NEW ZEALAND MARITIME LAW

Sealord Group Ltd v New Zealand Fishing Industry Guild Inc

IN THE EMPLOYMENT COURT
CHRISTCHURCH REGISTRY
Judgment Number: CC 11/05
File Number: CRC 17/05

IN THE MATTER of proceedings removed from the Employment Relations Authority

BETWEEN Sealord Group Limited and Amaltal Fishing Company Limited
Applicants

AND New Zealand Fishing Industry Guild Incorporated
Respondent

Court: Chief Judge GL Colgan, Judge C M Shaw, Judge A A Couch

Hearing: Wellington, 11 August 2005

Appearances: G P Malone, Counsel for the Applicants
P A D Davies, Counsel for Respondent
P J Gunn, Counsel for Robin Arthur Semmens, Intervener

Judgment: 12 August 2005

JUDGMENT OF THE FULL COURT

Introduction

1. The essential issue in this case is whether crew of fishing vessels operated by the applicants are paid in a manner consistent with the Minimum Wage Act 1983 and the Minimum Wage Order 2005.

2. This matter was originally lodged in the Employment Relations Authority as a dispute on 6 July 2005. On 7 July 2005 the Authority removed the matter to the Court on the ground that an important matter of law was likely to arise other than incidentally - s178(2)(a) of the Employment Relations Act 2000.

3. On 27 July 2005 a Labour Inspector, Robin Semmens, was granted leave by consent to appear as a person justly entitled to be heard. At the hearing, he was represented by Mr Gunn.

4. The involvement of the labour inspector was essential to the determination of the matter. The manner in which the applicants pay their sea-going employees is entirely acceptable to both the applicants and to the respondent, which represents the majority of those employees. It was the labour inspector who had questioned the method of payment and suggested the issue be decided by the Court. As a result, the contest was between the labour inspector on the one hand and the parties on the other. For the parties, the argument was principally presented by Mr Malone. His submissions were adopted by Mr Davies.

Facts

5. We were helpfully provided with an agreed statement of all relevant facts. The essential facts are -

Historically, the crew of fishing vessels in New Zealand have been paid on a "share of catch" basis. At the end of every voyage, each member of the crew received a percentage of the value of the fish caught less certain expenses. In most cases, the crew were engaged as independent contractors who were not entitled to paid holidays and did not receive any income when they were not at sea.

From the mid 1980s, New Zealand companies such as the applicants began to engage crew members as employees rather than independent contractors. This coincided with the introduction of larger vessels, including "freezer" ships which remain at sea for extended periods, typically 7 weeks.

By agreement, payment of employees remained on a "share of catch" basis. It was also agreed that the income of crew as employees should be spread more evenly throughout the period of employment. This was to enable employees to more easily budget for regular expenditure such as mortgage payments and hire purchase.

The current system of payment has several distinctive features. Crew are employed on a continuous basis but they are required to work only on alternate voyages, or two voyages out of three. They are paid in respect of every voyage, whether they go to sea and work or remain on land and are not required to work. The total amount paid to each crew member is ultimately determined by the value of the fish caught on the vessel's voyages. Each employee receives a fortnightly payment, the amount of which is determined by agreement. The balance in respect of each voyage is paid after the vessel returns to port and the value of the catch is determined.

The amount of fortnightly payments is, in some cases, less than the minimum wage payable for the hours typically worked during a 2-week period while at sea. This is particularly the case with the less experienced sailors.

Over a series of voyages, the total remuneration received by employees exceeds the minimum wage for the hours worked.

Minimum wage legislation

6. Section 6 of the Minimum Wage Act 1983 provides:

6. Payment of minimum wages - Notwithstanding anything to the contrary in any enactment, award, collective agreement, determination, or contract of service, but subject to sections 7 to 9 of this Act, every worker who belongs to a class of workers in respect of whom a minimum rate of wages has been prescribed under this Act, shall be entitled to receive from his employer for his work not less than the minimum rate.

7. The minimum rates of wages referred to in s6 are prescribed by the Minimum Wage Order 2005. It was common ground that the sea-going crew employed by the applicants were covered by the following provision of clause 4 of that order:

4. Minimum adult rates
The following rates are the minimum rates of wages payable to an adult worker:
…

(c) in all other cases, -

(i) $380 per week; and
(ii) $9.50 per hour for each hour exceeding 40 worked by a worker in a week.

