Employment Court rules employers were not entitled to require employees to take annual holidays during the 2020 Covid-19 Lockdown.
The Employment Court has ruled that Carter Holt Harvey LVL Limited (Carter Holt LVL) was not entitled to require its employees to use their annual holidays entitlements during the 2020 Covid-19 Lockdown because it did not make genuine attempts to reach agreement with employees about the timing of those holidays before issuing the direction to take leave.
Like many businesses affected by the 2020 lockdown, during Alert Level 4, Carter Holt had to shut down sites and employees were not able to attend work. Employees were advised that they would need to take annual holidays, followed by other types of leave once those entitlements had been exhausted.
Holidays Act 2003 entitlements
Under the Holidays Act, when annual holidays are to be taken by the employee is to be “agreed between the employer and the employee”, although an employer may require an employee to take annual holidays if the parties are unable to reach an agreement as to when the employee will take his or her annual holidays.
E Tū and the individual plaintiffs argued that employers were obligated to communicate with employees in an attempt to reach an agreement, proposing the timing of annual holidays, not determining it. If there is no agreement, then they may require the taking of annual holidays by giving a minimum of 14 days’ notice.
Carter Holt Harvey argued that the Holidays Act did not prescribe a specific process obligation before employers could determine that it is unable to reach an agreement. It stated that it was merely required to undertake a good faith assessment based on its experience with its workforce, the options practically available in the circumstances, and commercial decision making, in assessing whether an agreement could be reached, after which it may require the employee to take annual holidays.
Reaching an Agreement
The Court considered that the scheme of the Act anticipates an employee applying for leave, and then the parties attempting to agree, with the employer not unreasonably withholding consent to the employee’s request to take annual holidays. However, the employer may then require the taking of annual holidays if the parties are unable to reach an agreement.
The Court reiterated the importance of acting in good faith, and being responsive and communicative in the circumstances, even during unprecedented events such as the Alert Level 4 lockdown. In this situation, the Court found that Carter Holt Harvey did not attempt to engage with its employees before making a direction to take leave, although there were reasonable communication streams available. This included engaging with E Tū, the known representative of over half of its workforce, to whom it directly owes an obligation of good faith. Carter Holt Harvey was not entitled to assume that employees would be difficult to contact and engage with based on previous experience. The Court rejected its argument that even had there been direct engagement, it would have been unable to reach an ‘agreement’ on the issue. Given it made no attempt to reach an agreement, the Court ruled it was not entitled to require employees to take annual holidays. Carter Holt Harvey could not have lawfully required one of the employees to take annual holidays in any event, as that employee had no annual holiday entitlements.
A side issue arose as to whether, in circumstances where employees did not have an opportunity for rest and recreation but were only able to leave their homes in very restricted circumstances, they could not be said to be taking annual holidays in terms of the Holidays Act.
The Court quickly rejected that proposition. Although the Act envisages that annual holidays would provide for the opportunity for rest and recreation, it did not obligate employers to assess whether, in the particular circumstances of the employee, they would be able to utilise their annual holidays for those purposes.
This decision serves as a reminder of the importance of the overarching duty of good faith and the need to engage with employees before directing them to take annual holidays. It is not sufficient for an employer to unilaterally determine that it will not be able to agree on the timing of the holiday with employees.
The decision also reaffirms that employers must adhere to their legal obligations notwithstanding the advent of a public health emergency. Employers must comply with the duty of good faith notwithstanding an unprecedented event or change in working arrangements.