The Court of Appeal has recently ruled on the difficult question of whether an employer can employ or engage replacement labour ("strike-breakers") when its employees are on strike.

In Dairy Workers Union v Open Country Cheese Company Ltd the Court of Appeal held that the replacement labour (from a related company) was used to perform the work of the striking cheese workers and this was unlawful.

Background facts

The Open Country Cheese Company Limited (Cheese Company) is a subsidiary of Open Country Dairy Limited (Dairy Company). While the Cheese Company is involved in manufacturing at its plant in Waharoa, the Dairy Company has responsibility for selling and marketing the Cheese Company's products.

In August 2009 the Dairy Workers Union gave notice of a strike by members working at the Cheese Company's Waharoa site. The strike was timed to coincide with the Cheese Company's peak production season.

The Dairy Company Chief Executive decided that Dairy Company employees should staff the plant during the strike. Dairy Company employees then came in from various other sites, and worked at the Cheese Company plant under the direction of the Dairy Company Chief Executive.

The union challenged the use of Dairy Company employees on the basis that this was unlawful "strike-breaking". This claim focussed on section 97, Employment Relations Act, which prevents employers from employing or engaging other persons to perform the work of striking employees (except in certain limited circumstances).

Employment Court judgment

The union's claim was dismissed by the Employment Court, which found it was significant that the Dairy Company Chief Executive had directed the replacement labour (ie Dairy Company employees) during the strike. It noted that the Cheese Company was not given an option as to whether the Dairy Company employees would work in its plant during the strike - this was a decision by the Dairy Company.

Court of Appeal judgment - emphasis on benefit to employer

On appeal from the Employment Court, the question was whether, by allowing the Dairy Company employees to come onto its site during the strike for the purpose of continuing production, the Cheese Company had employed or engaged replacement labour in breach of section 97.

The Court of Appeal accepted the Employment Court's analysis that the words employ and engage have a wide meaning and confirmed that these words include any "use" of other persons to do the job of striking workers (even if there is no legal relationship of employer/employee or principal/contractor between the "strike-breakers" and the employer).

In light of this, the Court of Appeal held that the Cheese Company had used other persons to perform the work of striking workers in this case:

  • The work Dairy Company employees performed during the strike was Cheese Company work;
  • It was also work that striking workers normally did;
  • The Cheese Company did not refuse access to the Dairy Company employees, but allowed them to come on site and continue production; and
  • The work of the Dairy Company employees during the strike enabled the Cheese Company to continue production and therefore satisfy its contractual obligations.  

Implications for employers

In light of this case, even where an employer has not directly controlled replacement labour, if the employer has benefited from the work, there will be a real risk of a breach of section 97. The judgment is a timely reminder of the very real limits on using replacement labour during strikes.