Contents Page: NZJER, 2005, 30(1)Name

Judy Brown and Frances
Butcher

Title

Reporting on OHS in Annual
Reports: a look at disclosure
practices in NZ

Page
Number
1-22

23-47
Karen Lo and Felicity
Lamm

Occupational Stress in the
Hospitality Industry

North, N., Rasmussen, E.,
Hughes, F., Finlayson, M.,
Ashton, T., Campbell, T.
and Tomkins, S.

Nursing Turnover and Staffing
Practices in New Zealand DHBS:
A National Survey

49-62

Jon Henning and Jen
WilsonWhere’s My Pay?: a commentaryon wage forfeiture clauses for
insufficient notice.

63-75

Ian Powell

Downing Scalpels andStethoscopes: The 2003 South
Canterbury Senior Doctors’ Strikeand the Challenges facing their
Union

77-85

Pam Nuttall and Felicity
Reid'Three Foot Six Limited v Bryson
CA 246/03 12 November 2004' legal comment

87-92

Erling Rasmussen & Colin
Ross

Chronicle

93-102

New Zealand Journal of Employment Relations (2005), 30(1): 1

Reporting on Occupational Health and Safety in
Annual Reports: A Look at Disclosure Practices
in New Zealand
JUDY BROWN* AND FRANCES BUTCHER**

Abstract
Many organisations in New Zealand have begun to voluntarily disclose health and safety
information in their annual reports. This paper considers the rationales for such disclosuresand reviews the disclosure practices of 100 of New Zealand’s largest employers. It
utilises an index adapted from Morhardt (2002) and good practice guidance developedby the Health and Safety Commission in the United Kingdom (HSC, 2000) to evaluate thequantity and quality of reporting.

Introduction
In recent years many organisations in New Zealand have begun to voluntarily disclose
health and safety information and other employment-related indicators in their annual
reports. This is in line with overseas developments, where the practice of disclosing
information on social and environmental factors in addition to ﬁnancial performance isbecoming relatively commonplace. This practice is often described as “triple bottomline” or “sustainable development” reporting. Various industry groups, civil society
organisations and regulatory agencies have promoted this activity and issued a variety ofguidelines designed to improve the quality of reporting.1 Professional accounting bodies
are also beginning to pay attention to this area.2 A number of reporting awards schemes
have been instituted in an effort to encourage best practice.3
This paper focuses on the disclosure of occupational health and safety (OHS) informationin New Zealand. Section 2 considers the rationales for OHS reporting, placing the issues
in the context of wider debates about the appropriate conceptual foundations for socialand environmental accounting. Section 3 establishes a framework for analysing the OHS
disclosure practices of New Zealand’s largest employers and benchmarking them against* Judy Brown is an Associate Professor of Accounting in the School of Accounting and Commercial Law at Victoria
University of Wellington.
** Frances Butcher is a researcher/policy analyst at the NZ Department of Labour, Wellington.
The authors gratefully acknowledge the work of Andrew Stewart-Loughnan of the Department of Labour in collecting andanalysing the data, and providing valuable feedback on drafts. This paper is based on research conducted as part of awider Department of Labour ‘Triple Bottom Line’ project. An extended version can be found in the Proceedings of the
11th Labour, Employment and Work in NZ Conference, held at Victoria University of Wellington, November 2004.

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2 Judy Brown and Frances Butcher

international reporting guidance. It utilises an index adapted from Morhardt (2002) andgood practice guidance developed by the Health and Safety Commission in the United
Kingdom (HSC, 2000) to evaluate both the quantity and quality of reporting. Section 4reports the results of our review. Benchmarked against the index developed, the authors
conclude that there is considerable scope for improving the standard of OHS reporting in
New Zealand. Section 5 discusses the types of initiatives that might be used to progressdevelopments in this area. Section 6 contains our concluding remarks.

Rationales for OHS Reporting
There are a number of conceptual frameworks for approaching social and environmental
accounting. They may be broadly summarised into three categories: the business case,stakeholder-accountability and critical theory perspectives (Brown & Fraser, forthcoming).
Proponents of these approaches have different views about why and how this area should
be developed. In this section we focus on how these debates are played out within the
OHS context.
Business Case Approach
The focus in the business case approach is on highlighting the economic beneﬁts available
to employers from systematic OHS management and reporting practices. A number ofoverseas regulatory agencies have taken this approach. The HSC in the United Kingdom
has been particularly active. In 2000 it issued a “challenge” to the top 350 businesses toreport to a common standard on health and safety issues by the end of 2002 (HSC, 2000:
paras 42-46). It has also set up a “Ready Reckoner” website to promote the message
that “good health and safety is good business”.4 Case studies demonstrate the potential
cost savings available through, inter alia; less lost time, reduced absenteeism, lower
regulatory costs and enhanced business reputation. In New Zealand, business casethemes are also emphasised by the NZ Business Council for Sustainable Development,
the Sustainable Business Network and the Ministry for the Environment (see, e.g.,
NZBCSD, 2002; SBN & MFE, 2003).
The “safety pays” approach is contentious. Cutler and James (1996) observe that itis premised on the assumption that there is no inherent conﬂict between the goals of
workplace health and safety and organisational proﬁtability. It is simply a matter of“educating” employers on the merits of using an accounting based approach to OHS.
However, while raising awareness of the costs of injury and illness may yield beneﬁts forworkplace safety, identiﬁcation of costs per se does not justify a conclusion that it will be“economically rational” for employers to improve OHS performance (ibid: 758).
A number of studies have pointed to threats to employee health and safety posed byproduction pressures (e.g. Nelkin & Brown, 1984; Hutter, 2001). Much also depends onthe ﬁrm’s perceptions of its OHS risks (Hopkins, 1999). Cutler and James (1996: 758)

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Health and Safety Disclosure Practices 3

charge that, in some situations, (for example, industries characterised by low pay andlow proﬁt margins), cost beneﬁt calculations might encourage employers to accord safety
a lower priority. This is reinforced by research that suggests that, due to information
and bargaining power asymmetries, employees themselves often underestimate OHS
risks and do not factor the full costs they bear into their employment decisions (Nelkin &Brown, 1984; McGarity & Shapiro, 1996).5
A similar analysis applies with respect to decisions about OHS reporting. Researchsuggests that voluntary disclosures in annual reports are often a response to changed
societal expectations and public policy pressures; providing ﬁrms with a means oflegitimising corporate activity and warding off regulation (Walden & Schwartz, 1997;
Stewart & Collins, 2004). Voluntary reporting is also viewed as a way of building
reputation capital, signalling ethical leadership and risk management to shareholders. The
reporting of “bad news”, however, may provide the seeds for more strained stakeholder
relationships and regulatory attention. Disclosure may also lead to increased employee/
union bargaining power:“Taking a rational and cost/beneﬁt approach to voluntary disclosure [ﬁrms]
disclose only that information they perceive will increase the value of the ﬁrm.
Where the perceived harm of information outweighs the beneﬁts, the informationis unlikely to be provided.” (Chan & Milne, 1999: 267)
While ﬁrms may be happy to share OHS information in ‘win-win’ situations it seems unlikely
they will rush to volunteer information likely to adversely impact future cash ﬂows. Thismay help to explain the research that suggests that companies which report internallysometimes place a low priority on providing disclosures to external parties (Tilt, 2001).
There are also considerable dangers in over-estimating the business case for OHS.
In particular, it may encourage regulators (and the public) to overestimate the efﬁcacy
of a voluntary approach. Even if the “safety pays” lobby is correct, there is evidence
that some employees at least remain sceptical, a point brought home graphically in thefollowing quote:“I’ve been at meetings where they’ve discussed the cost of killing someone versus
the cost of a repair… I’m working at the moment on loss risk assessments… it ischeaper for someone to die than for us to do something… I’m sure it happens ina lot of industries.” (HSE, 1999: 21). 6
A further difﬁculty with the business case approach is that it encourages a framing ofissues from a narrow perspective. The “optimal” health and safety and reporting levels
are measured from the point of view of costs and beneﬁts to employers. Costs andbeneﬁts to employees and local communities are only factored into the analysis if there
are agency implications for the employer (e.g. in terms of lost productivity, regulatory
costs or reputation effects). It thus privileges private efﬁciency over social efﬁciency

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4 Judy Brown and Frances Butcher(Cooper & Sherer, 1984). This is problematic given that research indicates that the bulkof OHS costs fall on employees, their families, and the wider community (Dorman, 2000;
Hopkins, 1999).
It is considerations such as these that have led a number of commentators to favour astakeholder-centred approach to social and environmental accounting (Gray, et al., 1996).
Stakeholder theorists view much current reporting practice as having little to do withany genuine attempt to be accountable, (O’Dwyer, 2003; Christian Aid, 2004). Externalreports that are provided are often viewed as self-serving public relations documents withlittle substantive content.
Stakeholder-Accountability Approach
Stakeholder-accountability proponents view corporations as institutions with public
obligations.
Accountability in a participative democracy means “those controlling
resources provide accounts to society of their use of those resources” (Gray et al. 1996:37). It involves “the duty to provide an account (not necessarily ﬁnancial) or reckoning of
those actions for which one is held responsible” (ibid: 38, emphasis in original).
The starting point for this approach in OHS is that employees have a right to a safeand healthy workplace. This needs to be backed by rights to quality information toallow employees and other stakeholders to make informed decisions and to secure theaccountability of employers for OHS performance. Social and environmental accounting
is a mechanism that can help to internalise currently externalised OHS costs into
decision-making. It also has the potential to create new visibilities, to facilitate dialogue
and debate and to promote more open and transparent decision-making (Boyce, 2000).
The United Kingdom’s Centre for Corporate Accountability (CCA) has urged the HSE
to encompass the social as well as business beneﬁts of public reporting. The CCA
observes that statutory disclosure could:“… Allow… stakeholders to assess [employer] commitment to effective healthand safety risk and how alert [they] are to the need to monitor and improve [their]
health and safety performance.” (CCA 2001, para 3)
The CCA has also called for the linking of performance data with national targets,7 andemphasised the importance of establishing accountabilities (e.g. identifying directors withparticular responsibility for health and safety) and getting disclosure of “bad” news (e.g.
enforcement notices and convictions for OHS offences) as well as “good”.
From the stakeholder-accountability perspective, relevant OHS disclosures allow
employees and their representatives to make more informed decisions about “employersof choice”. Such disclosures also enable them to monitor compliance with existing

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Health and Safety Disclosure Practices 5

OHS legislation, relevant collective bargaining provisions and voluntary codes ofconduct. Disclosures are also viewed as an essential prerequisite for more participatory“stakeholder” systems of governance (Trades Union Congress, 1996).
Stakeholders can respond to the information provided by applying rewards and sanctions
through their market decisions, direct engagement with corporates and/or lobbying forlegislation (Tilt, 1994; O’Rourke, 2003). Accountability reporting also helps to engender asense of trust where employers demonstrate willingness to have their actions monitored
by stakeholders. Leaving employers to develop, implement and evaluate disclosuresunilaterally runs too much risk of the exercise descending into a ‘public relations’
exercise. Genuine stakeholder engagement, backed by statutory information rights andaudit provisions, helps to establish the credibility of the reporting process.
Stakeholder-accountability proponents view organisations from a pluralist perspective,
with employers and employees having interests in common and separate interests.
They have no difﬁculty with the idea that social accounting can result in ‘win-wins’ for
employers and employers where interests overlap. Workplaces that demonstrate theircommitment to good employment practices may well ﬁnd it easier to attract and retain
quality staff. However, cracks appear in the business case where separate interests
prevail. Stakeholder-accountability proponents point to research that indicates that ﬁrms
are very selective about the disclosures they make and typically only present information
favourable to their image (Deegan & Gordon, 1996). These ﬁndings hold even when it
is clear that ﬁrms do have “bad performance” to report (Christian Aid, 2004; Deegan &Rankin, 1996).
Regulatory authorities overseas are starting to respond to calls to go “beyond thebusiness case” to OHS reporting. The HSC in the United Kingdom, for example, israising issues of accountability and social responsibility more frequently (HSC, 2003).
In the United States, a variety of “right to know” legislation has been introduced aimed
at providing better access to OHS-related information. The Emergency Planning andCommunity Right-to-Know Act, 1986 introduced the Toxics Release Inventory, which
requires companies to publish estimated emissions of potentially hazardous chemicals.
Gunningham et al. (2002) report that this has created strong incentives for ﬁrms to reduce
the use of chemicals in order to preserve their “reputation capital” as well as empoweringcommunity groups.
In the New Zealand context, a District Court judge recently ordered Nuplex Industries Ltd
to publish details of a conviction for air pollution in its annual report, to make environmental
issues a mandatory item at all board meetings for a period of 24 months, and to publish
a notice to its employees detailing its breach and previous convictions.8 The Judge
noted that the company had presented itself as “environmentally responsible” and thatits reporting of the incident in the 2002 annual report was misleading. Triple bottom line
reporting requirements have also recently been introduced in the Local Government Act

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6 Judy Brown and Frances Butcher

