E Tū Inc v New Zealand Steel Ltd

E Tū Incorporated, a union, challenged New Zealand Steel Ltd over how 'make-up pay' should be applied under their collective agreement. The clause had been in place since 2011 and was meant to compensate employees who, at the employer’s request, worked outside their established ordinary hours and could not complete those hours.

The dispute arose during operational changes, such as shutdowns, when employees were asked to work outside their usual schedules. The union argued that make-up pay should be paid whenever ordinary hours were missed, regardless of total hours worked. New Zealand Steel believed make-up pay was not owed if employees still worked a full week. The Employment Court was asked to clarify the correct interpretation.

The Employment Court found that make-up pay is triggered when an employee, at the employer’s request, works outside their established ordinary hours and cannot complete those hours. This applies even if the employee still works 40 or more hours in the week.

The Court rejected the employer’s argument that make-up pay was only owed if total weekly hours fell below the standard. Instead, the focus is on whether ordinary hours were missed due to a change in work schedule. The Court also noted that there was no consistent custom or practice across New Zealand Steel regarding make-up pay, so the agreement’s wording was decisive.

If your business has a collective agreement with a make-up pay clause, you must pay make-up pay when employees miss ordinary hours due to your request - even if they work a full week. This ruling affects payroll, rostering, and HR practices.

Review your agreement’s definitions of 'ordinary hours' and ensure any changes to established hours are documented and agreed with the union. Train managers to understand when make-up pay is triggered and update payroll systems to reflect this interpretation. Consult with your union or employment adviser if you’re unsure.

To comply with this ruling, businesses should follow these practical steps:

This case interprets a collective agreement under the Employment Relations Act 2000. The Act requires good faith bargaining and compliance with agreed terms. Employers must ensure that any variations to hours of work are agreed in writing with the union, as specified in the agreement.

Make-up pay clauses are common in unionised workplaces and are designed to protect employees from loss of earnings when their schedules change. The Court’s decision reinforces the importance of clear agreement wording and proper documentation of any changes.