Employment Court rules that all salaried employees who are paid fortnightly must be paid $1,696 a fortnight regardless of how many hours they work
The Employment Court has ruled that Mount Cook Airline Limited’s part-time cabin crew who are paid a salary need to be paid the full fortnightly minimum wage of $1,600 (now $1,696 as at 1 April 2022) despite these part-time cabin crew only working six days a fortnight. This aspect of the Employment Court’s decision has been appealed to the Court of Appeal.
The Employment Court also ruled that the time part-time cabin crew spent when required to be away from home overnight was not ‘work’ under the Minimum Wage Act 1983 and so there was no requirement for them to be paid under the Act for this time.
Mount Cook operates airline services. It employs full-time, part-time and casual cabin crew. Full-time cabin crew are rostered to work for nine days in each 14-day roster period. Part-time cabin crew are rostered to work six days in each 14-day roster period. The duties and responsibilities of these employees are otherwise the same.
The part-time cabin crew’s salary is calculated as two thirds of the full-time salary and from 14 May 2021 the salary range payable was $1,049.27 to $1,161.42.
The E tū union claimed that this salary range (and previous salary ranges) were less than the amount payable to employees who fell within the “in all other cases” category of the Minimum Wage Order.
The Minimum Wage Order which applied at the time stated:
4 Minimum adult rates
The following rates are the minimum rates of wages payable to an adult
- for an adult worker paid by the hour or by piecework, $20 per hour:
- for an adult worker paid by the day,—
(i) $160 per day; and
(ii) $20 per hour for each hour exceeding 8 hours worked on a day:
- for an adult worker paid by the week,—
(i) $800 per week; and
(ii) $20 per hour for each hour exceeding 40 hours worked in a week:
- in all other cases,—
(i) $1,600 per fortnight; and
(ii) $20 per hour for each hour exceeding 80 hours worked in a fortnight.
*The above rates were increased from 1 April*
The part-time cabin crew can sometimes finish work for the day at a location other than their home base. When that happens, they stay overnight away from home. The next working day for that employee starts from that other location and ends when the home base is reached at the end of that working day. E tū argued that part-time cabin crew were at work while they were away from home overnight.
Minimum Wage Order
The Employment Court found that the Minimum Wage Order was not satisfied if a complying salary (i.e. a salary above the minimum wage) was pro-rated for part-time work without the resulting pro-rated salary also complying (i.e. being above the “in all other cases” figure of $1,600 (at that time) set out in the Minimum Wage Order).
The Employment Court found that the language in clause 4 of the Minimum Wage Order was clear and does not suggest that what is payable can be a part of, or portion of, those units of time. E tū submitted that employees in the “in all other cases” category were entitled to a minimum fortnightly sum and an extra payment for each hour worked over 80 in a fortnight.
Mount Cook argued that the “all other cases” category should be interpreted as a fortnightly rate where the employee works at least 80 hours. Mount Cook argued that if the employee worked fewer hours, the rate is proportionate to the actual work performed. So long as the minimum wage is paid for each hour actually worked compliance would be achieved. However, the Employment Court did not accept this approach. The Employment Court held that any part-time salary must still comply with the Minimum Wage Order (i.e. must be at least (at that time) $1,600 a fortnight), regardless of the hours worked.
The Employment Court considered whether the part-time employees were at ‘work’ while staying overnight by reference to three well established factors:
- Constraints placed on the employee.
- Responsibilities of the employee.
- The benefit to the employer.
The Employment Court found that when all of these factors were weighed up, the part-time cabin crew were not working and so were not entitled to be paid the minimum wage for staying overnight. The part-time cabin crew were free to do as they pleased once their duty ended and they had no responsibilities or duties to perform.
This decision has serious implications for any employer with part-time staff who are paid by way of a salary on a fortnightly or monthly basis. The effect of this decision is that those employees need to be paid the fortnightly rate of the minimum wage (currently $1,696) regardless of how many hours they work.
It is difficult to reconcile the Employment Court’s decision, that what is payable to an employee under the Minimum Wage Order for an hour, day, week or fortnight cannot be a part or portion of those units of time, with the reality of how most employees work. Many employees work less than a whole number of hours or less than a whole day, week or fortnight. The generally accepted approach to these arrangements has been to pro-rate the rates set out in the Minimum Wage Order to account for this, and to reflect the actual amount of time worked.
This decision has the effect of making those arrangements non-compliant with the Minimum Wage Order and will likely lead to some absurd results. For example, a part-time employee who works two days a week, is paid fortnightly and is paid $40,000 per annum (based on a full-time salary of $100,000) would be paid below the minimum wage. It is our view that this outcome was not intended by the Minimum Wage Order.
Mount Cook has been given leave to appeal this aspect of the Employment Court’s decision to the Court of Appeal.
If you have any questions about this case and how it will impact you or your business, please get in touch with Simon Martin or one of the Employment Team.