ERA rules timing of resignation cost 32 workers their wage increases
The Employment Relations Authority (ERA) recently dealt with a dispute involving 32 former employees who sought back pay from a collective agreement that was ratified after they had already left their employment. The workers had all resigned before their union and employer finalised wage negotiations that included retrospective pay increases.
The workers argued they deserved back pay for wage increases that were backdated to cover a period when they were still employed. They said the plain meaning of the collective agreement entitled them to these payments regardless of when they left their jobs. The workers relied on employment law provisions that allow collective agreements to have retrospective effect.
Their former employer maintained that only current employees at the time of ratification were entitled to these benefits. The employer argued the workers had become legal strangers to the collective agreement once they resigned, removing any entitlement to benefits flowing from that agreement.
The dispute involved a collective agreement between Fire and Emergency New Zealand (FENZ) and the New Zealand Professional Firefighters Union. The agreement came into force on 1 July 2021 and was set to expire on 30 June 2024. The bargaining process took 18 months, running from June 2021 to December 2022, with ratification finally taking place across different locations throughout the country.
The agreement included wage increases for firefighters, with part of this increase specifically recognising changes to their working environment. These changes dated back to 2018 when firefighters became required to attend all emergency medical call-outs at certain levels of seriousness. This represented a shift in their duties, as firefighters became co-responders to medical emergencies from that point forward.
The collective agreement stated that employees who were employed at the time of ratification, were union members, and whose work fell within the agreement's coverage would receive back payment of the increased rates dating back to 1 July 2021.
All 32 former firefighters had resigned before the December 2022 ratification date, raising the question of whether they still qualified for back pay covering the period they were employed.
The agreement recognised that working conditions had changed significantly, noting: "In 2018 the parties recorded the recognition that the current operating environment and the circumstances in which front line roles in particular are carried out had changed since the job sizing benchmark roles of senior firefighter and station officer were first evaluated."
FENZ argued that the former workers were legally "strangers" to the collective agreement because they were no longer employed when it was ratified in December 2022. The employer said that since the collective agreement no longer applied to these workers, they could not enforce any benefits, including back payment that would otherwise have been payable had they remained employed.
The employer relied on section 56 of the Employment Relations Act 2000, which sets out who collective agreements apply to. This law states that collective agreements only cover employees who are currently employed by the employer, are union members, and whose work falls within the agreement's scope. FENZ argued that because the workers had left before ratification, they no longer met the employment requirement.
FENZ presented email communications between their chief negotiator and the union secretary that appeared to record a specific agreement to exclude departed employees from back pay entitlements. These emails were exchanged during the final stages of bargaining when both parties were communicating about drafting the settlement terms for ratification.
The employer's chief negotiator had emailed the union secretary asking whether certain wording captured their discussions, specifically stating: "Workers who are no longer at FENZ at the date of ratification, are not eligible for back pay in relation to the ratification of the agreement." The union secretary responded the same day, saying "leave it by email rather than as agreed for terms of settlement."
The chief negotiator gave evidence that this issue of back pay for departed employees had been discussed repeatedly between the bargaining parties during 17 months of negotiations. He said that the union had initially sought back pay for any departed employees, but FENZ had consistently refused throughout bargaining.
The former firefighters argued they were entitled to back pay based on the plain meaning of the collective agreement's terms. They pointed to clause 7 of the settlement terms, which stated: "Pay increases are backdated to the effective dates of 1 July 2021 and 2022, with back pay payable. All other conditions are, unless otherwise stipulated, effective from the date of ratification going forward."
The workers said they fell within the definition of covered employees because they were employees, union members, and performed work within the agreement's coverage during the period for which back pay was specified. They argued that employment law supported their position, particularly since the law allows collective agreements to have provisions that take effect from dates before the agreement comes into force.
The workers referenced a previous ERA decision where employees who had been made redundant before their collective agreement was ratified were still found entitled to back pay. In that case, the Authority had stated:
"Back dating was clearly contemplated. The collective agreement could easily have provided for the back-dating only to apply to existing and current employees or for a lump sum equivalent to the back-pay to be paid at a time after 1 July 2002, such as 4 February 2005, which equated to the outstanding allowances. The parties, however, took a broad brush approach, with the attendant board brush consequences."
The workers strongly contested the relevance of the email communications that FENZ relied upon. They argued these emails should not be considered when interpreting the collective agreement because they represented prior negotiations that were deliberately not recorded in the formal agreement. The workers said these emails should be excluded under the agreement's completeness clause.
The completeness clause in the collective agreement stated: "This agreement and individual Employee's letters of appointment, constitutes the full and entire agreement between Employees and Fire and Emergency New Zealand, and supersedes all previous negotiations, communications and commitments made to employees whether written oral."
The workers argued that considering the email agreement would breach good faith obligations because the union members who ratified the collective agreement were not aware of this exclusion. They said FENZ's suggestion to keep the exclusion "by email so you don't have to get into arguments on the day" was misleading to the ratifying members. The workers also pointed out that if this agreement was truly a term of the collective agreement, it should have been included in the formal settlement terms.
The ERA found against the former firefighters on two main grounds. The primary reason was that the workers were "strangers" to the collective agreement because they were no longer employed when it was ratified. The Authority explained: "Because the applicants were no longer employed at the time the new Collective was agreed, they were not entitled to the benefit of any entitlements in the new Collective."
The Authority also found that the email communications between the parties provided relevant background that informed how the agreement should be interpreted. Despite the workers' arguments that the emails represented prior negotiations, the Authority concluded:
"Because of that I do not consider the emails can be characterised as prior negotiations... What is recorded is not a subjective view of one partis interpretation. Instead it reads as a mutually confirmed and recorded outcome between two bargaining teams, confirmed in writing between the two [chief negotiators]."
The Authority distinguished this case from the previous decision that the workers had relied upon, noting: "No such inferences are able to be drawn in this case once the agreement about back pay reached between the [union] and FENZ is taken into account... At the conclusion of bargaining and in the process of drafting the Terms of Settlement both parties agreed the departed employees were to be excluded from entitlement to back pay."
The Authority concluded: "Having established that agreement was reached, as an exercise in cross checking the plain and ordinary meaning of the words of the Collective Agreement using the emails as relevant background or context, the conclusion reached is that back pay is not payable to the applicants."
The ERA declined to grant the workers' request for back pay and also declined to award penalties for the employer's failure to provide wage and time records, noting this was not a case of complete failure to provide records and that some records had been provided.