2002.9From the perspective of Governments and regulators, social and environmental accounting
can be viewed as a way of infusing expectations arising from national legislation andinternational obligations. In the OHS arena, it provides a lever to encourage increased“ownership” of health and safety by corporate boards and managers and a stimulus tostrengthen employee participation in the ongoing management of workplace health andsafety. There is recognition that transparency can be a key driver of social change.
Critical Theory Perspective
Critical theorists view accounting as deeply embedded in broader societal relationships
and conﬂicts. Accountants and annual reports do not merely “report reality”. Rather
accounting systems are ideological tools used to shape agendas and debates and“to mediate, suppress, mystify and transform social conﬂict” (Guthrie & Parker, 1989:351). From this perspective, social accounting is driven “by the demands of powerfulinterests in society” (Puxty, 1986: 95). Employers do not merely respond to stakeholder
demand for information, but actively seek to construct a particular organisational image(Neu, et al., 1998); one that favours the interests of capital and helps to entrench its
power. They may engage in voluntary disclosure so as to appear socially responsive
and thereby pacify socio-political demands (Guthrie & Parker, 1990: 166) and control
the CSR agenda. Strategies may be expected to change as power relationships in thewider socio-economic environment change. For critical theorists, the fact that accounting
information is so often taken at face value:“Makes its role as a mystifyer of social relations and a legitimator of power anddomination the more insidious and threatening.” (Puxty, 1986: 98)
Critical theorists are particularly wary of “green-wash”, where business attempts topromote an image of being socially responsible but this is merely a facade for more sinister
corporate agendas. From this perspective, OHS disclosures may be used symbolicallyto publicly indicate interest and concern from the ‘top’ of the organisation but at the sametime disguise hidden agendas to preserve managerial prerogative (Hutter, 2001: 139). It
may be seen as a “tool of regulatory resistance”; with audits and cost beneﬁts analyses
becoming “as much a form of mystiﬁcation as an analytical tool” (ibid).
Rather than relying on concepts such as “stakeholder dialogue”, which fail to takeaccount of the imbalances of power between capital and labour, critical theorists prefer
to utilise “anti-reports” and similar mechanisms to expose the fundamental contradictionsof capitalism (Tinker, et al., 1991).

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Health and Safety Disclosure Practices 7

A Framework for Analysing OHS Disclosures
The analysis aimed to determine the current level of OHS reporting activity among New
Zealand’s largest employers, and to assess the quality of the information reported.10 An
essential stage in all content analysis studies, however, is deciding which documents toanalyse (Krippendorff, 1980). There has been little methodological consistency between
different studies assessing the content of corporate social reporting (Milne & Adler, 1999).
Social accounting content analysis has focused on annual reports “due to the high degreeof credibility they lend to information … their use by a number of stakeholders … and theirwidespread distribution” (Unerman, 2000: 669-670). However, a substantial proportion ofsocial and environmental reporting is published in documents other than annual reports(ibid.: 674). Studies that limit their examination to annual reports risk underestimating thevolume of reporting companies are engaged in (ibid.: 673; see also Gray, et al,. 1995).
Issues regarding quantiﬁcation in content analysis studies largely concern whether
to count sentences or words, whether differences in grammar between authors could
skew results and what to do about non-narrative information such as photographs orcharts. Unerman (2000: 669) observes that a key assumption underlying much CSR
content analysis “is that quantity of disclosure signiﬁes the importance of the item being
disclosed”. Different measurement approaches may lead to different impressions of therelative importance of disclosure categories (ibid: 674). Various hypotheses have also
been advanced regarding the location of CSR information within corporate reports.11
To reﬂect the trend of issuing standalone environmental and/or social impact reports,
this study did not focus exclusively on annual reports. Letters sent to Chief Executives
requested any publicly available monitoring information, including but not limited to,annual reports, triple bottom line reports, corporate social responsibility reports andenvironmental or health and safety reports.
Data Collection
A sample of 100 employers was deemed sufﬁcient for the analysis, based on available
resources and the amount of data it would generate. A list of New Zealand’s 200 largest
employers using FTE employees was provided by ACC. The initial response rate to theﬁrst 100 letters and follow up phone call was 50%. Using letters, phone calls and internet
searches, reports for 89 employers from the ﬁrst 100 were obtained. Four organisations
stated their reports were not publicly available; four were subsidiaries and shared material
with other employers on the list, and three did not make any material available within
the time frame for collection. The second batch of 100 letters used the same contact
methods. Eleven reports were used from this second batch, to bring the total number ofreports to 100.12

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8 Judy Brown and Frances Butcher

The sample of 100 employers fell into four size ranges:••••

6 employers had 10 000+ FTEs;
14 employers had 5001 – 9999 FTEs;
75 employers had 1000 – 4999 FTEs; and5 employers had less than 1000 FTE employees.

The largest industry in the sample was government administration and defence, with
21 employers, followed by manufacturing, with 19 employers. No employers in the ﬁnal
sample were from the agriculture, forestry and ﬁshing, or mining, or electricity, gas andwater supply or accommodation, cafes and restaurants industry groups.
Data was extracted from the reports as outlined in the next section and analysed using
an Access database.
Table 1: Industry type and number in sample

Data Analysis
The similar OHS legislative frameworks between New Zealand and the United Kingdom
meant the published HSC guidance for OHS reporting provided a good basis forcomparison with New Zealand reporting. This study also used the 2000 guidance (HSC,
2000). Later versions of the guidance (now a draft standard undergoing consultation,
HSE, 2004) became more proprietary and localised, referring to UK speciﬁc legislation
and requiring signiﬁcant alterations if it was to be used in the New Zealand context.
Based on previous Department of Labour research, a limited number of OHS indicators
were added to provide speciﬁc, supplementary information on New Zealand’s workplace
practices (Department of Labour, 2003).

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Health and Safety Disclosure Practices 9

It was decided to bypass issues surrounding methods of quantifying CSR and instead
assess the reports against established guidance. The HSE UK guidance had very broadand vague criteria by which to rate quality. Therefore, it was decided that this scoring
approach was too open to interpretation and subjectivity.
The Paciﬁc Sustainability Index (PSI) developed by Morhardt (2001; 2002; et al, 2002)
incorporates the Global Reporting Initiative GRI 2000 (updated, 2002) guidelines andother international standards such as the ISO 14031 environmental performance
evaluation standard.13 Because the PSI covers various areas of sustainability, workplace
health and safety was insufﬁciently detailed for the purposes of this study. However, the
PSI scale (and its rules for assigning score levels) was used with the HSC guidance toscore the New Zealand reports.
The PSI scale avoided a common problem experienced with scoring systems. Similar
mid-level aggregate scores for two reports can obscure that one reports in detail on a few
items, while the other covers a wide range in vague terms (Milne et al,. 2003: 7). The PSI
instead rated the information for the quality and depth of the information provided, apartfrom its inclusion. Moreover, the PSI scale included clear and complete descriptions of
the categories and items along with comprehensive criteria and guidelines for scoringeach item. These were used to compare the information against the HSC guidance.
Further criteria from the 2003 stock-take indicators were developed by repeating either
the PSI criteria, or including similar criteria. Further rules for interpretation were developed
during the quality control process, where every tenth report was coded independently,
any divergence discussed and an approach agreed upon.
The ﬁrst level of data analysis summarised results by question, aggregating results acrossthe entire sample. Particular points of interest were broken down into industry groups toprovide more detailed comparison. Data quality was assessed using Morhardt’s PSI
scale (Morhardt, 2001, 2002, et al 2002). Results are presented below.

Disclosure Practices of Top 100 New Zealand Employers
Principles
Nearly 60% of employers provided a broad statement about their OHS policy. The mostcommon principles given for considering health and safety are a concern for the safety,
health and welfare of employees, and a concern to provide a safe place to work (21 and18 examples respectively). The next most common example is recognition of the legal
requirement to address OHS issues (mentioned in 13 reports).
While 40 employers report on current progress or forthcoming plans, fewer reported on
their goals against which progress might be measured (25 examples). According to the
HSC Guidance (HSC 2000), a goal of no accidents/zero injuries was not acceptable

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10 Judy Brown and Frances Butcher

as a stand-alone statement. Only 14 employers reported the signiﬁcant risks faced by
employees. Thirty-one employers reported on the arrangements they made for consulting
employees.
The overall quality of the sample’s data in this area was below average. As Figure 1 shows,most employers did not mention this data at all. Of the planning, policy and progress datathat was included, ‘progress towards health and safety goals’ was the most commonlyscored as maximum quality, while a lower percentage scored the maximum on describing
signiﬁcant risks faced by their employees, and arrangements for consultation.
Figure 1: Health and safety planning, policy and progress: overall quality of thesampleFigures 2 – 6 describe the quality of planning, policy and progress by industry group. In
addition, outlining their OHS policy, reports were required to also note a contact person
and how the policy was implemented to score the maximum. The results on Figure 2
show that no employer scored the maximum 2 points for this data, but employers from allindustry groups (except wholesale) scored an average mark.
Figure 3 shows that manufacturing was the only industry group to feature a comprehensive
outline of the risks their employees faced, and the strategies in place to control the risks.
Most reports did not mention this data at all, while all of wholesale trade and a minorityof other employers did mention signiﬁcant risks, but were marked ‘formally addressed
but limited or not very clear’. A third of the ‘personal and other services’ group mentioned
risks brieﬂy.

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Health and Safety Disclosure Practices 11

Figure 2: The broad context of the health and safety policy: quality

Figure 3: Signiﬁcant risks and the strategies in place to control the risks: quality

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12 Judy Brown and Frances Butcher

Figure 4: Health and safety goals: quality

Figure 5: Progress towards achieving health and safety goals: quality

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Health and Safety Disclosure Practices 13

The overall data quality levels were low. Most industries did not mention their goals atall, and those that did, were described as being ‘formally addressed but limited, or notvery clear’. However, descriptions of progress towards achieving OHS goals (Figure 5),
were a lot clearer and comprehensive. Most industries scored either maximum points(‘appropriate detail, clear presentation’) or slightly lower (‘formally addressed but limited’or `not very clear’). These results do not carry through to statements about targets forforthcoming years. The HSC Guidance (HSC, 2000) required that this statement included
a numerical target as well as a date or timeframe. Many reports, if they disclosed thisinformation at all, included a vague statement with no dates or numerical targets (Figure6). The manufacturing and communication industry groups did score the maximum forsome of their reports, as did transport and storage.
Figure 6: Statement of the targets or objectives for the forthcoming years: quality

Monitoring
Monitoring is reported across injuries, sick leave, convictions and OHS performance.
Approximately a third of the sample group report injuries, most often as Lost Time Injuries(LTI), but this is not a single consistent method of measurement. It is given as a number
or a rate, and the method of calculating the rate varies from report to report.14 While
Lost Time Injury was the most commonly noted method (36 examples), the majority ofthese (34) were scored as “formally addressed but limited, or not very clear.” The next
most common methods of monitoring are by sick leave, injury number (using a range of

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14 Judy Brown and Frances Butcher

denominators) and by fatality, (Figure 7). Whereas injuries (lost time or otherwise) are
reported across a range of industry types, sick leave is largely reported by the healthand community services industry (67%), and fatalities by the manufacturing industry andthe similar high-risk industries, communication services, construction, and transport andstorage (together 90%). Five employers mention OHS enforcement notices or convictions,and more often it is the lack of notices or convictions that is reported. Only one mentioned
enforcement notices (and had not received any), whereas all ﬁve mentioned convictions(two received one each). While there were 100 examples of methods used to monitor
OHS performance (in 47 reports), 80 were scored as “formally addressed but limited, or
not very clear”. Five reports (24%) of the government and defence group, and six reports(32%) of the manufacturing group, as well as two from health and community services,and one each from property and business services, and transport and storage, provided“appropriate detail and clear presentation”.
Figure 7: Methods of Monitoring

The number or rate of injuries was used across nine industry groups. The two reports
scoring maximum points were in the government administration and defence, and the
manufacturing industries. However, the majority of reports (78) did not mention thenumber or injury rate at all. Two thirds of the reports did not use employee days lost as ameasure of their OHS performance. Just over one third used this measurement but thedata quality was average, “formally addressed but limited, or unclear”. Again, the tworeports with ‘appropriate detail and clear presentation” were in government administrationand defence, and manufacturing.
While fatalities are statistically rare, the HSC guidance (HSC 2000) did include whether
any fatalities occurred, plus any details. However, ninety reports did not mention whether
any fatalities had occurred. Ten reports did include this information although with average
results: 8 scored “formally addressed but limited, or not very clear”. The only report toscore the maximum for data quality was in the manufacturing industry.

