The Employment Relations Authority has ordered an employer to pay an employee $5,016 holiday pay despite him not working for the 18 months over which that pay was awarded.

The employee started work for the employer in 2019.  He worked for two weeks and then went off work on ACC for 18 months during which time he performed no work and was not paid anything by the employer.

The employer eventually decided it could not keep the employee’s job open any longer as there was no evidence provided that he would be able to return to work.  It dismissed him for medical incapacity.

The employee challenged his dismissal, but the ERA held that the employer had followed a fair and reasonable process to consider the employee’s ability to return to work and had given the employee opportunities to comment and provide medical information.  The dismissal was held to be justified.

As the employee had earned no wages for 18 months the employer calculated his holiday pay based on the two week period he had worked.

The ERA held that the calculation was wrong and the employee was entitled to holiday pay based on the greater of what he had earned or his ordinary weekly pay.  Even though he was not earning during the 18 months his ordinary weekly pay was what he would have got if he had been working.  This meant his holiday pay was over $5,000 for only two weeks effective work.

A harsh lesson for the employer.  They gave the employee 18 months to recover before terminating him.  They could have carried out the medical termination process much sooner as the employee was unable to return to work.  Perversely, if they had been less accommodating in holding the job open, they could have avoided most of the holiday pay awarded.


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Alan Knowsley

Employment Lawyer