Legal Matters

by Simon Lord

last updated 19/12/2017

Follow the law on alternative holidays, says Labour Inspectorate

by Simon Lord

last updated 19/12/2017

19 December 2017 – Payroll calculations are continuing to catch companies out, and franchisees could be vulnerable

Following on from an Employment Relations Authority (ERA) ruling that workers have a right to an alternative holiday when working on a public holiday, the Labour Inspectorate is advising businesses to take steps to meet their obligations under the Holidays Act.

Wendco (NZ) Limited, the company that operates all the Wendy’s stores in New Zealand, had been using an interpretation of the law that an employee had to have worked the previous three Mondays if they wanted to claim an alternative holiday for working a public holiday on a Monday.

It was suggested that managers deliberately rostered workers off one of those previous Mondays to stop them getting the entitlement. Although the ERA’s determination related to Wendy’s, other companies are known to have employed similar approaches. The ERA has clarified that such restrictive interpretations are not acceptable and given guidelines as to what must be considered.

Wendco has been ordered to recalculate entitlements for all employees back to July 1, 2012, and ensure every effort is made to contact previous employees who will be owed money. One estimate suggests that the total cost will be around 16,500 days or $1.6 million worth of leave. The company has advised that it may appeal the ruling.

Franchisees beware

With a number of statutory holiday days coming up over the summer period, franchisees would be well-advised to ensure that their payroll practices comply with the law, and that all entitlements are calculated on an individual basis.

‘As the ERA has indicated, an easy approach for a business to take using ‘blanket rules’ to determine holiday entitlements isn’t the same as a lawful one,’ says the Labour Inspectorate’s Payroll Lead Tania Donaldson.

‘The use of a ‘three week rule’ by Wendco (NZ) Limited to work out entitlements around public holidays meant some employees were not being provided with their full entitlements, and the employer was not meeting their obligations under the Holidays Act.

‘To work out an employee’s rights to an alternative holiday, you need to know whether the day is an ‘otherwise working day’ for the employee.

‘Working out whether the day is an ‘otherwise working day’ is a practical task, and each situation needs to be considered based on the employee’s specific situation and work pattern, where employers consider and apply all of the factors of s12 of the Holidays Act where they are relevant.

‘If it’s unclear whether the day is an “otherwise working day”, the things that may need to be considered include what the employment agreement says, the employee's usual work patterns, what the rosters say, whether the employee would normally have worked, and any other relevant factors.

‘Employers who configure their payroll system in a way that is convenient to themselves without proper regard to their obligations run a high risk of being non-compliant. While these considerations may require additional effort for some businesses, this is the law and they must abide by it.

‘If any employer has breached their obligations through the use of such blanket rules, they must fix their processes to prevent future breaches, and ensure they pay their employees what they’re owed for past breaches.

‘This is important as when employers fail to meet their obligations, the employees working hard to sustain the business miss out on their minimum entitlements. In addition, other businesses that do properly meet their obligations face unfair competition.’

More help

The Inspectorate advises that employers who are unsure if they are meeting their obligations under the Holidays Act should go to for information, tools and flow charts to help employers become compliant, seek independent legal advice, or ring MBIE’s contact centre on 0800 20 90 20.

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