New Zealand Air Line Pilots’ Assoc IUOW Inc v Tasman Cargo Airlines Pty Ltd

In June 2019, Tasman Cargo Airlines’ CEO sent an email to all staff announcing a 3% pay increase, backdated to 1 April. The increase was for all full-time and part-time employees, except contractors and those recently promoted. Nigel Farmer, a pilot and union member, expected to receive this increase like his colleagues.

The day after the announcement, the New Zealand Air Line Pilots’ Association (the union) initiated collective bargaining with the company. Soon after, Tasman Cargo’s Head of Flight Operations informed Mr Farmer and other union members that they would not receive the pay rise. The company’s position was that any future pay changes would be negotiated as part of the collective agreement process. Non-union staff received the increase, but union members did not.

Mr Farmer raised the issue with the company, but received no response. A collective agreement was eventually signed in April 2020, backdated to 1 April 2020, but it did not address the 2019 pay rise. Mr Farmer claimed he was owed arrears for the missed increase, and that it affected his bonuses for 2020, 2021, and 2022. The dispute centred on whether the company could lawfully withhold the announced pay rise from union members because collective bargaining had started.

The Employment Court found that Tasman Cargo Airlines breached the Employment Relations Act by withholding the announced pay rise from union members after collective bargaining started. The Court said the company’s actions undermined the union’s bargaining position, which is prohibited under section 32(1)(d)(iii) of the Act. The Court noted that the only reason given for withholding the increase was the initiation of collective bargaining, and this placed the union at a disadvantage in negotiations.

The Court ordered that Mr Farmer was entitled to arrears of pay from 1 April 2019 and made a declaration that the company’s conduct breached the Act. The Court emphasised that being open about the decision did not excuse the breach, as the effect was to disadvantage union members and compromise the bargaining process. The parties were directed to agree on the amount owed, with the option to return to the Court if they could not agree.

This case is a clear warning to employers about the risks of treating union and non-union staff differently when it comes to pay increases. If you announce a pay rise to all staff, you must apply it consistently, regardless of whether collective bargaining has started. Withholding an increase from union members can be seen as undermining the union and may breach the duty of good faith under the Employment Relations Act.

Employers should review their pay policies and communications to ensure they do not inadvertently disadvantage union members or affect the bargaining process. If you are unsure how to handle pay changes during bargaining, seek advice before making decisions. Consistency and transparency are key - make sure all staff understand how pay changes are applied and that no group is unfairly disadvantaged.

Employers should have clear processes for managing pay increases, especially when collective bargaining is underway. The following checklist can help reduce legal risks and maintain good faith with staff and unions:

• Announce pay increases in writing and specify who is eligible.
• Apply pay increases consistently to all eligible staff, including union members, unless a collective agreement states otherwise.
• Communicate any changes or exceptions clearly and promptly to all affected employees.
• Review your employment agreements and collective agreements to ensure there are no conflicts with announced pay changes.
• Consult with HR or legal advisers before making pay decisions during bargaining periods.
• Document all communications and decisions about pay changes for future reference.

The Employment Relations Act 2000 sets out the duty of good faith in all employment relationships. Section 32(1)(d)(iii) specifically prohibits conduct that is likely to undermine the bargaining process, such as withholding benefits from union members during collective bargaining. Employers must ensure their actions do not disadvantage union members or compromise the union’s ability to bargain effectively.

The Act requires transparency, fairness, and consistency in employment practices, especially around pay and conditions.

Employers should regularly review their policies and practices to ensure compliance with the Act, particularly when collective bargaining is likely or underway. Good faith obligations apply to both employers and unions, and breaches can lead to legal claims, orders to pay arrears, and reputational damage.