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Health and Safety Disclosure Practices 15

Details of OHS enforcement notices were also very rarely mentioned. The one that did
was from the manufacturing industry. The situation was largely the same for quality of
OHS convictions information (95 examples). Full marks were awarded to one retailreport, in addition to one 2 and three 1’s given to four reports in the manufacturingindustry group.
Table 2: Health and safety performance

Other Indicators
Twenty-nine employers reported on staff turnover. Of these, 9 were government
administration and Defence, and 10 were Health and community services. Of the 85
employers in the ACC partnership programme, 33 (39%) mention their participation.
Of the 16 employers from the health and community services industry, 4 report on theachievement of the Ministry of Health’s Health and Disability Safety standard (NZS

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16 Judy Brown and Frances Butcher

8134:2001), and 8 on the National Mental Health Sector standard (NZS 8143:2001).
Thirty-one employers reported on the arrangements they made for consulting theiremployees.
The data quality was widely spread. Of the 33 (39%) employers who noted their
participation in the ACC Partnership programme, 16 scored the maximum, with data thatwas of “appropriate detail and clear presentation”. This high score was spread acrossalmost all industry groups.
Of the 16 employers in the Health and Community services, one scored maximum points
for information on the Health and Disability safety standard, three scored 1 for data thatwas “formally addressed but limited, or not very clear”, while the majority (12 examples)
did not mention the Standard at all. The Mental Health sector standard fared slightly
better with one scoring the maximum, while seven scored 1 and eight scored 0.
Absenteeism is becoming an established measure of health – in terms of both theworkplace itself and the health of its workforce. Sick leave is measured in a variety ofways, as noted above. The three employers who scored the maximum 2 points werefrom the Government administration and Defence, and Health and community services
industry groups. Twelve employers scored 1 each, from the Government administration
and Defence (2 examples), Health and community services (8), and Manufacturing (2)industry groups respectively. The remaining reports scored did not mention sick leave atall.
Voluntary turnover data was of slightly better quality. Three employer types scored the
maximum 2 points, from the Government administration and Defence (3 examples),Health and community services (3 examples), and Manufacturing (1 example). Twentytwo employers scored 1 for data quality that was “formally addressed but limited, or notvery clear”.
Under the HSE Act amendment 2002, employers are required to have an employee
participation system if they employ more than thirty staff. One third (31) of employers
provided some information about their methods for consulting employees, with 24 ofthese scored as “formally addressed but limited or not very clear.” The two reports thatscored 2 were in the Government administration and Defence, and Transport and storage
industry groups.
Programmes
Half the sample groups report on OHS programmes or actions. The largest type ofprogramme is auditing, with 49 examples. Most of these are internal standards, policies
or guidelines (10 examples), internal auditing (9), and reporting to management (9). The
second largest type (42 examples) is education or training programmes. Within that

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Health and Safety Disclosure Practices 17

group, the largest single programme, with 25 examples, is “staff training in health andsafety”, rather than speciﬁc courses such as ﬁrst aid or ﬁre warden training (four andthree examples each). The third largest type is for employee participation (39 examples),most of which are OHS committees (16) or representatives (13). After “staff training in
health and safety”, these are the second and third largest single example.
As a proactive programme, the use of OHS awards, whether internal or external, is almost
exclusively limited to the manufacturing industry, who provide ﬁve examples of each – theconstruction industry is the only other industry to mention awards (one example of theuse of external awards).

Improving the Quality of OHS Reporting in New Zealand
There are a number of ways in which OHS reporting, and indeed employee-related
reporting more generally, might be improved. We consider that a tripartite approach involving government agencies, employers and unions – offers the best prospects foradvancement. Other parties that could usefully be included in stakeholder engagement
processes include representatives from ethical investment funds, consumer organisations
and NGOs (e.g. those with a focus on human rights).
In particular, the quality and completeness of reporting needs to be addressed. At present
many important dimensions of OHS performance are omitted. Engaging workplace
representatives (e.g. unions and health and safety committee representatives) andOHS professionals in the process of developing indicators should help to ensure morebalanced reporting. Ideally, a standardised set of deﬁnitions and performance measures
might be developed, with room for sector-speciﬁc considerations. This might also include
differential reporting guidance (e.g. simpliﬁed reporting regimes for SMEs). There are
a number of established international reporting frameworks that could be of assistancehere.15 A full set of indicators could be formulated for internal use (e.g. by health and safetycommittees), with summary information provided in annual reports. A joint approach to
the development and monitoring of OHS indicators would cohere well with the conceptof workplace participation which the Health and Safety Employment (HSE) Act seeks toencourage.16
Government agencies have an important role to play in this process. The Department ofLabour is currently following the lead of the HSE in the United Kingdom (see, e.g., HSC
2000, 2003) and promoting efforts to raise both the quantity and quality of OHS reporting
through its government-wide Workplace Health and Safety Strategy. This involves
co-ordinating stakeholder initiatives aimed at encouraging more consistent, complete
and credible reporting on employment issues. It is currently gathering information oninternational developments and best practice examples from New Zealand and overseas
to disseminate through its website as part of the Strategy (Department of Labour 2004).
The Accident Compensation Corporation could require employers to establish OHS

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18 Judy Brown and Frances Butcher

reporting systems to qualify for ACC levy discounts through the Partnership Programme
and Workplace Safety Management Programme. Government agencies could publish
league tables of the top 100 New Zealand employers, both in terms of the quality ofreporting and OHS performance itself. The government is currently building in socialand environmental reporting requirements through a range of sustainable development
initiatives, including government procurement policies.17
For the reasons canvassed in Section 3, we are not convinced that a voluntary
approach to OHS reporting is sufﬁcient. The “business case” will take disclosure only
so far. Regulators need to consider a broader range of costs and beneﬁts (including
costs borne by employees, local communities, taxpayers and future generations) andto remain cognisant of the accountability issues at stake. Employees have OHS rights
and, arguably, a right to information that enables them to assess employer performanceand participate effectively in workplace decision-making. Shareholders, consumers
and NGOs are also showing increasing interest in this area. We consider that a strong
argument can be made for listed companies to be legally required to disclose standard
OHS indicators in their annual reports as part of a wider set of employment-related
indicators. This would provide a useful supplement to the information rights that currently
exist under the HSE Act and the good faith requirements of the Employment Relations
Act (Davenport & Brown, 2002).
Requiring employers to report on certain indicators would help counteract the current
lack of ‘negative outcome’ reporting. Evidence of such reporting was lacking in the 100
reports analysed. Aside from noting sick leave, there were no examples of negative healthoutcomes, such as noting how many employees suffered from work-related long latency
illness. Reports were more inclined to mention a limited range of positive initiatives,
largely conﬁned to ﬂu vaccinations. There were, however, more negative outcomes of
injuries or fatalities reported.
Although monitoring employees’ health is a legislative requirement, there is little evidenceof monitoring apart from sick leave or voluntary turnover in a limited number of reports.
There were employers in the list that were highly likely to use hazardous chemicals, or
employed a large number of ofﬁce-based staff. There was however, no disclosure on
the monitoring of hazardous chemicals and just one mention of gradual process; bothincreasingly featuring in both local and international health statistics.
Concerns about disclosure bias and the incompleteness of reporting also highlight theimportance of paying attention to veriﬁcation and audit issues. Independent, third party
assurance is widely recognised as a requirement to enhance the quality and credibility ofthe disclosure process. AccountAbility recently released its AA1000 Assurance Standard:
Guiding Principles (2003) together with a set of guidance notes in response to growing
concerns about the quality of disclosures in annual reports. They are designed to help
ensure that reports provide accurate and balanced representations of organisational

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Health and Safety Disclosure Practices 19

performance and underlying systems and processes. Stakeholder engagement isemphasised as a way of improving accountability and performance.18
In 2002, the Institute of Chartered Accountants of NZ established a taskforce toinvestigate sustainable development reporting. The taskforce identiﬁed several key
issues, including the extent to which such reporting ﬁts within the existing conceptual
framework for external reporting and auditing of ﬁnancial information (ICANZ 2002).
A sub-committee of the Financial Reporting Standards Board has been established topursue these issues. Hopefully this will also contribute to informed development of thearea. However, as Gray (2004) observes, the accounting profession has not exactly led
the charge in efforts to lift corporate social reporting standards. Indeed some elements
are quite hostile to the idea of expanding the realm of accounting beyond the arena ofshareholders and the capital markets. The Institute of Chartered Accountants in Englandand Wales has lobbied against attempts to include mandatory reporting on OHS andother elements of ‘human capital management’ in annual reports (ICAEW 2003). Thus it
would seem unwise to leave this activity to accountants alone.

Concluding Remarks
While it is encouraging to see employers disclosing OHS information in their annual
reports, we consider that disclosure practices in New Zealand still have a long way to
go in terms of both the quantity and quality of reporting. There is considerable room for
improvement in terms of completeness, consistency, veriﬁability and comparability (seealso Milne et al. 2003, on triple bottom line disclosures in New Zealand more generally).
Attention needs to be paid to both the content of reports and the reporting process(e.g. in terms of stakeholder engagement and audit). We hope this article will provide
organisations and interested stakeholders with some ideas for taking reporting practices
forward. We consider that much can be gained by drawing on existing frameworks andguidelines for sustainable development reporting and auditing (e.g. the GRI and AA1000
frameworks). We have provided examples of the types of initiatives that might be pursued
to progress developments in this area.
Growing numbers of writers are pointing to the fact that social reporting has been treatedas something of a poor cousin to environmental reporting (Deegan 2002: 285), in termsof both theoretical and practical developments. There is increasing recognition that theemployment arena is one with considerable research potential. We encourage ongoing
monitoring by employers, workplace and community stakeholders, policymakers andresearchers of national and international developments in this area.

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20 Judy Brown and Frances Butcher

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Footnotes
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

16
17
18

See e.g., the Global Reporting Initiative sustainability reporting guidelines (GRI, 2002) and the Accountability
AA1000 framework of social accounting standards (Accountability, 1999, 2003).
In New Zealand, the Institute of Chartered Accountants of NZ has issued a Report of the Taskforce on Sustainable
Development Reporting (ICANZ, 2002).
One of the longest standing awards schemes is offered by the Association of Chartered Certiﬁed Accountants in the
UK (see ACCA, 2004). ICANZ offers awards in sustainable development reporting and human resource reporting(see http://www.icanz.co.nz for details).
http://www.hse.gov.uk/costs/index.asp
The situation is exacerbated by long latency occupational illnesses where symptoms may not be evident until
decades following initial exposure.
See also Nelkin and Brown (1984).
These include targets established by the UK Government (HSC 2000) and related union participation agreements(e.g. HSE 2002).
Auckland Regional Council v Nuplex Industries Limited, DV AK CRN 2004066321 [18 March 2003].
The 2004 amendment required councils to report on the social, economic, environmental and cultural well-being of
the community (see Part 3 of Schedule 10).
The HSE UK has undertaken this type of study twice. See HSE 2002b and 2003.
For example, including OHS statistics in the ﬁnancial and operational highlights or a ‘review of the year’ may imply it
is seen as integrated into the company’s activities and is more than a ‘personnel’ issue, which may be the impression
given if it is located in the ‘people’ section (Gray et al 1995).
Full details of the methodology used, including demographic details of the total population from which the sample of
100 employers was taken and a copy of the survey instrument, are available in the conference proceedings referred
to in Footnote 1.
Used with permission from the author. The PSI is also available on the internet: http://www.mckennaroberts.edu.
Lost Time Injuries use the total time lost to injury divided by a variety of denominators e.g. days (full day, shift day,including or excluding weekends); hours (one hundred hours, one million hours, etc.).
See, e.g., European Industry Council (1998), Accountability International’s SA8000 scoring system (http://www.
sa-intl.org/SA8000), National Occupational Health and Safety Commission (2003), World Business Council
for Sustainable Development (2004), Global Reporting Initiative (2004). Despite New Zealand being a nation ofsmall to medium enterprises, enterprise size is not necessarily an impediment to integrating sustainable practices.
Seven employers are part of the GRI programme; one of these – Tall Poppies – has seven employees. http://www.
globalreporting.org.
Under Section 19 of the HSE Act places of work with more than 30 employees must develop health and safety
worker participation systems.
See, e.g., the Ministry for the Environment’s Govt3 programme (http://www.mfe.govt.nz/issues/sustainable-industry/
govt3/index.html).
See Owen, Swift and Hunt (2001) on the importance of this being genuine dialogue.

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Hospitality Stress 23

Occupational Stress in the Hospitality Industry- An Employment Relations Perspective
KAREN LO & FELICITY LAMM*

Abstract
This article endeavours to draw attention to occupational stress amongst workers in
so-called ‘low risk industries’ – namely the service and hospitality industries - and to
explore their perceptions of stress, their attitudes to managing stress and their responses
to the recent inclusion of stress in the Health and Safety in Employment Amendment
Act, 2002. It is also the intention to broaden the scope of analysis by investigating a
range of employment factors – such as heavy workloads, interpersonal relationships andorganisational factors - which can contribute to occupational stress amongst workers.
Findings from two case studies are reported and they indicate that working in thehospitality industry can be stressful and that many workers are vulnerable in terms of
their poor working conditions and low wages. Consistent with other studies, it was also
found that there was low trade union presence and a high rate of casualisation and staff
turnover. At the same time, there was a lack of overt conﬂict between management andworkers, with an apparent close alignment of goals between the two parties and a styleof management that could be described as unitarist.

