The increase in an employee’s annual holiday entitlement from three to four weeks came into effect on 1 April 2007.  This has led to a number of disputes between employers and unions over the correct interpretation of ‘additional’ holiday entitlements. 

The Cerebos Gregg's case
The most recent decision on this topic was issued by the Court of Appeal in Service and Food Workers Union Nga Ringa Tota v Cerebos Gregg's Ltd (Cerebos Gregg's) in February 2012. This case concerned the interpretation of contractual entitlements for long-serving employees. The collective agreement provided that all Union employees at Cerebos Gregg's Dunedin site were entitled to three weeks' paid annual holidays and that all Union employees at the site with six years' continuous service were entitled to an 'additional one week of annual holiday'.

The issue before the employment institutions was whether the effect of the amendment to the Holidays Act 2003 (Act) was to confer one week's paid annual holiday to those employees who had completed six or more years of current, continuous service in addition to the new statutory minimum of four weeks, or whether this extra week now formed part of that statutory minimum.

Earlier decisions
The Employment Relations Authority in its determination in 2009 found that the further annual holiday of one week for eligible employees was additional to and not included in the four weeks' annual holiday conferred by the Act. The employer successfully challenged this decision in the Employment Court in 2011. Judge Couch found that the parties intended the additional week's holiday conferred by the collective agreement to be annual holidays for the purposes of the Act and concluded that the extra week was subsumed in the statutory entitlement after 1 April 2007.

Court of Appeal
In quashing the Employment Court decision and reinstating that of the Authority, the Court of Appeal held that the relevant clause was intended to preserve the continuous service entitlement for long-service employees of a week's annual leave in addition to that provided by the Act. This meant that employees covered by the collective agreement with six years' service were entitled to five weeks' annual leave, backdated to 1 April 2007. While emphasising that correct interpretation remains dependent on specific contractual wording, the Court referred to the 'consistent approach' emerging from previous cases that have considered enhanced entitlements for long-serving employees.

What does this mean for employers?
Following this decision, the courts are now likely to interpret a contractual provision entitling long-serving employees to additional leave to mean this leave must be paid 'in addition to the statutory minimum', ie five weeks' entitlement, rather than four weeks. Therefore employers with these types of clauses may need to factor this in when assessing staffing needs and costs.

Furthermore, it is likely that references to enhanced leave entitlements recognising other factors, such as the nature of the employee's work, will be interpreted the same way unless the wording of the relevant clauses clearly states a contrary intention.

It is now almost five years since the minimum statutory annual leave entitlement increased from three to four weeks. Most collective agreements will have now been renegotiated on the basis of the four weeks statutory minimum. However, this is a timely reminder to employers to ensure that their intentions in relation to any enhanced leave entitlements are clearly and unambiguously reflected in the wording of all future employment agreements.