(1)(c)(ii) of the Act for which the court could properly direct payment.
The future
Recent years have seen numerous changes to the Act. Employers would be wise to review their existing agreements for compliance and to subject any arrangements relating to availability, overtime or on-call requirements to careful scrutiny.
No longer can employers rely on defending a claim for reimbursement of reasonable compensation for availability by taking the position that there is no jurisdiction, with such an award being tantamount to fixing terms of employment.
Nor can an employer rely on an argument that it is not requiring an employee to be available where there is a cultural expectation that he/she be available to work.
Perhaps the ripple effect of ongoing conversations globally about work/life balance (including recent debates about the EU Working Time Directive) and questions about the future of work have heightened concern from employees about the reach of work into their personal lives and an increase in claims questioning overtime and availability arrangements.
Employers must ensure their availability provisions are compliant and fit-for-purpose or beware of their bite.
June Hardacre is a partner and Hannah King is a senior associate at MinterEllisonRuddWatts.
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