Introduction
There has been growing recognition in the literature over the past twenty years thatoccupational stress can contribute to work-related ill health, with negative effects on
both physical and psychological well-being (Caplan, Cobb, French, Harrison, & Pinneau,
1975; Perrewe & Anthony, 1990; Bohle and Quinlan, 2000; Smith 2003). Occupational
stress has been associated with reduced work output and can contribute to increased
accidents, absenteeism, employee turnover and poor employee performances (Caplan,
Cobb, French, Harrison, & Pinneau, 1975; Perrewe & Anthony, 1990; Spector, 2003).
Moreover, it has the potential to spill over to affect employees’ private life, causing marital,
friendship or community problems (Kahn & Byosiere, 1992; Sauter, Murphy, & Hurrell,1990). These outcomes of occupational stress can result in signiﬁcant economic andsocial costs for both employers and employees (Watkins, 2003).

* Karen Lo was a Master student at the Department of Management and Employment Relations, the University of
Auckland, New Zealand. Dr Felicity Lamm is a Senior Lecturer at the Department of Management and Employment
Relations, The University of Auckland, New Zealand

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24 Karen Lo and Felicity Lamm

Recently, there has been a great deal of public attention on occupational stress in New
Zealand as a result of the Health and Safety in Employment Amendment Act, 2002. In thisAmendment, occupational stress is ofﬁcially recognised as a ‘hazard’ (refer to Section 8).
Such changes have been largely informed by signiﬁcant developments in New Zealand’scommon law as demonstrated in two leading decisions from High Court and Court ofAppeal respectively – namely Brickell v Attorney-General and Attorney-General v Gilbert(Caisley, 2004; Scott-Howman & Walls, 2003). In essence, these cases conﬁrmed thatthe employer has a general duty of care to safeguard their employees not only fromphysical harm but also from mental harm (Scott-Howman & Walls, 2003). Furthermore,
more recent New Zealand and UK court cases – for example, Hatton v Sutherland [2002]
2 All ER 1 (CA) – have supported the notion that counselling alone is not sufﬁcient to allow
an employer to discharge his/her obligations under both statue and common law, (ScottHowman & Walls, 2003). There has to be demonstrable evidence that the employer has
endeavoured to eliminate or isolate or minimise the sources of stress. Therefore, theinclusion of stress and fatigue in the Amendment to the Health and Safety in Employment
Act has meant that all employers must be cognizant of the employment conditions of theirworkers, irrespective of the type of work, and must implement systems that treat stressand fatigue as any other workplace hazard (Department of Labour, 2003).
Although it is generally acknowledged that occupational stress can be a contributing
factor in workplace illness and injury rates, little is known about the extent of occupational
stress in so-called ‘less hazardous’ industries that rely on ‘emotional labour’, such as
the hospitality industry. This lack of knowledge is of concern given that hospitality
workers now constitute 6.0% (102,620 workers) of the total surveyed workforce in New
Zealand (Statistics New Zealand, 2004a). In the literature, this fast-growing industry is
characterised by non-standard and precarious work arrangements, low-wages, excessive
work demands, intensive customer interaction and a rapidly changing work environment(Haynes & Fryer, 1999; Bernhardt, Dresser & Hatton, 2003). There is also the issue of‘emotional labour’: a requirement for employees to act in an empathetic, positive andfriendly manner at all times when dealing with customers in order to make them feelwanted and welcome (Anderson et al., 2002; Grandey, 2003; Lashley, 2001).
The purpose of this article, therefore, is to examine the attitudes of those working in thehospitality industry to both occupational stress and the recent legislative changes. For
several reasons, the focus in this article will be on large-sized, metropolitan hotels. First,
there is general agreement in the literature that there is a lack of knowledge of occupational
stress across a range of industry sectors, including the hospitality industry, and across avariety of occupations and organisational levels (see Singer, Neale, & Schwartz, 1987).
Second, larger hotels are more likely to have established health and safety committees
and a greater unionised workforce compared to small hotels restaurants, bars and cafes(Whatman, Harvey, & Hill, 1999) and, therefore, may present more evidence of the role ofhealth and safety representatives in dealing with occupational stress (refer to S19 of the
Health and Safety in Employment Amendment Act, 2002). Finally, the majority of large

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Hospitality Stress 25

hotels in Auckland (as in many other parts of New Zealand) are in overseas ownership(Haynes & Fryer, 1999) and this could offer comparative insights to overseas and local
management of occupational stress.
The article commences with a brief proﬁle of the New Zealand hospitality industry and an
overview of the research on occupational stress. Based on the extant literature, a morecomprehensive model is presented that incorporates the core employment relations
features and levels of analysis with the orthodox psychosocial elements. Using themodel as an underlying framework, the key ﬁndings from a study of two large hotels arepresented. The implications of the ﬁndings are discussed further in a thematic mannerand the concluding remarks propose areas for further research.

The Hospitality and Hotel Industries
The hospitality industry is categorised as the Accommodation, Cafes and Restaurants
sector (division H57) under the Australian and New Zealand Standard Industrial
Classiﬁcation (ANZSIC). This sector employs approximately 6.0% of the New Zealand’s
working population and represents 3.5% of New Zealand businesses, see Table 1. For
the year ending February 2004, the Accommodation, Cafes and Restaurants sector
generated $28,085.30 of revenue, which represents around 2.8% of the New Zealand’s
total industry gross earnings (Statistics New Zealand, 2004b). Although cafes andrestaurants represent the largest number of businesses in the hospitality category,
accommodation businesses (ANZSIC subdivision H57 10) are the second largest group,
making up 35.3% of the hospitality industry. In the accommodation industry, the hotel
sector represents the largest group, as shown in Table 2, and accounts for approximately
51.6% of the industry’s total employment.
Table 1: Proﬁle of New Zealand’s Accommodation, Cafes and Restaurants Sector(Source: Statistics New Zealand, February 2004 b)

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26 Karen Lo and Felicity Lamm

Table 2: Proﬁle of New Zealand’s Accommodation Businesses(Source: Statistics New Zealand, February 2004b)

Over the past decade, a major feature of the hotel industry has been the rise of global
players and the intensifying competition. This has caught hotels in a strategic bind: trying
to minimise costs through applying a range of cost-cutting strategies and, at the same time,
attempt to improve the quality service by implementing customer orientation programmes,
etc. (Bernhardt, Dresser, & Hatton, 2003; Korczynski, 2002; Peccei & Rosenthal, 2000).
According to Bernhardt, et al (2003: 7), strategies to reduce personnel, freeze wages
and conditions, eliminate or combine job categories and increase hours of work have
had enormous implications for those working in the industry. There has also been agrowing trend to subcontract out services and administrative functions, such as valet,cleaning, laundry, payroll and beneﬁts processes, compliance and systems maintenance(Fox, 1998). Employers have beneﬁted from subcontracting and outsourcing the work interms of lower labour costs, lower utility and water costs and less scrutiny from regulatory
agencies (Francis, 1998; Lattin, 1993; cited in Bernhardt et al., 2003). However, thesubcontracting of work has also hastened the decline in the number of unionised workers
and shifted many of the compensation claims to outside organisation (Haynes, 2005).
Because of the dichotomous nature of the hotel industry (i.e. ﬂuctuating ﬁnancial proﬁts
and tight margins versus the pressure to deliver quality services), the literature suggeststhat working in the hotel industry can be stressful and has raised a number of concerns.
Typically, these concerns are associated with shift work and fatigue as a result of working
long hours, unpredictable shifts, few breaks, heavy physical demands (manual handlingheavy loads, etc), and mental and emotional demands (Wallace, 2003). Inherent in thisfast-paced, competitive service industry are the high levels of casualisation and highemployee turnover (Bernhardt et al., 2003; Haynes, 2005). Low pay is also a concern
since work is remunerated on the basis of qualiﬁcation standards which tend to be set
lower in relation to other service industries like nursing and policing (Haynes & Fryer,1999).

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Hospitality Stress 27

Previous Research on Occupational Stress
One of the major weaknesses of orthodox research on occupational stress is that it
has been dominated by psychological and medical approaches. This has meant thatoccupational stress is largely attributed to individual behaviours such as personality traits
and therefore, coping mechanisms are primarily initiated and managed by the individual(Cartwright, Cooper & Murphy, 1995; Semmer, 1997; Parkes and Sparkes, 1998).
Authors who pursue these lines of inquiry have been criticised for their narrow focus on
the individual and for fostering a ‘victim-blaming ideology’ rather than recognising otherenvironmental sources of stress and investigating underlying problems and solutions
that incorporate a wider number of factors (Otto, 1985; Cox, 1988; van der Hek & Plomp,
1997; Cartwright & Cooper, 1997; Cooper, Dewe & O’Driscoll, 2001; Hart & Cooper,
2002).
In addition, there has been a growing recognition that managing occupational stressis complex and multifaceted, and therefore requires a more holistic approach. Thereis also recognition that employment factors (e.g. wages and conditions, employment
relationships, company policies, etc.) as well as the roles played by the different interestsgroups (employers, trade unions and government agents) are important in understanding
the complex nature of occupational stress (see Bohle & Quinlan, 2000; Smith 2003;
Bohle, 2004; Gold, 2005).
Taking a more multi-dimensional view of stress, Cooper, Dewe and O’Driscoll, (2001)
argue that sources of stress can be grouped into three broad categories: job-speciﬁcsources, organisational sources and individual sources. The ﬁrst two categories are
external to the individual and are frequently referred to as “environmental” sources ofstress. Cartwright and Cooper (1997) identiﬁed six environmental sources as follows:
1.
2.
3.
4.
5.
6.

Factors intrinsic to the job itself
Roles in the organisation
Relationships at work (with supervisors, colleagues, and subordinates)
Career development issues
Organisational factors (e.g. organisational structure and climate)
The home-work interface.

Cox (1998) and Hart and Cooper (2002) have incorporated the six environmental
sources together with some employment relations features to create a new model, as
illustrated in Figure 1. The key strength of their model is that it expands the notion ofoccupational stress by marrying some of the best aspects of psycho-medical perspective
and employment relations. Unlike conventional psycho-medical approaches, this model
not only recognises the interaction between individual and organisational factors and theireffects on the employee’s well-being at the micro level, but it also incorporates a strong

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28 Karen Lo and Felicity Lamm

link to organisational performance. Moreover, although a number of researchers havehighlighted the negative impacts of occupational stress on organisational performance interms of the quality of the working environment and employee attitudes and behaviours,
this factor has often been overlooked in stress research (Kompier, Geurts, Grudemann,
Vink & Smulders, 1998; Reynolds & Shapiro, 1991). At the macro level, external
factors, such as government legislation and share holders’ demands, inﬂuence the coreelements of the organisation, such as employee performance (Hart & Cooper, 2002).
The core elements are also inter-related and can inﬂuence each other. For example, theorganisation’s policies and practices will inﬂuence how the team operates under certain
conditions.
Figure 1: Factors that Impinge on Occupational Stress

Source: Hart, P. M., & Cooper, C. L. (2002).

Although Cox (1988) and Hart and Cooper’s (2002) model is useful in that it attempts
to broaden the investigation on occupational stress, it only incorporates some of theemployment relations features and it does not include the employment relations’ levels ofanalysis (that is, workplace, organisation, industry, region, etc). Therefore, it is necessary
to provide a more in-depth approach to occupational stress within the hospitality industry
by focusing on the following levels:••

The level of the employee: work-related factors, such as the level of pay, hours ofwork, etc., as well as non-work aspects of the person’s life (Duxbury & Higgins,2002);The organisational level: the company’s OSH policies and systems within thecontext of performing services in which many of the tasks involve emotional labour(i.e. interpersonal interaction with primarily clients, colleagues and supervisors).

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Hospitality Stress 29••

The level of the industry: the characteristics of the industry and pressures fromthe key stakeholders, such as representatives from the employers and employees
associations and human resource managers operating in the industry.
The national level: The legislation that governs occupational health and safety as
well the enforcement agency – the Department of Labour’s OSH Service.

By amalgamating Hart and Cooper’s (2002) model with Cartwright and Cooper’s (1997)
six environmental sources as well as incorporating the employment relations’ levels ofanalysis, it is possible to create a framework sufﬁciently robust to investigate stress in thehospitality industry as shown in Figure 2 below.
Figure 2: Employment Relations Analysis to Stress in the Hospitality Industry

Unlike psycho-medical models that focused on ‘cause and effect’ interactions between
stress factors, the employment relations framework applies a wider perspective tooccupational stress at different levels of analysis. The triangular model in Figure 2
demonstrates that the key elements to stress can be viewed as interconnected rather
than as separate factors.

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30 Karen Lo and Felicity Lamm

Methodology
As stated previously, given the growing academic interest in the working conditions in thehospitality industry and the increased attention occupational stress is currently receiving,
the scarcity of information on the level of occupational stress in this industry is surprising.
Thus, it was the intention of this study to investigate the following research questions:•••

What are the experiences of occupational stress amongst employers and employees
in the hotel industry?
What are their perceptions and attitudes about the responsibilities of managing
stress?
What is the hotel industry’s current approach to occupational stress?

