Shortfall on holiday pay sparks legal challenge to a two-decade company practice
The Employment Relations Authority (ERA) has ruled that shift allowances paid to Amcor Flexibles (New Zealand) Limited employees must be included when calculating gross earnings for annual holiday pay, in a determination that overturns more than two decades of company practice.
The decision resolved a dispute between Amcor and E tū Incorporated, the union representing affected employees, over the interpretation of section 14 of the Holidays Act 2003 (HA03) and clauses within the parties' collective agreement.
The matter originated in November 2024, when Amcor employee Stewart Latimer noticed while on annual leave that his holiday pay appeared incorrect.
Latimer believed the payment should have accounted for his shift allowance. He raised the concern with Amcor and the E tū delegate in December 2024, prompting a meeting between Amcor representatives and E tū members in February 2025.
At that meeting, Amcor confirmed that shift allowances had never been factored into gross earnings calculations for holiday pay purposes, a practice it said had been in place since 2002.
Amcor argued its approach complied with clause 16.1 of the collective agreement, which requires holiday pay to be calculated in accordance with the HA03, and that shift allowances qualified as non-taxable payments excluded from the statutory definition of gross earnings under section 14.
E tū disputed this, arguing that both the collective agreement and the HA03 required shift allowances to be included.
Should shift allowances count towards holiday pay?
ERA member Simon Greening found in favour of the union.
"The taxable status of an allowance is not determinative of whether the allowance falls within the definition of gross earnings," Greening ruled.
Greening's decision hinged on the narrow scope of the statutory exclusion Amcor sought to rely on.
The ERA found that a shift allowance is "not paid to reimburse an employee for time lost as a result of public transport not being available" and does not meet the threshold of a "reasonably assessed amount to reimburse the employee for any costs incurred," as required under section 14(c)(ii) of the HA03.
Amcor had pointed to the 1971 New Zealand Metal Trades Employees Award to argue the allowance was historically tied to travel reimbursement.
But the ERA disagreed, finding the Award provision Amcor relied on "does not refer to shift allowances" at all, and that the relevant Award clause on shift allowances instead concerned weekend work, not travel costs.
Amcor also attempted to raise estoppel as a defence, arguing that a shared understanding had developed between the parties that shift allowances would be excluded from gross earnings.
The Authority rejected this argument on all four grounds required to establish estoppel, finding that Amcor's practice stemmed from its own interpretation of the HA03 rather than any representation made by E tū.
"Amcor was not relying on a belief or expectation created by Etū, but its own interpretation and understanding of the HA03 in regard to determining gross earnings," it said.
The Authority concluded that shift allowances paid to Amcor employees covered by the collective agreement "fall within the definition of gross earnings pursuant to s 14 of the HA03."
