The timing of when workers cashed out their leave changed their redundancy calculations
Early leave sellers at New Zealand's oil refinery won bigger redundancy payouts than employees who waited.
When Channel Infrastructure made 121 workers redundant on May 31, 2022 after converting its Marsden Point oil refinery to an import terminal, a seemingly straightforward leave buyout scheme created a costly legal divide. On December 8, 2025, the Employment Court confirmed that divide was lawful.
In November 2021, the company offered employees a chance to cash out their accumulated leave early. The pitch was simple: sell now or get paid at redundancy. What seemed like equivalent options turned out to be anything but.
Forty-four employees took the deal and sold their leave in December 2021. The remaining employees held onto their leave balances, expecting payment when their employment ended six months later.
The problem emerged in how redundancy compensation was calculated. Under the collective agreement, redundancy payments were based on "average weekly earnings as defined in the Holidays Act 2003," which includes all payments the employer is contractually required to make.
When redundancies were processed, Channel Infrastructure treated the two groups differently. For the 44 employees who had accepted the buyout offer, those earlier payments were included in their gross earnings calculations. But for the employees who waited, their additional leave payments on termination were excluded from the redundancy formula.
The employees challenged this calculation at the Employment Relations Authority, which sided with them. Channel Infrastructure then appealed to the Employment Court.
Judge Kathryn Beck delivered a split decision that upheld the unequal treatment. The court found that while the collective agreement itself did not require the company to pay out additional leave types like service leave and shift worker compensation on termination, the leave buyout offer created binding individual agreements with those who accepted.
As Judge Beck explained, when employees accepted the buyout, all elements of a contract were present: "There was an offer recorded in an email with clear terms; 44 employees expressly accepted that offer within a specified timeframe, and the company executed the deal."
For employees who declined the buyout, the outcome was less favorable. The court acknowledged the company had made a promise to pay their leave at redundancy, stating: "if you choose not to accept this "one off" offer to cash out your leave, it will be paid out at the time of any redundancy." While this created an obligation under good faith principles, it did not create a contractual requirement that would trigger inclusion in redundancy calculations.
The distinction proved critical. Contractual obligations fall within the definition of gross earnings under the Holidays Act. Good faith obligations, while legally binding in their own way, do not.
The case highlights how carefully worded offers during restructuring can inadvertently create different entitlements for employees in identical situations. The 44 early sellers effectively had their leave counted twice in the value they received, while those who waited received only the face value of their leave payment without the multiplier effect of redundancy calculations.
For HR teams managing large-scale redundancies, the case demonstrates how voluntary schemes offered during consultation can crystallize into enforceable agreements that change the calculus of final payments. The source of a payment obligation matters as much as the obligation itself when determining what counts toward statutory calculations.
Channel Infrastructure now faces the task of distributing funds held in trust based on these distinctions, with employees who made different choices about the same offer receiving materially different outcomes from their redundancy.