Given the exploratory nature of the investigation a qualitative, comparative case study
methodology was adopted. A triangulated approach was also used which involved
the collection of data from multiple sources (Patton, 1987). The two large hotels werechosen to represent the different types of organisations within the hotel sector – one
being part of an international chain while the other is a locally owned hotel (referred toas Hotel A and Hotel B respectively). Within the two case studies, 35 interviews using asemi-structured interview schedule were undertaken between August 2003 and February
2004. The duration of each of the interviews was approximately forty-ﬁve minutes. Theinterviewees represented all the departments and levels in the organisations. Hotelparticipants included the executive managers as well as departmental managers,
supervisors and staff from the four departments - front desk, food and beverage, kitchen
and housekeeping. Organisational documentation and archival records pertaining tostress policies and practices were also collected from the two hotel cases.
Furthermore, interviews were undertaken with key stakeholders from the Department ofLabour’s Occupational Safety and Health (OSH) Service, the Employers and Manufacturers
Association (Northern), the Service and Food Workers Union, representatives from the
Employees Assistance Programme as well as HR specialists. Interviews of the key
stakeholders were used to support or challenge data collected from the case studies as away of addressing the problem of intrinsic bias that comes from single observer research(Yin, 1994; Ghauri et al., 1995).
The macro/micro levels of analysis embedded in the study is compatible with the underlying
broader employment relations perspective. In particular, the data was analysed byadopting Marshall and Rossman’s (1989) analytical strategies. Firstly, the interview data
was organised through coding and transcription and were structured in accordance tothe research questions and the interview schedule. Secondly, categorisation processes
were used to identify recurring regularities in the data and to evaluate the plausibilityof those developing categories. In order to rule out alternative explanations of thedata, pattern-matching technique (Yin, 1994) was applied by constantly comparing the

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Hospitality Stress 31

emerging categories against the collected data for credibility and centrality. Finally, theinterview data and the organisational records were presented into tables and graphs andwere discussed in a summarised and reﬂective format.

Findings
It was found that the two hotels differ in terms of their organisational proﬁle, as summarizedin Table 3. One on hand, Hotel A is part of an international chain and has been in
operation since 2001. The hotel tends to attract younger employees as it offers more
overseas transfer opportunities, than Hotel B. On the other hand, Hotel B is locallyowned, has been in operation for over 26 years and has twice the number of staff as
Hotel A. Hotel B has a higher proportion of female staff than Hotel A. It is also important
to note that Hotel A has subcontracted its housekeeping services (28 staff).
Table 3: Characteristics of Case Studies* Excludes housekeeping contractors.
** The majority of the housekeeping contractors is union members.

The two hotels also vary in their employment relations arrangements as seen in Tables 3
and 4. In terms of trade union membership, Hotel B has 65% union members while noneof Hotel A’s employees belong to a union. However, the majority of Hotel A’s subcontracted
housekeepers are unionised. Averaged out across both sites, the low number of tradeunion members is consistent with national ﬁgures for the hospitality industry (Haynes,
2005). According to Haynes (2005), union membership in the large hotel industry in the
Auckland region averaged 11.2% (range being 1% to 25%) in 2002-2003.

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32 Karen Lo and Felicity Lamm

Table 4: Employment Conditions as of February 2003

* Ordinary Working Hours: 8-hour shift and 5 shifts per week** Special Leave is now separate into Sick Leave and Bereavement Leave under the Holidays Act 2003.

Hotels A and B have different overtime practices and polices. In Hotel A, there is nolimit on the amount of overtime workers can do and the breaks between shifts – 8 hours– are shorter than those in Hotel B. In spite of the unlimited overtime allowed, Hotel A’s
management has put in place a number of constraints on their full-time, non-managerial
staff working extra hours. For example, employees must obtain written management
authorisation prior to working overtime and there were no overtime penal rates or bonuses(day off in lieu) for working overtime. While the provision of breaks and access to freemeals are generally the same across the two hotels, the housekeeping subcontractors in
Hotel A are not provided with free meals.
Unlike Hotel A, there is a more ﬂexible approach to working overtime in Hotel B in which
mutual agreement between the employee and the supervisor is only required for working
four consecutive 10-hour shifts. In Hotel B, employees must have a minimum of a 12hour break in between shifts and can only work a maximum of 10 hours of overtime per
week. Furthermore, although both hotels complied with the basic minimum standard ofleave entitlements, Hotel B offered unlimited accumulation of special leave which was notprovided under the previous Holidays Act 1981.

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Hospitality Stress 33

Figure 3: Reasons for Staff Turnover

Overall, the rate of staff turnover is considerably higher in Hotel B (56%) than in HotelA (35%), as shown in Figure 3. However, the organisational records of exit interviewsfor Hotels A and B must be treated with caution for a number of reasons. First, therecorded staff categories used by Hotels A and B are dissimilar and crude. In HotelA, the breakdown of categories is: management, supervisory and front line positions;while in Hotel B the breakdown of categories is: full-time and part-time positions. As
a result of the simplistic method of categorising the data, there is no way to verify the
anecdotal evidence of an even higher staff turnover in the food and beverage sections inboth hotels, compared to the recorded highest rate of staff turnover in supervisory/frontline positions in Hotel A and in part-time positions in Hotel B. Second, both hotels use
contract and temporary labour and therefore the true level of staff turnover is not reﬂectedin the staff records and assertions can only be made based on the records of permanent
staff. Third, the reasons for leaving given during exit interviews may not necessarily be
accurate.
In spite of these drawbacks, the reasons for employees leaving appear to be fairly
consistent and tended to be clustered around new employment opportunities, relocation,and education opportunities rather than associated with shift work and health concerns.
Other less common reasons for staff turnover include family obligations, transfer,termination of contract and inappropriate behaviours at work. There were also a numberof employees who left the job without giving any notice (or “no show”). It is impossible
to give any accurate reason why these employees left, though they were predominately
part-time and constituted one quarter of total staff turnover in Hotel B. Interestingly, HotelB had signiﬁcantly higher turnover in part-time staff (67%) than in full-time staff (33%),
while Hotel A’s staff turnover was equally distributed across full-time and part-time staff.

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34 Karen Lo and Felicity Lamm

Other key differences between each of the hotels are highlighted in the performanceindicators, such as the level of disciplinary actions, sick leave and workplace accidents.
Each of the indicators has implications for stress in the respective workplaces.
Table 5: Organisational Performance Records

As shown in Table 5, disciplinary procedures for both hotels were few and minor. There
was no record of suspension/dismissal occurring and there appears to have been only
a few discussions and warnings given for misdemeanours such as, falsifying timesheet/wage records, intoxication, unauthorised possession of company property, etc.
Although Hotel B had a signiﬁcantly higher record of sick leave – 3675 hours comparedto Hotel A (which recorded 90 hours of sick leave), this ﬁgure was inﬂuenced by the illhealth suffered by one employee. However, Hotel B had a signiﬁcantly lower numberof recorded accidents in spite of the fact that it has almost double the number of staff
compared to Hotel A. Although Hotel B’s injury rate was lower than Hotel A’s, at the timeof the data collection, Hotel B was paying higher Accident Compensation Corporation
premiums under the Workplace Safety Management Practices (WSMP) Programmecompared to Hotel A (see below for more detailed discussion). However, Hotel B wasa new entrant into the WSMP and, according to a management interviewee, the lower
grade/higher premiums reﬂected this status.
While both hotels share core occupational health and safety (OHS) elements within theirpolicies and practices, there some were notable differences. In particular, there weredifferences in their means of communicating OHS outcomes and concerns as well as
having different Accident Compensation Corporation (ACC) ratings, as seen in Table 6.
Both hotels are operating OHS committees comprising of employer and employee
representatives from different departments. These committees comply with the mostbasic criteria outlined in the Health and Safety in Employment Act, 2003 and are consistent
with other large hotels in Auckland (see Haynes & Fryer, 1999:106). While both hotels
have arrangements to cover the duties of attending committee members, interviewees

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Hospitality Stress 35

stated that it was still difﬁcult to attend the meetings as they neither had the time norsomeone to relieve them from their duties. The OHS committee meetings in Hotel A
are held more frequently than those in Hotel B (monthly compared to two-monthly). On
the whole, the content of the OHS meetings was similar across the two hotels: they had
similar agendas, including accidents reported and other health and safety issues. The
minutes of the meetings in Hotel B are distributed to all departmental heads and areposted at the reception area. In addition, the OHS hazard identiﬁcation forms in Hotel B
are also posted on all departmental notice boards. In Hotel A, the minutes of the OHS
committee meetings and other printed information, such as copies of the employment
legislation and customer feedback forms, were ﬁled at the staff canteen.
Table 6: OSH Practices and Policies

Both hotels participate in the Accident Compensation Corporation’s (ACC) Workplace
Safety Management Practices (WSMP) Programme in which participating companies
are allocated reductions on their workplace cover levies (see http://www.acc.co.nz for
details). Based on an independent audit, ACC assesses and grades a company’s injury
and illness rates and their OSH systems and procedures. While participation in the
programme is optional, it is recommended for organisations with 20 or more employees(also refer to Section 19 of the Health and Safety in Employment Amendment Act, 2002).
The ACC reductions are divided into three levels: primary (10% discount), secondary(15% discount) and tertiary (20% discount). The two hotels have achieved different
ratings for the WSMP Programme. At the time of the research, Hotel A had achieved atertiary level rating while Hotel B had achieved a secondary level rating.

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36 Karen Lo and Felicity Lamm

Table 7: Stress-related Practices and Resources

Both hotel case studies have in place a variety of practices aimed at reducing the levels
injury and illness and by proxy the management of workplace stress as outlined in Table
7, commencing with training. Both hotels undertake induction training that incorporates
an overview of the organisation, customer service as well as key health and safety
procedures such as hazard identiﬁcation, including stress-related hazards. However,interestingly, the hotels’ records showed that stress had never been identiﬁed as ahazard.
In particular, Hotel B provides an external training course focusing on building individual
conﬁdence and stress management for new recruits and this course is also offered toother staff every 2-3 years. According to the management of Hotel B, the course has anemphasis on stress within their occupations and is separated into two main parts: theﬁrst part focuses on team building, building individual conﬁdence, and ways of servicing
guests; and the second part looks at ways of handling stress and difﬁcult clients. HotelB also has two on-site union delegates who can assist in any employment matters,
including stress related issues.
On the other hand, the management of Hotel A can refer stressed employees to a numberof services, including a free on-site massage services and independent counselling, withthe hotel management paying some of the costs. However, very few of the staff were
aware of these services and to date, there had been only two referrals during its three
years of operation.
The two hotels also had other ways to monitor the level of workplace stress through theuse of employee surveys and performance reviews. For example, Hotel A conducts
an online voluntary employee opinion survey that measures the respondents’ levelof satisfaction with the organisation and their level of awareness of health and safety

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Hospitality Stress 37

responsibilities. The survey is measured against the company’s other hotels and each
hotel must maintain a benchmark of 80% employee satisfaction. Other assessment tools
include annual performance reviews and exit interviews to ascertain the reasons why
people were leaving.
Although the managers in Hotel B had previously conducted employee opinion surveys,
the practice had been discontinued. Instead, information on employee performance andsatisfaction is gained from annual employee performance appraisals which are conductedby departmental heads. However, it is problematic relying solely on this evaluation
system since a lack of anonymity may discourage comments on sensitive issues, suchas staff dissatisfaction or a tense relationship with other staff. Also, as noted in previous
studies, by focusing on the performance or non-performance of the individual, the wider
organisational and employment issues that impact on the wellbeing of the employee are
frequently overlooked.
While it was evident that working in the hotel industry has stressful elements, whenparticipants were asked to rate their level of stress, the ratings were medium to low, as
indicated in Table 8.
Table 8: 5-Point Rating Scale of Perceived Stress Levels

Note: Hotel A participants were interviewed during a typical season of the year (mid October 2003). However, Hotel B
participants were interviewed during a quiet season (early Jan 2004), so they were asked to recall their stress levels
during the peak season (i.e. before Christmas 2003) in order to derive an average rating that is comparable to Hotel A.

