Offer of pay rise not binding, as employees sought to negotiate more…

The Employment Relations Authority has rejected two employees’ claims that their employer breached good faith obligations by failing to implement a pay raise that was offered to the employees.

The employer sent an email to the employees stating that their pay rates had been reviewed and that they were both going to receive an increase in pay.

The following day, the union which represented the employees entered into negotiations for a collective agreement with the employer.

Three weeks after the negotiations began, the employer sent an email to the employees stating that union members would not receive the pay raise, as any change in their remuneration would be negotiated and implemented in the collective agreement.

The employees brought their claims to the Authority, seeking to enforce the pay raise and recover the wages that they would have received if the raise had been implemented.

The Authority had to decide whether the employer had breached its good faith obligation by not implementing the pay raise.

Firstly, the employer sent out an email informing the employees that they would not receive the pay raise if they were union members. This email did not get a response from the employees, so the employer was led to believe that there was no objection to it.

The Authority decided that the employees were aware that they were not going to receive the pay raise if negotiations were entered into.

Furthermore, the issue regarding this pay raise was not raised until a year after the collective agreement was signed by the parties.

These factors led the Authority to decide that the employer had not been concealing any details of the pay raise from the employees and that they were therefore acting in good faith.

The Authority also decided that because of the full disclosure of the employer, the collective agreement process had not been undermined, meaning the employer had not breached any employment standards.

If there is confusion around an employer’s obligations, it pays to seek advice from a professional with experience in the area.

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Alan Knowsley & Matthew Binnie

Litigation Team
Wellington