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Minimum wage: rate or fixed amount?

5 Apr 2024

| Author: Fiona Wu

Employment – Minimum Wage Act 1983 – part-time salaried employee – pro-rata salary – meaning of ‘rate’

Mount Cook Airline Limited v E tū Incorporated [2024] NZCA 19 per French, Miller and Katz JJ.

 

Mount Cook Airline Ltd (Mount Cook) employs both part-time and full-time cabin crew. E tū is the union that represents the cabin crew. The collective agreement between Mount Cook and E tū provides for part-time cabin crew to perform two-thirds of the work of full-time cabin crew over a fortnightly pay period, in exchange for a pro rata salary (two-thirds of a full-time salary).

E tū challenged this approach to calculating the salary of part-time cabin crew employees in the Employment Court, on the basis it breaches the requirements of the Minimum Wage Act 1983. By Order in Council, the Act prescribes that (among other things) the minimum rates of wages payable to an adult worker is $1,600 per fortnight. E tū argued the order should be interpreted as requiring a minimum payment of $1,600 per fortnight to part-time cabin crew, regardless of the number of days (or hours) actually worked during their fortnightly pay period.

 

The Employment Court decision

The Employment Court agreed with E tū, finding the expression “rate” of pay to mean a fixed amount payable for a unit of time: “the language in…the order is clear and does not suggest that what is payable can be part or portion of those units of time”.

 

The Court of Appeal

Before the Court of Appeal, Mount Cook submitted the Employment Court erred in its interpretation of the order, and that the order’s scheme was clearly based on an hourly rate, an eight-hour day, a 40-hour full-time week and an 80-hour full fortnight. The goal of minimum wage legislation is to ensure an employee receives at least the minimum hourly wage for all the time they have actually worked, and the pro rata interpretation meets that objective.

E tū supported the Employment Court’s reasoning, submitting the wording of the order was unambiguous and the pro rata interpretation would dismantle the order into a single “paid by the hour” category. E tū did not accept that the order was based on an hourly rate, eight-hour day and 40-hour week.

The Court of Appeal noted that while competing interpretations advanced by the parties were both potentially open, the pro rata interpretation accorded more closely with the plain meaning of the clause. The court noted the clause used the word “rates” throughout, and the ordinary meaning of “rate” envisages a proportional relationship between time and wage, as opposed to a fixed amount.

The court also turned to the overall context of the Act, which defined a default full-time working week as 40 hours, and to its purpose of preventing the exploitation of workers and recognising the diminished bargaining power of lowly paid employees. These purposes were better served by the pro rata interpretation.

 

Applicable principles: interpretation of Minimum Wage Order 2021 as it applies to part-time salaried employees – whether ‘rate’ to be interpreted as fixed amount – whether pro rata salary arrangements compliant.

 

Held: The appeal is allowed. The Employment Court erred in its interpretation of the order as it applied to part-time salaried employment.

The amount set out in the order was a rate of payment per fortnight, based on a full-time worker who worked 80 hours over two weeks. The minimum wages entitlement of part-time salaried employees must be prorated. The entitlement of a part-time salaried employee will be x/80 multiplied by the relevant sum specified in the order, where x equals the number of hours of work the employee has either performed during the relevant fortnight or agreed to perform, but did not perform due to a direction by their employer – whichever is greater.

 

Mount Cook Airline Limited v E tū Incorporated [2024] NZCA 19.

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