Staff interviewed were asked to rate the level of stress in their jobs on a 5-point scale, with
1 being the lowest and 5 being the highest. Overall, employees in both hotels reported amoderately stressful rating (2.91 and 2.52 respectively) with no major differences acrossoccupations or status in the organisation. There was a general agreement amongst
interviewees that although the employer’s expectations are high, the working hours andworkload are fair and acceptable and many hotel participants reported that they rarely had
to work overtime. Interviewees also noted that the high levels of stress from customer
interaction and the pressure of the job are not constant as some days are busier that
others. A few interviewees (3 out of 35) stated that they enjoyed the ﬂexible working
hours as well as being kept reasonably busy. One of the most interesting ﬁnding was

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38 Karen Lo and Felicity Lamm

that, with the exception of one person, interviewees who did shift work stated that they
had no major health problems and had little interference with their personal life – whichis contrary to the ﬁndings in mainstream literature.
Figure 4: Employee Well-Being

Generally, the interviewed employees felt a sense of well-being. Job satisfaction andorganisational commitment were high across both hotels. However, 3 out of 13 employees
in Hotel A reported dissatisfaction with pay and lack of promotional opportunities, at shownin Figure 4. For example, one of the subcontracted housekeeping employees saw little
advancement opportunities within the company. In another example, an employee from
Hotel A complained of not being promoted and felt that their skills and experience werebeing undervalued by their superiors. However, some of the interviewees noted that one
way to advance their careers in the industry was to gain experience in a range of jobs,
including those that entailed shift work.
Finally, the primary mechanisms for coping with stress amongst the employees rested
with the individual. The interviewed hotel managers argued that while they provided
sufﬁcient health and safety measures, coping with stressful situations was a personalmatter. Therefore, as highlighted in Figure 5, it was not surprising that main responses
to occupational stress was individual adaptation whereby employees tended to use
personal coping strategies and social support more often than other types of strategies.
The most common strategies were those that centred on controlling one’s emotions (e.g.
staying calm, taking deep breathes), task/situation oriented strategies (e.g. focusing on
the problem, time management) and seeking out team and peer support.

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Hospitality Stress 39

Figure 5 Stress Management Strategies Used by Hotel Employees

Discussion
While the ﬁndings highlight a number of differences between Hotel A and Hotel B, suchas staff conﬁgurations and the contents of organisational policies and practices, both
hotels share similar core functional elements, such as OHS committees, and similar
responses, particularly the perceived levels of stress. Certain themes related to theresearch questions have also emerged that require further exploration – namely:••••

The perceived levels of stress
Coping mechanisms based on the individual
Sources of stress; andCompliance status quo.

One of the most puzzling aspects of this study was the respondents’ low to moderate
perceived levels of stress and very few acknowledged that they had stress-related
health problems. This perception was also supported by key stakeholders. The OSH
Service intervieweees classiﬁed the hospitality industry as “a poorly organised job
category” (Interview tape OSH1 17/09/2004) as it involves one-off stress factors (e.g. therisk of robbery) and fatigue (e.g. 7-day operation and shiftwork) in comparison to highstressed jobs that are inherently stressful by their nature (e.g. air trafﬁc, ambulance andpolicing).
The question is “why”? Could it be that hospitality workers are at risk of the “boiled frog”
syndrome – that is, they are unaware of the impacts of an increasingly dynamic andstressful working environment on their health and well-being? There is evidence in both

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40 Karen Lo and Felicity Lamm

this study and others that there is widespread acceptance by those in the industry thatstress is an integral part of the job (e.g. shiftwork, long working hours and emotional
demands) or as some of the interviewees stated: “it’s part of the package” and others
described it as a “burn and churn” working environment (Interview tape HR1 06/11/2004).
That is, hospitality workers are expected to tolerate occupational stress. As Sarabakhsh
et al. (1989) have noted:“… hospitality managers are aware that they will face irregular hours anddemanding work when they enter the industry – individuals who can’t tolerate
those conditions don’t choose careers in hospitality.” (p.76)
Another possible explanation for this general tolerance of stress is that in each of
the case studies, management tended towards a unitarist approach in managing
employment relations. Put simply, under a unitarist style of management, dissidence is
not acceptable and disagreements are the result of management’s failure to communicate
its goals effectively (Blyton & Turnbull, 1998). Employees are not expected to challengemanagerial decisions or their employer’s right to manage; to do so would result in thedisapproval by their managers, as noted by both the trade union organisers and cleaning
staff in this study. Nonetheless, this and other studies (for example, Kahn, & Byosiere,
1992; Cartwright, et al, 1995; Houtman, et al 1998; Bohle, et al, 2004) indicate that eventhe most dedicated and compliant workers have limits and that they are prone to stressrelated ill-health and social problems if they are exposed to prolonged stressful working
conditions.
A second theme that emerged from the ﬁndings is that the coping mechanisms rest
almost entirely on the individual and that this self-management approach was generally
accepted by those working in the two hotels and most of the industry stakeholders.
Rather than challenging management over the decisions concerning conditions ofwork (see Lukes, 1993), typically individual employees adapted to stressful situations
by applying a number of personal strategies that ranged from physiological techniques(deep breathing, etc.) to social support mechanisms. Such strategies are concentrated
at the individual level rather than the organisational or industry levels of analysis. Thissuggests an abrogation of the regulatory duty of care in which the responsibility for healthmatters rests no longer with the employer, but with the employee.
The prevalence of a close working relationship between employers and employees in the
hotel cases suggests that social support may play a critical role in neutralising employees’
experience of occupational stress. Given the all consuming aspect of hospitality work interms of long and unsocial hours, it is not unusual for work teams to provide a “second
family” for many hospitality workers. This was particular so in Hotel B where a number of
employees described their hotel as “very social”, “enjoyable and friendly”, “comfortable”,
and “homely family environment”. In this sense, the camaraderie in the workplace provides
an essential source of motivation, belongingness and support, especially for those who

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Hospitality Stress 41

are strong team players, which may in turn strengthen employees’ commitment to theirorganisation in spite of unsatisfactory or stressful working conditions. According to Casey(1995; 2002), this “family culture” can be manipulative in nature in which employees
are subconsciously drawn into the life of the organisation while subsuming their own
personal lives and families. Furthermore, with unitarist style of management, there isa single source of authority (management) and each team or division was uniﬁed in acommon purpose, namely the success of the team, and ultimately the organisation.
The ﬁndings also alluded to other possible coping mechanisms – namely to vacate
the job or to take annual holidays, sick leave or leave without pay - once stress levels
become intolerable. Most interviewees commented on the high absenteeism rate andthe high staff turnover in the hospitality industry, where it is common for employees toleave their jobs without giving notice, particularly in Hotel B. However, as the industry has
casualised most of its labour force and has a transient working population, it would be amisnomer to state that the high staff turnover was entirely the result of occupational stress.
Nonetheless, one of the possible outcomes of an increase in the rate of stress-related
illnesses could be growing number of absentees in the future (see Cooper and Cartwright,
1994). In addition, poor employment conditions associated with the industry have been
identiﬁed by Hinkin and Tracey (2000) as the primary causes of employee turnover in thehospitality industry. Drawing on American and European longitudinal studies of voluntary
employee turnover in the hospitality industry (see Wasmuth & Davis, 1983; Woods &Macaulay, 1991, 1998), Hinkin and Tracey (2000) concluded that dissatisfaction with anexisting job (rather than attraction to other opportunities), poor quality of supervision andpoor working conditions were more likely to be the main reasons for leaving rather thanthe low level of pay. Given this evidence, therefore, one has to question the validity ofthe exit interviews in both hotels, where the predominate reason given for leaving thejob was better opportunities. Moreover, although employee turnover in both hotels (35%
and 56% respectively) are relatively lower than the industry average in America (70%),
Hinkin and Tracey’s (2000) international study highlights the complexities of investigating
occupational stress and the necessity to expand the purview of analysis.
A third theme was the sources of stress. Typically, employees and employers as well
as stakeholders emphasised the resource constraints, such as work overload, time
constraints, shortages of stafﬁng and dealing with difﬁcult customers, as inﬂuential factors
in occupational stress. Staff shortages (either as a result of ﬁnancial constraints or labour
shortages) meant that sometimes workers, particularly the supervisors/junior managers,
were required to work longer hours. This is supported by evidence found in the two casestudies where 4 out of 6 (66.6%) supervisors and junior managers reported that theynormally worked 40 hours plus overtime whereas 3 out of 13 (23%) entry level workers
reported they only worked overtime occasionally. Furthermore, most executive and line
managers (9 out of 13 interviewees) worked 50 hours or more per week. Comments
about the general working conditions in New Zealand – that is, working longer and harder– were frequently mentioned by hospitality workers and the stakeholders. It is estimated

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42 Karen Lo and Felicity Lammthat almost 22% of New Zealand workers work more than 50 or more hours per week
(Messenger, 2004; Statistics New Zealand, 2004c). By contrast, in most EU countries,
the number of people working 50 hours or more per work remains well under 10 per cent,with ﬁgures ranging from 1.4 per cent in the Netherlands to 6.2 in Greece and Ireland(Messenger, 2004). Although the link between hours worked, ill health and injuries is still
debatable, there is growing evidence that working beyond 48 hours a week doubles therisk of coronary heart disease (Wedderburn, 1996; Smith, 1993, 1999; Quinlan and Bohle,
2000; Messenger, 2004; Gold, 2005). Similarly, a New Zealand study by O’Driscoll revealed
that as daily working hours are increased from eight to 12, there are detrimental effects on
health and safety over time (cited Macﬁe, 1998). Other New Zealand studies on shift work
show that people who cope better are those with well-established community and family
support networks, maintained during periods outside work (Wilson, 1995; Rasmussen andLamm, 2002).
Inter-personal relationships, particularly the tensions between subcontractors and nonsubcontracted employees, were also identiﬁed as a source of stress by the employees
and managers. The use of subcontractors is an extensive and increasing practice inthe hospitality industry (although this common practice was not mentioned by the key
stakeholders interviewed). There are a number of studies that shows subcontracted
workers in general have higher rates of injury and illness, compared to non-subcontracted
workers as they are often required to carry out the more hazardous duties that thehost company does not wish to undertake (Quinlan, Mayhew & Ferris, 1997; Tucker,
2002). However, instead of commenting on stress felt by subcontracted workers, thehotel interviewees suggested that the general tense relationship between them andsubcontractors was a source of stress. The views of the interviewees in both hotels
reﬂected a “them and us” tension between subcontractors and the “hotel family”. For
instance, in Hotel A, one housekeeping subcontractor noted that it was difﬁcult toapproach the hotel division manager and that there had been angry exchanges between
subcontractors and hotel members over minor deﬁciencies. Although the housekeeping
subcontractors are predominantly under a collective employment agreement with theprincipal cleaning company, they are excluded from Hotel A’s OHS training and committee
meetings. Similarly, in Hotel B, a few hotel employees stated that there was a problem
with temporary and subcontracting staff as they did not perform well under pressure.
Thus, one could surmise that the lack of communication, support and worker participation
experienced by the subcontractors could not only be stress inducing, but could also
foster tension between the workers in the hotel industry.
A fourth theme was that there is a compliance status quo in which the management inboth hotels made no special provision to incorporate work-related stress as a workplace
hazard into their existing OHS policies and practices. According to the managers andthe OHS Committee members in the case studies, stress constituted a minor share of theagenda in their meetings. They argued that major changes are unnecessary because
they already have in place adequate health and safety systems and an ‘open-door’

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Hospitality Stress 43

policy. However, employees interviewed reﬂected a somewhat contradictory perspectiveof the application of these systems and in particular, the “open lines of communication”.
For instance, the majority of employees interviewed (with the exception of the divisional
managers who directly report to top management) indicated that it would be very unlikelythat they would approach management with a complaint about their stress levels. The
general belief amongst employees was that while senior management were sympathetic
towards their staff, they were not proactive in remedying the stressful situations. In addition,
there is a high turnover of line managers, creating constant variations in capabilities
and people skills (and differing levels of support) at the supervisory level. In short, themajority of employees did not consider their superiors suitable to alleviate the conditions
causing stress. These sentiments, however, are juxtaposed with the comments madeby 23 interviewees (out of 35) that there is intimate teamwork and interdepartmental
relationship and that their working environment is very friendly. In addition, 7 interviewees(out of 35) noted that most senior and line managers are supportive and approachable
and that management has an open door policy. Such comments could be described as
attuned with the unitarist perspective, as discussed above. Such contradictory ﬁndings
are supported in the literature where a number of studies show that there is a great deal ofmanagerial rhetoric on reducing stress levels, but with little evidence of real commitment
and that employers often underplay the stress suffered by employers (Houtman et al.,
1998; Lamm, 2002).
The other area in which compliance status quo was exhibited was in the lack of awarenessof the recent OHS reforms, including the addition of stress and fatigue. Despite thefact that both hotel case studies have well-informed OHS Committee meetings, theﬁndings indicate that hospitality employees, in the main, are unaware of the legislativechange and hence were unable to comment substantially about such changes. The
possible reasons for this low level of awareness amongst the employees interviewed
are: the general lack of worker participation and collective bargaining arrangements(in which most interviewees did not know what was meant by “collective agreement”)
as well as a weak trade union presence. There is overwhelming evidence that worker
participation, collectivism and a strong trade union presence greatly enhances both thelevel of awareness of OHS requirements and the health and safety of employees (Weil,
1991; Walters, 1997). However, given that both hotels display a unitarist approach to
employment relations (that is, trade unions are viewed as an unnecessary intrusion) andthe precarious and non-standard nature of employment in the industry, it is not surprisingthat these elements are largely absent.

