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Supreme Court Decision - Redundancy

OCS Statement – 10 August 2012

Supreme Court Decision - Redundancy

Yesterday, the Supreme Court handed down its decision in a long running dispute between OCS and the New Zealand Service & Food Workers’ Union (“SFWU”). This dispute related to the right to bargain for redundancy compensation and entitlements where there has been a transfer of undertaking (change of contract situation) and the collective agreement excludes redundancy payments.

This dispute arose out of the change of cleaning contract for Massey University, where OCS successfully took over the contract from the incumbent cleaning companies. This occurred in 2010. At the time of transfer, the contract scope was such that OCS had to perform the contract at significantly reduced hours per person than what had previously been done.

OCS consulted extensively with the SFWU and affected staff to make the necessary workplace changes, and consulted with a view to retaining staff or keeping the potential number of redundancies to a minimum. These negotiations were not successful. Despite statements in the media, OCS did not lock out the affected staff during this process.

When it became clear that redundancies would have to be made, OCS then attempted to bargain with the SFWU, as directed by the Employment Court, in respect of non monetary entitlements. OCS did so in good faith. OCS’s position was that because the collective agreement specifically excluded the payment of redundancy compensation, OCS was not required to bargain this component. The SFWU rejected OCS’s bargaining on non monetary entitlements, as the Union wished only to discuss and bargain for monetary compensation.

Yesterday’s Supreme Court decision vindicates OCS’ position on the right to bargain for monetary compensation when the collective agreement expressly excludes it. The Supreme Court however did state that employers are required to bargain with affected staff for redundancy entitlements other than monetary compensation. In the particular circumstances of this case, that is what OCS did. There is however a need for guidance, either by Parliament or the Courts, as to what “redundancy entitlements” other than monetary compensation are.

The SFWU is claiming in the media that it has secured a “victory” in the Supreme Court. OCS strongly disagrees with this assertion. The SFWU has failed in its principle aim of gaining additional payments for employees by reason of redundancy where compensation has been specifically excluded. Nonetheless, OCS recognises that there are no “winners” when the prospect of redundancy is involved. OCS does not make these decisions lightly and does so only after consultation with affected employees and the Union concerned.


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