Issues

8. Whether these arrangements are consistent with the minimum wage legislation depends on when payment is required to be made. Mr Gunn and Mr Malone both submitted that the time at which wages are required to be paid is not dealt with by the Minimum Wage Act 1983, the Minimum Wage Order 2005, or the Wages Protection Act 1983. We agree. The Minimum Wage Act 1983 and the Minimum Wage Order 2005 deal with the amount of wages to be paid to workers. The Wages Protection Act 1983 deals with the manner in which wages are to be paid once they become payable. The time at which wages are to be paid is an issue to be determined in each case by reference to the employment agreement governing the employment relationship. In some cases, there will be express agreement when wages are to be paid. In other cases, the time of payment will be a matter of inference from the practice of the parties over time.

9. On this basis, the key issue in this case is one of interpretation of the employment agreements between the applicants and their sea-going employees.

The employment agreements

10. We were provided with three collective employment agreements between the applicants and the respondent covering the employment of fishers. The first covered all fishers employed by Sealord Group Limited ("Sealord"). The second covered fishers employed by Amaltal Fishing Company Limited ("Amaltal") on the vessel MFV Amaltal Enterprise. The third agreement covered fishers employed by Amaltal on the vessel MFV Amaltal Explorer.

11. Under the Sealord Fishers' agreement, the key provisions are -

7.2 Each fisher will be paid fortnightly a retainer based on fifty (50) percent of the vessels budgeted catch payment. This clause is varied by agreement between the parties for freezer vessel crew who will receive a retainer based on 70% of their package, paid fortnightly and a catch bonus based on 30% on their package.
…

7.4 All fish landed will be subject to Sealord's dockside grading system. Any fish that is considered to be in a condition unfit for processing will not be subject to catch bonus. …
…

7.6 The minimum combined annual retainer and catch bonus for permanent full time staff will be no less than any minimum wage order.

7.7 Payments for casual fishers shall be as agreed on a trip by trip basis but will not be less than any minimum wage order.

8. TRIPS OFF

Once a fisher has completed the required number of trips on his/her vessel s/he shall qualify for a trip off payment which shall be calculated as follows:

The amount of his/her retainer together with a pro-rata share of the catch taken by the vessel during the trip off in respect of which he/she is being paid.

12. The MFV Amaltal Enterprise collective employment agreement provides at p6-

The crew remuneration shall be calculated at 23% of the gross earnings of the vessel less [certain specified] costs:

13. There is then a table setting out the percentage of the crew remuneration to which each crew member is entitled. This is expressed as a percentage of the total crew remuneration. The agreement also provides at p6:

To assist financial planning the company will fund a pay advance system for all crew. Payments will be made on the following days after the vessel departs - 14th, 28th, and 42nd.

14. There follows a table setting out the amount of each advance, according to the position occupied by the employee. The lowest amount is $688 for a "Sailor C". The agreement also provides at p7 -

Crews Bonus payment shall be paid within 7 days of vessel discharge

15. Under the heading "Salary and Leave System" the agreement provides that, after completing one trip in the case of officers or two trips in the case of other crew, each employee shall be entitled to "a paid trip off (including catch bonus)".

16. The MFV Amaltal Explorer agreement has a broadly similar structure to that for the MFV Amaltal Enterprise but is expressed in different terms. For each category of crew there is defined a "base rate of pay". This is expressed as a salary which is to be "paid on 15th & 30th of each month". The lowest rate of base salary is $14,000 for a "Grade C" factory/deck crew. The agreement then provides –

In addition to the above salaries a catch bonus shall be paid at the completion of each voyage.

17. The agreement sets out the amount of catch bonus to be paid to each category of employee per tonne of fish landed. This is followed by the provision -

Payment of the catch bonus shall be within 7 days of vessel discharge.

18. Under the heading "Salary and Leave System", this agreement has an identical provision to that in the MFV Amaltal Enterprise agreement - that is, employees are entitled to a paid trip off (including catch bonus) after the completion of one trip in the case of officers or two trips in the case of other crew.

Compliance with the minimum wage legislation

19. The case for the labour inspector was that each of these agreements should be interpreted as providing for the payment of wages on a fortnightly basis with a bonus at the end of each voyage. Based on this construction, Mr Gunn submitted that the employer was required by the Minimum Wage Act 1983 to pay each employee every fortnight not less than the minimum wage for the hours worked in the previous 2 weeks.

