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Jolly or Jail – employment obligations over the season of cheer

Tis the season to be jolly and avoid jail! Whether blowing off steam at the Christmas Party or closing the doors for some well-earned rest and recuperation, employers need to be on their toes to ensure that they meet their legal obligations. This short article explores some of the statutory obligations employers have.

The end of year is in sight and many employers are preparing to close shop for the year. But before the jolly season commences, employers and employees should make themselves aware of their obligations under various pieces of employment legislation including: the Employment Relations Act 2000, Health and Safety at Work Act 2015 and the Holidays Act 2003 (the Act). Understanding these key pieces of legislation will help all parties remain jolly while avoiding jail.

Christmas parties

Christmas parties need to be full of cheer for everyone. This means employers need to ensure that they are providing safe and healthy environments and sometimes this will require the employer to consider what is appropriate for their employees. Think about comfort, acoustics, and visual stimulus.

If alcohol is being served, adhere to responsible host guidelines and be sure to serve food and non-alcoholic beverages. It is best practice to have an allocated and responsible sober employee (if a large crowd, more than one).

Employees need to understand that conduct at a work event, regardless of whether it is outside of normal working hours, and away from the location of work, can be reviewed by an employer if their conduct, amongst other things:

  1. brings the employer’s name and/or reputation into disrepute; and/or
  2. leads to a complaint being made against them or a colleague.

If a complaint is received, the employer needs to act as a fair and reasonable employer and consider the matter.  Failure to manage concerns can give rise to personal grievances for unjustified disadvantage, and/or constructive dismissal (if the person raising the complaint resigns).

On receipt of a complaint, the employer should ensure it understands:

  1. what happened – i.e., rude talk, assault, harassment;
  2. who was involved? were there witnesses?
  3. when did the alleged event happen?
  4. where did the event happen?
  5. why did it happen? and
  6. how did it happen?

Collating the above information will assist in understanding what steps a fair and reasonable employer could take.  Employers need to be careful to not jump to conclusions or act before they have completed a preliminary investigation into the matter.

Annual closedown

A lot of businesses in New Zealand choose to close their doors over the holiday season, giving their staff a well-deserved rest.  This is beneficial for staff member to boost morale, reduce the risk of burnout and is a great tool to manage an employee’s annual holiday entitlement.  But what if staff do not want to stop working?  What steps could a fair and reasonable employer take?

Employer obligations

The Act allows employers to shut down their business one time in any 12-month period.  During this shutdown, employers can direct employees to use some or all of their annual holidays.[1]  Depending on the operational needs of the business, an employer may have different shut down periods for different parts of the business.[2]  For example, a business that sells paper may have a warehouse (which deals with dispatching the product) and an office location (which deals with the sales themselves) and may have two separate closedown periods to match the workload required.

Section 32 of the Act allows employers to direct an employee to take annual holiday during this period.[3]  An employer who is looking to close their doors must give the employees no less than 14 days’ notice of the requirement to take annual leave or to stop work.[4]

Best practice for an employer who wants to close their business over the holiday season is to:

  1. look at the employee’s employment agreement – do they have a closedown clause?
  2. consider whether the employee has annual holiday entitlement – or does the employee only have accrued annual holiday?
  3. decide if any part of the business will remain open – will a warehouse still function?
  4. think about when you are planning to close the business – so enough notice is given; and
  5. plan and implement in accordance with the statutory requirements.

Sickness and bereavement

If an employee becomes sick, or a member of their whānau passes away, before the employee takes approved annual holiday entitlement the employer must let the employee take this time off as sick, bereavement, or family violence leave.[5]

If this occurs after the employee has started their break, then an employer may agree to let the employee use an alternative form of leave.

Public holidays & an otherwise working day

Typically, annual closedown periods happen from late December until mid January.  During this time there are four public holidays:

  1. Christmas day;
  2. Boxing day;
  3. New Years day; and
  4. the day after New Years.

Therefore, for a significant number of full-time employees in New Zealand, they do not need to use annual holiday entitlement for these days.