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44 Karen Lo and Felicity Lamm

Conclusion
This article has attempted to expand the level of analysis by incorporating employment
relations features in its investigation of the complexities of occupational stress within thetwo hotel case studies. As a result of applying an employment relations perspective, anumber of interesting aspects have emerged. First, the employees have low to moderate
perceived levels of stress and yet there is no evidence that the stress levels are decliningor that their conditions and pay rates are improving to any large extent. Also, theabsenteeism and staff turnover rates are high and are increasing. In short, there is noconclusive answer as to why the interviewed employees perceive their stress levels to
be low to moderate. It may be important that, under the unitarist frame of reference,
management has a low tolerance to any dissent employees. Second, although there
were some employer initiatives to reduce or manage workplace stress, coping withstress is still essential the domain of the individual employee. However, this focus on
the individual should not preclude a wider examination of workplace stress. That is, theemployment factors, such as poor working conditions, the lack of resources, etc., which
contribute to stress cannot be overlooked or diminished.
Third, the overall results from these two case studies were similar despite the difference intheir hotel ownership and management. The interviewed hotel managers and employees
held similar perceptions about occupational stress and the responsibility in managing
stress. The case studies revealed that there was a passive, even neutral reaction by
the hotel managers to the inclusion of occupational stress and fatigue in the Amendment
to the Health and Safety Act, 1992. The employees’ general lack of awareness of thechanges to the health and safety legislation and their company’s stress-related policies
and deﬁcient resources were not surprising given the low level of both worker participationand trade unionism. Instead, the goals of employers and employees were harmoniouslyaligned within a socially bonding work environment. Thus, the ﬁndings show that thehospitality industry is still entrenched in the unitarist approach to employment relations,in spite of the fact that the current legislation has pluralist intentions.
Finally, it is advocated that it is necessary to move the traditional research of occupational
stress beyond the narrow conﬁnes of a mono-disciplinary approach with a single levelof analysis to a multidisciplinary approach with multiple levels of analysis that underpins
the employment relations perspective. By expanding the purview of the research on
occupational stress in the hospitality industry, it will hopefully shed more light on the wider
factors that contribute to occupational stress in this and other related industries.

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Hospitality Stress 45

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Turnover amongst Nurses 49

Turnover amongst Nurses in New Zealand’s
District Health Boards: A National Survey of
Nursing Turnover and Turnover Costs
NICOLA NORTH, ERLING RASMUSSEN, FRANCES HUGHES, MARY FINLAYSON,TONI ASHTON, TAIMA CAMPBELL AND SHARON TOMKINS *Abstract
Turnover amongst nurses is a critical issue as nurse shortages throughout the Westernworld are putting a strain on health systems. New Zealand’s nursing shortage isexacerbated by international recruitment efforts targeting New Zealand nurses. Our studyof turnover and turnover costs is part of a wider international study, using an agreed study
design and instruments, to determine the direct and indirect costs of nursing turnover.
These costs also include the systemic costs, estimated by determining the impacts ofturnover on patient and nurse outcomes.
The paper reports on two components of the study. First, a pilot study was conductedin six countries, including New Zealand, to identify availability of costs and suitabilityof the instrument. The pilot study found it difﬁcult to establish the costs of turnover
since information about many costs was not available. Second, as part of a national
survey of nursing turnover and turnover costs, Directors of Nursing in the 21 District
Health Boards (DHBs) throughout New Zealand were contacted to complete a survey
on turnover and workplace practices; 20 participated. The survey did not establish howturnover rates were determined in the individual DHBs. Instead the study indicated thenursing turnover was a problem in 13 DHBs, with 5 DHBs reporting turnover rates over
20%. However, turnover did not appear to be an issue across the country as 5 DHBs
reported low turnover in the 5-10% range. Notwithstanding the importance of attracting
and retaining nurses, there were tight controls over recruitment of new staff in the majority* Nicola North, Frances Hughes, Mary Finlayson and Sharon Tomkins are employed by the School of Nursing, The
University of Auckland. Erling Rasmussen is from the Department of Management and Employment Relations, The
University of Auckland. Toni Ashton is from the Department of Community Health, The University of Auckland. Taima
Campbell is from Auckland District Health Board.
Please contact Nicola North (n.north@auckland.ac.nz) regarding this article and the research project.
This article is part of an international project to examine the cost of nurse turnover and the impact of turnover onpatient safety and nurse health and safety outcomes. Co-principal investigators are Dr. Linda O’Brien-Pallas (Universityof Toronto, Canada) and Dr. Judith Shamian (Ofﬁce of Nursing Policy, Health Canada). Team members represent
ﬁve countries and include the following: Dr. James Buchan (Queen Margaret University College, Edinburgh, UK); Dr.
Christine Dufﬁeld (University of Technology, Sydney, Australia); Ms. Frances Hughes (Ministry of Health, Wellington,
New Zealand); Dr. Heather Laschinger (University of Western Ontario, London, Ontario, Canada); Dr. Patricia Stone(Columbia University, New York, NY, USA); and Dr. Pat Grifﬁn (Health Canada, Ottawa, Canada).
This project to date has been supported by Health Canada, the Ontario Ministry of health and Long Term Care and theMinistry of Health, New Zealand.

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of DHBs, and several DHBs reported a freeze on recruiting Registered Nurses (except
for ‘specialist’ nurse roles).

Introduction
Turnover amongst nurses is an issue of growing concern for health services and policy
makers as many countries in the Western world are experiencing endemic shortagesof nurses. The nursing profession is experiencing declining numbers of new nurses,
an older average age of new graduates and high rates of younger nurses leaving theprofession due to an unwillingness to accept the relatively poor pay, high stress, andlimited opportunities for advancement. Contributing to nurse shortages, therefore, arean exodus of Registered Nurses (RN’s) from the profession, a decline in the number ofgraduates entering the profession, and an ageing nursing workforce as the ‘baby boomer’
generation of nurses approaches its retirement (Cowin, 2002; Shader et. al., 2001; Stoneet al., 2003). For example, the UK is now facing a situation where 1 in 5 nurses is aged
50 or older (Buchan, 1999). At the same time demand for a skilled, experienced nursing
workforce is growing as skill shortages also affect other medical and health professions,and there is an increasing demand for health services with an aging population, complex
morbidities and high expectations of excellent health care.
Like other Western countries, New Zealand is facing nurse shortages and an aging nursing
workforce: 45% of active registered nurses were aged 45 and over in 2002 (NZHIS, 2002).
The nursing shortage is exacerbated by international recruitment efforts targeting New
Zealand nurses (including new graduates). Furthermore, New Zealand research into
the career plans of nurses has consistently found that around 30-40% of all active RNs
intend to leave their jobs in the next 12 months, and over 50% of New Zealand nurses
cease active employment as a RN within eleven years of initial registration (CobdenGrainge & Walker, 2002; Gower & Finlayson, 2002; Nursing Council of New Zealand,
2000; NZ Herald, 2002; and Quinnell, 2001). While the problem of nursing turnover isacknowledged (see Rasmussen et. al., 2005), the levels, costs and consequences bothin economic and quality terms have not been empirically established in New Zealand,
hampering policy and organisational efforts to address the issue.
This paper describes a national study on nursing turnover and the cost of nursing turnoverin New Zealand’s public hospitals. The study is part of an international collaborative study
involving Canada, Australia, the United States, the United Kingdom, and Scotland, all ofwhich participated in a pilot study to test the survey instrument. Other countries may joinsubsequently. To date, the study has been commenced in Canada and New Zealandonly. In New Zealand, only the ﬁrst stage, a national survey of Directors of Nursing tocontextualise the study, has been completed so far. Some results of this survey arepresented in this paper. However, the paper will ﬁrst brieﬂy review the literature on thecost of nursing turnover and then it will discuss the ﬁndings from the pilot study in New
Zealand.

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Turnover amongst Nurses 51

Determining the cost of nursing turnover: the literature
There is a considerable body of research on the reasons for turnover: the predominantreasons nurses resign from a job include issues related to salary, work schedules, job
satisfaction, professional autonomy and job-related stress (Blegen, 1993; Cangelosi,
Markham & Bounds, 1999; Cowin, 2002; Irvine & Evans, 1995; and Shader et. al., 2001).
There are obviously strong ‘push’ factors which encourage nursing turnover, though ‘pull’factors in form of private sector and overseas job opportunities have featured frequently
in media reports (Rasmussen et. al., 2005). As such, nursing turnover ﬁts the so-called‘push-pull model’ (see Tava, 2005) where a combination of factors conspire to generatea high level of turnover.
There is also a small body of international and New Zealand literature on the consequencesof nursing turnover: regular turnover of nursing staff has a negative impact on the carepatients receive as health care teams become destabilised, staff morale declines,
communication lines become disrupted and strain is placed on resources as temporary
cover is arranged (Blegen, Goode & Reed, 1998; Buchan & Seccombe, 1991; Finlayson,
2002; Mueller & Price, 1989; O’Conner, 1996). In addition, efﬁciency is reduced and staff
safety is compromised by staff shortages, increasing the likelihood of such incidents asneedlestick injuries (Clarke, Rockett, Sloane & Aiken, 2002). However, turnover may
also have positive impacts on employees and employers. Dalton and Todor (1979) assertthat turnover can increase organisational effectiveness through enhanced innovation andmobility, and turnover is seen as an opportunity to replace dissatisﬁed workers who may
have been unproductive for some time. In spite of these research ﬁndings, few policy
and health service decision-makers have addressed the link between staff numbers,
characteristics of work environment and the impact on patients, nurses and the hospitalsystem as a whole. (O’Brien-Pallas, 2001).
Nursing turnover can have negative social impacts on an organisation, by disrupting
cohesiveness, increasing internal mobility and often triggering additional turnover. In
addition to impacting on the social dynamics of an organisation, turnover takes up asigniﬁcant proportion of the healthcare dollar. Nursing turnover affects hospital efﬁciency
through the costs of recruiting and orienting replacement nurses, the costs incurred inusing temporary agency nurses to ﬁll vacancies, reduced efﬁciency of team-based careon patient units, and the administrative costs of supervising new nurses (Alexander,
Bloom & Nuchols, 1994). However, studies into the cost of nursing turnover are limited
in number and are predominantly a decade out of date, therefore failing to reﬂect current
nursing shortages (Johnston, 1991; Jones, 1990).
The identiﬁcation of turnover costs per RN varies signiﬁcantly due to both environmental
factors and a lack of consistency between studies. Deﬁnitions of turnover, in particular,
have been inconsistent amongst previous turnover research, and the costs included havevaried, limiting comparability between studies. For example, American research has

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estimated turnover to cost as little as US $1,528, or in excess of US $25,000 per nurse,
largely due to indirect costs (Hoffman, 1985; Jones, 1990). Loveridge (1998) foundturnover costs ranged from US $2,000 to $5,000 per RN, and Wise (1990) estimatedturnover costs to be $5,435 per experienced RN. Similarly, a British study within the
National Health Service (NHS) found that nursing turnover cost between £1,250 and£7,760 per nurse (Buchan & Seccombe, 1991). Waldman, Kelly, Aora and Smith (2004)
found that turnover of all health professionals, not only nurses, in a medical centre
represented a minimum of over 5% of the total operating budget. Turnover of nurses
was the greatest contributor to costs, through loss of productivity, followed by training
costs, with costs related to hiring the smallest driver.
The inclusion of both direct and indirect costs is a primary cause for disparities in results
amongst studies calculating turnover costs. Costs may also vary according to the levelof experience and specialisation required for the position. Those on a higher wage
may receive larger holiday leave payouts, and positions requiring a greater degree of
specialisation may be more difﬁcult to ﬁll, causing longer periods of temporary cover.
Due to the difﬁculty of accessing and measuring indirect costs many studies underrepresent the cost of turnover by studying only the direct costs. The term ‘turnover’ canalso be used differently; for example, it can be used narrowly regarding nurses leaving
the organisation, or it can be used more broadly to include internal transfer. Whether
nurses leave voluntarily or not may also vary among studies. Even the term ‘nurse’ canbe deﬁned differently, depending on qualiﬁcations and organisational levels of the nurses

covered.

The Pilot Study: testing cost measures
The methodological deﬁciencies and variation of costs of nursing turnover studies, andinconsistent use of cost measures combined with the lack of data, must be overcome
if the true costs are to be determined. In 2002 a group of inﬂuential researchers andpolicy makers in nursing initiated an International Consortium with the aim of conducting
international comparative studies using the same deﬁnitions and methodologies toestablish the true cost of nursing turnover to inform and drive policy to address nursing
shortages and turnover.
The aim of the international pilot study was to test an instrument developed to determine
costs of turnover, not primarily to describe the costs themselves. The investigators wereasked to document the availability of data, whether costs were accurate or estimated,
how costs were calculated, and if possible wider systemic costs attributed to nursing
turnover (including patient care errors and adverse nurse outcomes incurring costs). For
the purposes of the pilot study, the term ‘nurse’ referred to registered nurses working as
staff nurses only, excluding enrolled nurses, nurse specialists and nurses in management
roles, such as charge nurses. ‘Turnover’ was deﬁned as voluntarily leaving the primaryplace of employment, including both internal transfer and leaving the organisation; thus,

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Turnover amongst Nurses 53

an agreed formula for determining turnover rates was used.
Costs were conceptualised as direct and indirect costs. Direct costs were those costs thatwere easily identiﬁed and were a direct result of recruitment, temporary replacement andleaving. In contrast, indirect costs were costs which were normally incurred as a resultof the nurse leaving, but which primarily related to the time spent by other employees
in administering the turnover process e.g. orienting and preceptoring, new hires andemployment termination costs. The instrument employed in the pilot was based on
Buchan and Seccombe’s (1991) disaggregation of turnover costs into 40 items under thefollowing headings:
•
•

•
•

Separation: The costs associated with processing a nurse leaver’s
separation from the employment of the organisation.
Temporary Replacement: The costs associated with the method, or
methods, which the employing organisation adopts in the interim period until
a permanent replacement is recruited.
Recruitment and Selection: The costs incurred by the organisation in
searching for, and appointing, an appropriate permanent replacement.
Induction and Training: The costs associated with induction and training of
the replacement nurse, and costs incurred during the time elapsed until
the replacement is determined to be providing an equal contribution to thatprovided by the leaver.

