HomeFEATURESEmployment law game changes in the retail sector

Employment law game changes in the retail sector

Rule change one: Public holidays and when a day would ‘otherwise be a working day’

Flexibility is important in the retail sector, so variable rosters are popular. But when it comes to determining whether employees are entitled to an alternative day’s holiday for working on a public holiday, they can be problematic.

Employees are entitled to an alternative day’s holiday (day in lieu) for working on a public holiday if the public holiday falls on a day that would ‘otherwise have been a working day’ for that employee. But with variable rosters, it can be difficult to judge what would ‘otherwise be a working day’.

Lots of retailers have operated an unofficial rule of using the three weeks leading up to the public holiday as the assessment period for whether a day would otherwise be a working day. That is, if the public holiday falls on a Monday and the employee hasn’t worked in the last three Mondays, that day would not ‘otherwise be a working day’ for that employee.

This rule was successfully challenged in the case of Wendco (NZ) Limited v Labour Inspector of MBIE [2017]. Wendco (which operates the Wendy’s fast food chain) had explicitly included the three week rule in its employment agreements so it was clear to employees. However, the Employment Relations Authority (Authority) in rejecting the validity of this rule, found that the rule restricted or reduced some employees’ entitlements to alternative holiday days and created a risk of targeted rostering.

Rather than a three week period, the Authority held that employers had to undertake an individual assessment over a three to six month period, to determine whether the public holiday in question would ‘otherwise be a working day’ for an employee. If the employee worked that day of the week for a majority of weeks during that period, then they would be entitled to an alternative day’s holiday for working a public holiday falling on that day.

This case makes it clear that an individualised approach is the price an employer pays for the benefit of the convenience it gains by using variable rosters. Retailers may benefit from taking a more standardised approach to rostering, particularly in relation to days on which public holidays regularly fall, such as Mondays.

Since Wendco, we have seen media headlines claiming that employees are missing out on their alternative holiday entitlements based on the three week rule, referring to this as “outright wage theft”. Most recently, Unite has asked other major fast food retailers to accept the Authority’s Wendco judgment and voluntarily remedy the impact of its three week assessment period. This is not a simple compliance issue that has a quick fix, there is a large degree of analysis involved and each employee’s entitlements will need to be calculated individually.

Rule change two: Working time before and after work is paid time

Many retailers require employees to be present before their store opens for a quick overview of the day ahead and some are often required to stay after hours at the end of the day for cashing up, or while the last customers make their way out of the store. Employees are often not paid for the extra 10 – 15 minutes at either end of the day.

A recent Employment Court case against a national furniture store held that where employees were expected to attend morning meetings before work each day, they were entitled to be paid for this time. The retailer unsuccessfully argued that this time was not considered “work” for this purpose of the Minimum Wage Act 1983 and that they had no obligation to pay employees for these meetings.

The Employment Court made clear that this, along with cashing up, handing over, or waiting until the last minute customers leave a store, will be considered “work”. Therefore, not paying employees for this time will be considered a failure to meet minimum wage obligations. This decision gives rise to an obligation to make back payments to hundreds of affected employees for the last six years.

Recent headlines suggest that this practice has been widespread and the Labour Inspectorate has been overwhelmed with complaints of a similar nature.

Rule change three: Availability provisions

While the introduction of tighter rules around availability provisions and zero hours contracts is not new, the first decision to consider this issue has provided some interesting guidance around how availability can be approached.

An “availability provision” is a clause in an employment agreement to the effect that: whether an employee works or not is conditional on the employer making work available; and the employee is required to be available to accept work. These provisions have typically been used in sectors where a degree of flexibility is required in rostering, such as the retail sector.

Since the new rules came into effect in 2016, employers making use of availability provisions must provide guaranteed hours and ‘reasonable compensation’ in the employment agreement, for the employee being available.

The case of Fraser v McDonald’s Restaurants (NZ) Limited [2017] was the first case to assess whether availability provision rules were engaged or infringed.

Two Auckland McDonald’s employees sought a declaration that their individual employment agreements contained availability provisions that were not in accordance with statutory requirements. McDonald’s was rostering employees based on their agreed availability, for a set number of guaranteed hours which was calculated on a quarterly basis and set at 80 percent of the average from the previous quarter. Additional hours were offered on occasion to employees and they were given 24 hours to decline these additional hours if they were no longer available. The issue for the court was whether the employees were required to be available during the additional hours, and if they were, whether it was necessary to include an availability provision in their contracts.

The Employment Court concluded that a request to work hours in addition to an employee’s work schedule was not a requirement, and such a request could be rejected without penalty. This meant it operated lawfully and was not an availability provision.

This case provides a useful example of how employers could operate a rostering systems which provides an element of flexibility, within the rules applying to availability provisions.

Changes on the horizon

With the change in Government, comes the customary change to employment laws. Below is a summary of the changes most relevant to the retail sector.

Trial period of 90 days restricted to businesses with less than 20 employees

The statutory 90 day trial period will become a thing of the past for retailers with 20 or more employees, if the Employment Relations Amendment Bill 2018 (the Bill) passes in its current form.

This change will come into effect four months after the Act comes into force. Until then employers are able to continue making use of the trial period.

The trial period has been a useful tool, particularly in the retail sector, where job applicants may have limited experience and it can be tricky to assess customer service and other essential skills until the person has commenced work.

Going forward, retailers that employ over 20 employees will likely revert to using probationary periods in their employment agreements. However, unlike a trial period, the probationary period does not prevent the employee from raising a personal grievance in relation to the dismissal, so a fair and justified process will need to be followed.

Statutory rest and meal breaks

Employees are currently entitled to rest and meal breaks that provide reasonable opportunity to rest, refresh and take care of personal matters. The new Bill will restore statutory rest and meal breaks and remove the current flexibility and ability for businesses to compensate an employee for not taking a break. According to the Bill, breaks will need to be of a prescribed length and at fixed times during a shift, unless otherwise agreed. The Bill states that as far as reasonably practicable, a rest break should be in the middle of a shift. This could have implications for retailers that have multiple staff with similar start and finish times.

Businesses should ensure they are not caught off guard by these amendments and changes to ‘the rules of the game’. Now is also a good time to update employment agreements and systems to ensure your business does not fall into any employment law traps.

Our national team of retail and employment experts is on hand and would be happy to answer any questions you have.

For a confidential chat, feel free to contact;

Jessie Lapthorne: Mobile; +64 9 3747156 


Katrina Hammon Mobile; +64 9 3747147 


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