If an employee does not work on a public holiday, but the public holiday falls on a day that the employee would work otherwise (i.e., on a Monday) then the employee must be paid.[6]

The Act does not provide a definition of an otherwise working day, instead, it is decided on a case-by-case basis.  When deciding if a public holiday is an otherwise working day an employer should consider the employee’s:[7]

  1. employment agreement;
  2. pattern of work;
  3. type of employment (i.e., are they casual, or permanent?);
  4. roster or other similar system; and
  5. reasonable expectations to work on the day concerned.

The Employment Relations Authority considered what was an otherwise working day in Labour Inspector v Bronz Group (NZ) Ltd and found that if an employee has worked on the day that  a public holiday falls on within the last six months, on at least one occasion, then the employee should be paid for the public holiday as an otherwise working day.[8]  This is an incredibly generous definition of an otherwise working day.

Deciding if a public holiday falls on an otherwise working day will depend on a factual assessment under s12(3) of the Act.

Gross earnings

When an employee takes annual holiday entitlement, they must be paid at a rate based on the greater of:[9]

  1. the employee’s ordinary weekly pay, at the beginning of their annual holiday; or
  2. the employee’s average weekly earnings for the 12 months immediately before the end of the last pay period before the annual holiday.

Where an employee has, or may receive discretionary payments i.e., through a bonus scheme it needs to be clear whether such payments are applicable when calculating payment for annual holidays.  Discretionary payments are different to contractual payments as the employer has absolute discretion to make these payments.  Deciding if a payment is discretionary or contractual requires an assessment of the employee’s employment agreement.

In Metropolitan Glass & Glazing Ltd v Labour Inspector, Ministry of Business and Innovation and Employment the Court of Appeal ruled that a discretionary payment that an employer is not contractually bound to make, should not be included in the employee’s gross earnings.[10]

Employers going into the holiday season should carefully consider their employee’s IEAs and consider whether the bonuses are discretionary, or contractual obligations.

How to pay staff during closedown

The frequency with which a business pays its employees will vary from owner to owner.  Some pay weekly, while other may pay monthly.  How do you apply this during a closedown period?  The Act does not provide any guidance.

We consider best practice, and what a fair and reasonable could do is to pay the employee in advance of the closedown period.

On-call requirements

If an employer shuts down their business (requiring employees to use annual holiday entitlement), an employee cannot reasonably be expected to be on call.  Therefore, the employer will not need to pay the employee any on-call compensation.  On-call compensation only needs to be paid to the employee when they are making themselves available outside of their guaranteed working hours.

Working a public holiday

An employer can instruct their employees to work on a public holiday, however, this triggers certain employee entitlements.  If an employee is instructed to work on a public holiday they are entitled to:

  1. be paid at least time and a half of their hourly rate; and[11]
  2. if the day is an otherwise working day, the employee is entitled to receive an alternative holiday (more commonly referred to as a day in lieu).[12]

Employers need to be careful when instructing employees to work on a public holiday, as employees are entitled to the above for working on any part of a public holiday.  Therefore, if an employee works one minute into a public holiday, and the public holiday falls on an otherwise working day they must be given an alternative holiday.


If you require advice around how to mitigate the silly out of this season or want to know your rights under the Holidays Act 2003, then please contact one of our specialists in the Employment team including, Alexandria Till or Brett Edwards.

[1] Holidays Act 2003, s29.

[2] Ibid, s31.

[3] Ibid, s32.

[4] Ibid, s32.

[5] Ibid, s38.

[6] Holidays Act 2003, s49.

[7] Ibid, s12.

[8] [2021] NZERA 265 (2021), at [30].

[9] Holidays Act 2003, s21.

[10] [2021] NZCA 560

[11] Holidays Act 2003, s50.

[12] Ibid, s56.

This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.

For further information

Alexandria Till - Harkness Henry Partner

Alexandria Till


Brett Edwards

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