Business
restructuring can result in a new employer taking over existing employment
contracts. Transferring employees might
negotiate new terms but the new employer is not obliged to depart from their pre-existing
employment contract.
Cleaners at Massey
University who are members of the Service and Food Workers Union failed in
their attempt to get redundancy provisions from their new employer when their
pre-existing employment contract specifically excluded any right to redundancy.
The problem arose
after Massey University put its cleaning contracts out to tender in early
2010. OCS Ltd won the new contract and a
number of cleaners transferred to OCS as their new employer. These transfers were treated as continuous
employment with the cleaners joining a new employer on their pre-existing
contract terms.
The court was told OCS
then told transferring staff they would no longer be employed unless they
agreed to a new contract less favourable than their pre-existing contract. For those not willing to accept the new
terms, questions of redundancy arose.
The Supreme Court
ruled that provisions of the Employment Relations Act dealing with redundancy
in this case are clear: the pre-existing contract dictates what is due. If the pre-existing contract expressly
excludes redundancy (as it did in this case) then there is no entitlement to
redundancy. The employees’ position gets
no better on transfer to the new employer.
Service
& Food Workers Union v. OCS Ltd – Supreme Court (9.08.12)
12.029