Recent case looks at non-compliant availability provision

What happens when an availability provision is non-compliant because it does not allow for compensation, but the employee is not “required” to work additional hours? 

Can the employee still be said to have suffered an unjustifiable disadvantage in his or her employment? 

This issue was considered by the Employment Court last year in AFFCO New Zealand Ltd v. Stewart [2022] NZEmpC 200, which offers helpful insights into how availability provisions will be treated by the employment institutions.

What are availability provisions? 

An availability provision requires an employee to be available to perform work when the employer directs it.

Section 67D of the Employment Relations Act 2000 places restrictions on the use of availability provisions. The section was originally introduced to address “zero hour” contracts where an employee had no guarantee of work or minimum hours but was required to remain available should they be required.

Under the Act, availability provisions are allowed but only if they meet certain requirements:

• The employment agreement specifies agreed hours of work, including guaranteed hours.

• The provision relates to a period where the employee is required to be available in addition to their guaranteed hours.

• The employer has genuine reasons based on reasonable grounds for including the provision and the number of hours of work specified in that provision.
• The provision provides for payment of reasonable compensation to the employee for making themselves available. For salaried employees, availability compensation can be part of their salary. For wage employees, availability compensation must be a separate amount.

Further, s. 67E of the Act states that employees are entitled to refuse additional work if the availability provision does not allow for reasonable compensation for making themselves available to perform the additional work.

When can employees bring personal grievance claims for non-compliant availability provisions?

Under s 103 of the Act, an employee may have a personal grievance against the employer where the employee has been unjustifiably disadvantaged by their employment agreement not complying with certain statutory provisions, including s. 67D of the Act.

This means that a non-compliant availability provision may give rise to a personal grievance, but only where the employee has been disadvantaged by the non-compliance.

The AFFCO case

Mr. Stewart worked as a meat processor. His employment agreement contained an availability provision which stated that he may be required to work extra hours during the week and on weekends as required by his employer, and he must work such extra hours as required. 

The availability provision did not include compensation for availability and was non-compliant with s. 67D. The employer offered compensation at a later stage, but the offer was rejected by Stewart as he believed the level of compensation offered was insufficient. No further negotiation between Stewart and his employer took place. Stewart continued to work overtime, as he had done for many years, because he felt that there was an “absolute expectation” he would do so.

Stewart subsequently brought several personal grievance claims in the Employment Relations Authority, including in respect of the non-compliant availability provision. While Stewart successfully argued that the availability provision did not comply with s. 67D of the Act, the Authority determined that he had not suffered an actual disadvantage because his employer had not tried to enforce the availability provision. There was also no evidence of a disadvantage having been suffered.

The determination was appealed. The sole issue on appeal before the Employment Court was whether Stewart had suffered any disadvantage because of the non-compliant availability provision.

Key insights into non-compliance

The Court decided that Stewart had suffered disadvantages that arose by the inclusion of the non-compliant availability provision. Specifically, there was no value attributed to Stewart’s availability, and the employer did not share the cost of Stewart making himself available. 

The key point from the decision is that non-compliant availability provisions can amount to a disadvantage where no compensation is given to the employee for making themselves available. The underlying rationale of this outcome is the same as that of the reason for reform in this area in the first place: availability provisions materially constrain an employee’s ability to plan their life away from work, and employees should be compensated for this.

The AFFCO case offers several other helpful insights. In particular, even where the employer has not enforced an availability provision as such, the Court will consider the nature of the employment relationship as well as how and why additional work is offered and accepted.

AFFCO argued that Stewart had the right of refusal to perform additional work under s. 67E of the Act, but had not exercised that right, nor was he or would he have been disciplined for declining additional work. The Court rejected that argument on the basis that:

• In practice, Stewart could not realistically decline additional work. That was because Stewart’s team was small and to decline additional work would have meant a lot of stress would be placed on his co-workers. There was also a power imbalance between the parties. The Court found that these factors justifiably informed his reasonable belief that there was an “absolute expectation” he accepted additional work.

• It was within the employer’s interests for Stewart to accept additional work, and it made no attempts to dissuade him or make it clear to him that additional work was voluntary rather than expected.

• There was no difference between the expectations for Stewart to accept additional work versus other employees whose employment agreements did include availability provisions which allowed for compensation.

The AFFCO case also makes it clear that employers have an obligation to either engage in negotiations for the amount of compensation for the employee making themselves available (if it has not previously been agreed) or release the employee from the availability provision where the parties are unable to come to an agreement.

Finally, the Court in the AFFCO case noted that a non-compliant availability provision will not automatically give rise to a personal grievance. Only where an employee has suffered a disadvantage as a result of a non-compliant availability provision will they have a personal grievance claim.

Statutory requirements

In conclusion, availability provisions are not straightforward and there are a number of statutory requirements that apply, including that the employee be adequately compensated for making themselves available. 

An availability provision can only be the basis for a personal grievance where an employee has suffered a disadvantage. This will not be the case merely because an availability provision is non-compliant with the Act. However, reasonable compensation in this context is a statutory requirement and failure to compensate employees for making themselves available can amount to a disadvantage. 

Ultimately, the employment institutions in deciding these issues will consider the nature of the employment relationship and how the availability provision operates in practice.

Alison Maelzer is a partner practicing employment law at Hesketh Henry in Auckland. Bridget Perkins is a law graduate in the Employment Team at Hesketh Henry in Auckland.