A recent Employment Court case has drawn attention to the ongoing challenges faced by employers when determining correct rates of pay carried out on public holidays.
With Matariki approaching, it is a timely reminder for employers to turn their attention to the Holidays Act 2003 to ensure legal compliance.
Key Principles
No work on a public holiday
- Employees are entitled to a paid day off work for the public holiday if that day would ‘otherwise have been a working day’ for that employee.
- Payment for the day off must be no less than the employee’s relevant daily pay (the amount they would have received had they worked on the day if it wasn’t a public holiday, including commission, overtime, etc.) or average daily pay (gross earnings for the previous 52 weeks divided by the number of days worked or on paid leave in that 52 week period). Average daily pay may be used where it is not possible or practicable to calculate relevant daily pay or if the employee’s daily pay varies within a pay period.
- An employer can require an employee to work on a public holiday only if the public holiday falls on a day that the employee would otherwise work and the employee’s employment agreement requires them to work on a public holiday.
Working on a public holiday
- 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.
- Payment for working on a public holiday must be paid at the employee’s relevant daily pay or average daily pay that relates to the time actually worked on that day, plus half that amount again (time and a half).
When a day would ‘otherwise be a working day’
- What would ‘otherwise be a working day is generally straightforward for workers with a consistent weekly schedule.
- Where it is unclear whether a public holiday falls on a day that would otherwise be a working day (for example, where employees have variable rosters) the law requires employers and employees to attempt to reach agreement having regard to a range of factors including what is specified in the employment agreement, the work pattern, and whether the employee works only when work is available. While this will often be a fact dependent assessment, previous case law has indicated that a review of work patterns over a three to six month period is reasonable when assessing whether a public holiday would ‘otherwise be a working day’ for a specific employee.
Fire and Emergency New Zealand v New Zealand Professional Firefighters Union [2023] NZEmpC 90
This recent Employment Court case concerned a provision in a collective agreement (CEA) between New Zealand Professional Firefighters Union (NZPFU) and Fire and Emergency New Zealand (FENZ) which effectively sought to set a special public holiday rate. The case focused on whether this provision was compliant with the “time and a half” public holiday pay requirements in the Holidays Act.
The CEA in issue provided for a standard hourly rate which was an employee’s total weekly wage divided by 42 (being the average number of hours worked in a seven-day period).
The CEA also provided for three overtime rates which applied in different scenarios.
- Rate 1: first three hours of overtime on a weekday and before 12 pm on a Saturday.
- Rate 2: overtime worked in excess of the first three hours and all overtime after 12pm on a Saturday, or any time on a Sunday.
- Rate 3: overtime worked on a public holiday (1.5 times the standard hourly rate).
At the time of the case, Rates 1 and 2 were also 1.5 times the standard hourly rate.
Rate 3 was in effect a special public holiday rate. Specifically, there was a clause in the CEA which stated that, where an employee worked an overtime shift or overtime hours on a public holiday, they would be paid Rate 3, which already included 0.5 extra for working on a public holiday.
FENZ position was effectively that it was legally compliant to pay just Rate 3 for overtime on public holidays as it was already inclusive of the time and a half payment. It said that relevant daily pay (including overtime), when calculating payment for working on a public holiday, was the standard hourly rate.
NZPFU argued that this approach disregarded overtime rates which would have otherwise applied (Rate 1 or 2), and that time and a half needed to be paid in respect of those higher overtime rates.
The Court agreed with NZPFU and stated that relevant daily pay must be based on the amount the employee would have received if they worked on the day concerned, including overtime, if this would otherwise have been received.
The Court was of the view that if overtime is worked on a public holiday, the definition of relevant daily pay requires the starting point to be the applicable overtime rate. This meant that Rates 1 or 2 should have been used as the starting point, with the 1.5 multiplier applied to that rate for public holiday overtime. The CEA was ultimately in error because it attempted to set the rate of pay for public holiday overtime, without regard to the overtime rate that the employee would have received if the day worked was not a public holiday.
While the decision might be specific to those employers that have special public holiday overtime arrangements, it serves as an important reminder of the correct approach for payment when working on public holidays.
Special thanks to Associate Nikita Bartlett for preparing this article. For more information, please contact a member of the Employment Law team.