20. We do not accept that this is the proper construction of the agreements. Rather, we accept the analysis submitted to us by Mr Malone. The remuneration received by each employee for the hours worked comprises three components –

i. The fortnightly payments, characterised variously as "retainer", "pay advance", or "base salary".

ii. The "catch bonus" paid at the end of each voyage.

iii. The fortnightly payments and catch bonus paid during voyages of the vessel when the employee is not required to work.

21. Under this arrangement, each component of an employee's remuneration becomes payable at a different time. The first is payable fortnightly. The second is payable at the end of each voyage. Payment of the third is completed at the end of each cycle of voyages, being two voyages in the case of some crew and three voyages in the case of others.

22. The effect of this arrangement is that the sufficiency of payment for the purposes of the Minimum Wage Order 2005 must be determined on a voyage cycle basis for the vessel on which the employee works.

23. In support of his submissions regarding the application of the Minimum Wage Act 1983 and the Minimum Wage Order 2005 to the arrangements for payment of the applicants' employees, Mr Gunn invited us to have regard to s4 of the Wages Protection Act 1983. It provides:

... an employer shall, when any wages become payable to a worker, pay the entire amount of those wages to that worker without deduction.

24. Mr Gunn submitted that, as the agreements between the applicants and their employees specifically provide for fortnightly payments in respect of work done, it would effectively be a deduction from the wages payable for that work to delay some of the payment until the end of the voyage.

25. The fundamental difficulty with that submission is that s4 of the Wages Protection Act 1983 only has application when wages become "payable", When they become payable is a matter to be determined by reference to the employment agreement between the parties. In this case, the parties have agreed that the only amount payable at the end of each fortnight is the "retainer", "pay advance", or "base salary". The other components of an employee's remuneration do not become payable until later. It follows that, by making the agreed fortnightly payments, the employers are paying without deduction all of the wages "payable" at that time.

26. Mr Gunn also referred us to s103(5) of the Fisheries Act 1996. This subsection deals with payment of crew engaged or employed on overseas vessels granted permission to operate in New Zealand fisheries waters. Paragraph (c) of s 103(5) provides:

(c) For the purpose of determining whether the payment to any person engaged or employed to do work on any such vessel meets the requirements of the Minimum Wage Act 1983, the hours of work of, the payments received by, and the entitlements to payment of that person shall be assessed in relation to the whole of each period of such engagement or employment in New Zealand fisheries waters:

27. Mr Gunn submitted that, because Parliament had seen fit to enact this provision only in respect of foreign vessels, it must be presumed that such an approach is not to be taken in respect of New Zealand owned vessels. While we accept that this is probably correct, it does not assist us in determining this case. The effect of s103(5)(c) of the Fisheries Act 1996 is to make compliance with the Minimum Wage Act 1983 by the operators of overseas vessels independent of the terms of agreement between the operator and crew of the vessel. It is therefore a distinctly different situation to that applying in respect of New Zealand vessels, or indeed any other workplace in New Zealand, where the time at which wages become payable is a matter to be determined according to the agreement or arrangement between the parties.

Conclusion

28. Our conclusion is that the arrangements for payment of fishers employed by the applicants in accordance with the collective employment agreements between the applicants and the respondent do not breach the Minimum Wage Act 1983 and the Minimum Wage Order 2005. That conclusion is subject only to the proviso that, when assessed on a voyage cycle basis, the minimum wage is paid or exceeded in respect of the hours actually worked during the period of the cycle.

Costs

29. On behalf of the applicants, Mr Malone sought an award of costs payable by the labour inspector. Even if it were appropriate, we do not think we have jurisdiction to make such an order. The labour inspector took part in the proceedings not as a party but rather as an intervener, pursuant to clause 2(2) of the Third Schedule to the Employment Relations Act 2000. The parties consented to this arrangement although there are other provisions by which additional persons may be joined as parties. The power of the Court to award costs is prescribed in clause 19 of the Third Schedule. It provides only that the Court may order "any party" to pay costs. It follows that the Court has no jurisdiction to order an intervener to pay costs. In any event, as this was a test case, we do not think an award of costs would have been appropriate.

A A Couch
Judge
For the full Court
Judgment signed at 2.30pm on 12 August 2005