When an overseas employer has its staff working in New Zealand under their overseas employment contracts, does New Zealand employment law cover them?
This question was partially answered in the recent Supreme Court decision, Brown & Anor v New Zealand Basing Limited.
Flying overseas, but living in New Zealand
B and S are Cathay Pacific pilots and live in Auckland. They start and finish their tours of duty in Auckland but work entirely outside New Zealand. They are employed by New Zealand Basing Limited (NZB), a company incorporated overseas subsidiary of Cathay Pacific. Its only business is employing New Zealand based pilots.
The employment agreements between B and S and NZB stated that they were governed by the law of Hong Kong. This flowed from the historical arrangements under which these pilots had at one stage in fact been based in Hong Kong.
The employment agreements required the pilots to retire at 55. Hong Kong law does not prohibit discrimination by reason of age, New Zealand law does. Such a provision would be unlawfully discriminatory in New Zealand unless it fell within recognised exceptions. It is accepted in New Zealand that, generally speaking, the age of 65 is a recognised occupational qualification for international pilots.
NZB required B and S to retire at the age of 55. They said this was in conflict with New Zealand employment law, and specifically the age discrimination provisions of the Employment Relations Act 2000.
B and S succeeded in their arguments in the Employment Court, failed in the Court of Appeal but succeeded again in the Supreme Court. The Supreme Court considered that the rights, which B and S complained had been infringed, were statutory -not contractual- rights. It followed that NZB could not evade the application of those rights by selecting the law of an overseas jurisdiction.
The rights were statutory rights, imposed by the various protective items of legislation provided for by New Zealand employment law.
But… can't parties choose the law they want to apply?
Normal conflict of laws principles primarily relate to the ability of parties to make an effective choice of law and choice of courts and, if they fail to make a choice, provide for rules to determine which jurisdiction's law will apply. But this was a different situation.
The rights asserted by B and S were the personal grievance rights provided for under the Employment Relations Act to complain of unlawful discrimination. These are statutory rights, not contractual. Had the rights been purely contractual, there was no reason why such claims should not be determined by reference to foreign law, if such law was the proper law of the contract. After reaching this conclusion, the Supreme Court looked not only at the nature of the statutory rights to bring a personal grievance for unlawful discrimination, but also at the provisions of the Employment Court Regulations 2000 which provide for service of Employment Court proceedings (and there are parallel provisions for the Employment Relations Authority) on overseas companies. There are no express territoriality limitations in the New Zealand employment legislation.
Nevertheless, the Supreme Court said that it would determine on a case-by-case basis whether the statutory rights under the Employment Relations Act 2000 apply to any particular claim. As just stated, it concluded that claims of this nature -a personal grievance for unlawful discrimination- did fall within the jurisdiction of the New Zealand courts.
The court also indicated that the rights to be free from sexual and racial harassment are also rights that are statutory, and not contractual rights.
The Employment Court has jurisdiction over employment agreements governed by foreign law.
The right not to be discriminated against applies to employment agreements governed by foreign law that are being performed in New Zealand. Similarly, the right to be free from sexual or racial harassment so applies. None of these rights are in any sense contractual so choice of another system of law is irrelevant. These rights will be breached by any conduct that occurs within New Zealand in relation to employment being performed in New Zealand.
This last point is worth repeating. The Supreme Court made it clear that the rights apply to conduct which occurs in New Zealand, regardless of where the employment contract was entered into, and regardless of the choice of law or the choice of courts which the parties made.
The Supreme Court specifically left undetermined whether the other personal grievance rights that are available under New Zealand employment law, in particular the right not to be unjustifiably dismissed, might apply in the case of an employee working in New Zealand under an employment agreement entered into overseas, and governed by overseas law.
Implications for overseas-based employers
An employer that engages staff overseas who will work in New Zealand, even if not all the time, and enters into employment agreements with such staff based on overseas law, must exercise significant caution.
It is clear that such staff have a right to complain of unlawful discrimination, or racial or sexual harassment, if such discrimination, or harassment, occurs during their employment in New Zealand.
What is not clear is whether such staff can bring a claim for unjustified dismissal under New Zealand employment law if they are dismissed during the course of their employment in New Zealand.
Employers who are based overseas and who engage staff who will work in New Zealand under overseas‑based employment documentation need to act carefully with regard to their conduct towards such staff while they work in New Zealand. Careful documentation can improve the situation, but, given the Supreme Court decision, documentation is not the only answer. The manner in which staff are dealt with while they are working in New Zealand will also be crucial.
If you have any questions, please contact one of our experts below.