A largely ‘bottom up’ approach was used, focussing on the hospital unit level. Analysis at
the unit level avoids intra-organizational variation in turnover by work unit (Mueller & Price,1989). The bottom up approach evaluates the costs and beneﬁts of turnover through achecklist method which ‘allows the development of a detailed picture of the costs of turnover
within individual employing units and can assist operational management to identify major
sources of costs, and potential cost saving policies.’ (Buchan and Seccombe, 1992: 23).
For the purposes of the pilot study, the units used in all the participating countries weregeneral medical and general surgical units, thereby minimising variation across the pilot
studies. General surgical units were those where 80% or more of the patients admitted
were usually treated for surgical conditions by a general surgeon, while general medical
units were those with 80% or more of the hospital inpatients admitted and treated for nonsurgical conditions; speciﬁed specialties were excluded for each category, e.g. psychiatry
from medical, paediatric from general surgical.
The cost of turnover was evaluated retrospectively within one medical and one surgicalunit of one of New Zealand’s major metropolitan hospitals over a six months period,
from 1st July to 31st December 2001. The hospital involved in the study was known tohave high rates of turnover, with ﬁgures released by the hospital’s District Health Board(DHB) indicating a turnover rate of 18.2% for health professional staff in 2001. It must
be noted that throughout this period the hospital made major reductions to its budget and3 North et. al. 8 May 05.indd 5

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54 North et. al.

had carried out managerial restructuring in previous months. Faced with huge budget
deﬁcits, the DHB was undertaking restructuring in the hospital’s nursing management,
removing a layer of leadership, and freezing the employment of new staff.
The Results of the Pilot
The general surgical unit investigated was comprised of 27 beds, with an averageoccupancy rate of 92.16%, and the general medical unit was also comprised of 27 beds
with an average occupancy rate of 93.8%. While actual turnover rates and related costs
were calculated using the protocol and checklist developed for the pilot study, it must beemphasised that reporting these results is not the main purpose of this paper. Neither
the turnover rates and costs reported reﬂected the hospital’s reported turnover rates and,in the absence of data regarding costs, are almost certain to grossly under represent
costs. Rather, this discussion focuses on the process of locating data, interpreting data
and reﬂecting on both reliability of data and implications of data management.
Nursing turnover rates were based on the number of RN FTE (Registered Nurse Full
Time Equivalents) terminations per ﬁscal year calculated as a percentage of the averageannual budgeted RN FTEs. The ﬁrst problem encountered concerned how to determine
the budgeted RN FTEs. Curiously, three differing levels of budgeted FTE per ﬁscal
year were provided by the hospital: the units’ own reported ﬁgures, those of the Human
Resource department, and the Payroll database. The FTE ﬁgures provided by the nurse
managers were based on the actual number of persons working in the units, whereas
budgeted FTEs, reported by the Human Resource department, were between 2-3 FTEs
lower than those reported by the nurse managers. It was explained that the reasons forthe discrepancies were due to the software system used by the payroll department, whereannual leave and sick leave dollar amounts were deducted from the budgeted FTEs, andthat Human Resources estimates reﬂected a forecasting based reporting system. For
the purposes of the pilot, the FTE-based nursing turnover rates were extracted from
actual FTEs who work in and are paid from the budget of the units analysed.
During the 6-month study period, there were 2 terminations and 2 RN FTEs were hiredin the surgical unit. In the general medical unit, 1 termination occurred and 3.8 RN FTEs
were hired. Annual turnover rates for Registered Nurse were 7.4% in the medical unit
and 12.5% in the surgical unit. These numbers are lower than the DHB’s total turnoverrate for health professionals of 18.2% for 2001, and anecdotal evidence from nurse
managers as well as low turnover rates (compared to the DHB’s average annual turnoverrate) indicate that the study took place during a period of low turnover. As the pilot study
focussed on just one six-month period, it probably does not reﬂect true turnover levels
due to the nature of taking a cross-section in time.
The second difﬁculty concerned the identiﬁcation of costs related to nursing turnover. It
clearly exacerbated problems that the pilot was a retrospective study. The main difﬁculties

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Turnover amongst Nurses 55

related to loss of institutional memory due to turnover of clerical and senior nursing staff,
the fact many human resource and payroll information were aggregated, and simply
tracking down who exactly had the required information, and then these staff had to ﬁndtime to identify the costs requested. Using the instrument provided, Figure 1 shows thecosts that were determined, some of which were estimated costs and others documented
costs. The ﬁgure also shows costs that the investigators were unable to determine.
Figure 1: Analysis of Data Availability and Total Turnover Costs for Surgical andAcute Units at a New Zealand Hospital

These ﬁgures were not collected by the hospital administration.
These ﬁgures were not available as the numbers were too variable to calculate costs with accuracy, or the costs related
to the units in the deﬁned time period could not be disaggregated from general ﬁgures.
1
2

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56 North et. al.

Figure 2 shows the distribution of costs. Between 65% and 75% of turnover costs werea result of temporary replacement costs: those costs incurred in covering for staff that
had left, and the administrative aspects of arranging cover. The bulk of these costs
were due to the higher wages associated with employing nurses from internal banks
and external agencies, and the expense incurred in paying regular staff to work overtime
to cover for the staff members who had left. The total costs for temporary replacementof unﬁlled positions came to $8,400 per nurse. The clerical and administrative time
utilised in arranging temporary coverage is also signiﬁcant, with up to one hour spentby charge nurses ringing their own staff to cover vacancies; however, no data wasavailable on these costs as the charge nurses were unable to retrospectively report how
often this occurred. Following temporary replacement costs, the most signiﬁcant costto arise, as a proportion of total turnover costs, was in orientation and training of staff.
Orientation and training costs varied from 13% of the surgical unit’s total turnover costs
to 22% of the medical unit’s. At the time of the study, all staff employed by the DHB weresupernumerary for the ﬁrst two weeks of their employment, although in practice this wasvariable based on the nurses’ level of experience. The cost of orientation/training was
similar across the surgical and medical units varying from $3,467.50 to $3,648.00. This
cost was estimated based on the median hourly staff nurse rate covering the hours inwhich they were in orientation and supernumerary in the unit. It does not include theﬁxed cost of delivering orientation programmes and job training. Data was not available
on the reduced efﬁciency of the preceptor while training new employees.
Figure 2: Distribution of Measurable Turnover Costs for Surgical and Acute Units

In summary, total costs were very similar for the two units, the medical unit incurring$30,959.17 over the six-month study period, and the surgical unit $26,934.02 in turnovercosts. However, it must be emphasised that these costs are likely to signiﬁcantly underrepresent actual costs due to costs for some variables, particularly productivity costs,(shown in other research as a signiﬁcant contributor to turnover costs (Waldman et al,2004)), not being available (shown in Fig. 1), and due to the process of desegregationfrom other costs incurred by a given service or department.

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Turnover amongst Nurses 57

Despite signiﬁcant gaps in the data collected, the cost of nursing turnover was nearly$60,000 for just three RN terminations in the two hospital units; $20,000 per nurse.
Although this study under-represents actual turnover costs, the pilot reﬂects the signiﬁcant
impact which nursing turnover is having on healthcare budgets of New Zealand’s healthservice organisations. The pilot study conﬁrms that nursing turnover is consuming a large
proportion of the health care dollar and this represents a net loss to direct patient care.
These ﬁndings are consistent with previous research into the cost of turnover and, likeprevious studies, they are indicative of the minimum cost of turnover.
The outcome of the pilot is two-fold. First, in view of the indicative high real costs ofnursing turnover, a decision was made to proceed with a national study. This decision
was made both at the International Consortium level and locally. In New Zealand,
funding has been secured and the full study is now underway. The study will control fordifferences in particular databases and administrative systems by taking a randomised
sample of nursing units in New Zealand’s public health service organisations. This willallow results to be generalised with conﬁdence. Furthermore, seasonal variations inturnover will be countered by collecting data over a full calendar year. The results of aprospective, national study will provide hospital management with the evidence needed
to support strategies to retain valued nursing workforces, thereby positively affecting
patient outcomes.
Second, based on the experiences of the pilot study, the International Consortium madea number of changes to the survey instrument. The limitations to the application of
the checklist were predominantly a result of the hospital’s data collection procedures.
The data required for the pilot entailed additional effort by human resource and nurse
management staff because available data was collected and stored in a form for otherpurposes. As shown in Figure 1, most of the data could not be identiﬁed or it was impossible
to disaggregate nursing data from other human resource data. Further, the retrospective
nature of the pilot meant that some important data was lost to recall. Prompted by thepilot study, several changes were made to the research design: the study is prospective,
it collects data not only on the direct and indirect costs of turnover but also includes theimpact of turnover on patient and nurse outcomes; and it incorporates considerable ﬁnetuning of the methods used to calculate actual costs.

The New Zealand Cost of Nursing Turnover Study
Subsequent to the pilot study, the research team has already commenced on a longitudinal
study of the direct and indirect costs of nursing turnover in New Zealand’s public hospitals,
including the impact of turnover on patient and nurse outcomes. Twenty-two general
medical and surgical units in 11 District Health Boards have been randomly selected. As
a ﬁrst stage of the study, the Directors of Nursing in all twenty-one District Health Boards(DHBs) throughout New Zealand were contacted and invited to participate in a survey.
Twenty DHBs and Directors of Nursing agreed to be involved and they either returned

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58 North et. al.

completed questionnaires or participated in a telephone interview.
The aim of the survey of Directors of Nursing was to identify workplace practices affecting
nursing turnover, in order to contextualise nursing turnover and its costs. The following
data were requested: information related to nursing turnover currently collected; data,
policy and initiatives on retention and recruitment; and relevant studies and reports
conducted internally. Only results pertaining to turnover are reported here.
Reported turnover
The majority of Directors of Nursing (DONs) received regular reports from Human
Resources or Payroll on resignations and new appointments, with fewer DHBs also
producing reports on internal transfers, dismissals, leave of absence, parental leave andvacancies. These reports were received at weekly or monthly intervals. Three DHBs
mentioned that a Balanced Scorecard reporting system – including turnover ﬁgures - wasused. In other DHBs, turnover was speciﬁed in the Annual Report. In some DHBs, Nurses
and Midwives are not separated from other staff so reliable turnover ﬁgures cannot beestablished for these DHBs. Only three DONs reported that analysis on nursing turnoverdata was carried out. On the other hand, there were three DHBs that collected no dataon nursing turnover: in one of these DHBs, there appeared to be little turnover and inanother DHB, the collection of turnover data had stopped because the responsible HR
staff had left.
Thirteen DONs reported that nursing turnover was a problem, or that it was becoming
an increasing priority. This referred to turnover that normally ranged between 12% and25%. Five DHBs, primarily in the main cities of New Zealand, reported turnover rates
that were at or over 20%. DHBs in regional areas were more likely to report that there
was low turnover, or that they had not felt major turnover issues for some time. These
DHBs reported turnover rates of 5% to10%.
The survey did not establish how turnover rates were determined. When turnover data
was not available, estimates were given instead or the numbers of nurses who had left
(not turnover rates) were reported. Another approach is to report on unﬁlled vacancies(for example, one DHB reported 19.2 unﬁlled advertised vacancies). It proved extremely
difﬁcult to make comparisons, some DHBs routinely report turnover data on a monthlyor quarterly basis, and turnover data can also be reported separately for wards and/or services. When turnover rates were available they were reported differently. The
following illustrates the different reporting format based on information from 9 DHBs••

3 North et. al. 8 May 05.indd 10

5 regional DHBs reported rates at 12%, 12.9%, 15.84%, 16.38% and 16.9%.
In contrast, 2 metropolitan DHBs reported annual turnover rates as 19.2% and22-24%, and they also provided quarterly turnover data which ranged from

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Turnover amongst Nurses 59••

3.2%-37.5% per ward in one of those DHBs and 23.7-35.7% per service in theother.
Another DHB reported monthly turnover rates per ward of between 1.47% and7.49% and still claimed to have a problem with high turnover.
Two DHBs gave a very detailed breakdown of turnover data which indicatedthe age and length of service distributions: unsurprisingly, the highest level ofresignations occurs in the age ranges 22-39 and the lowest level of resignationin the 40-55 year range. One of these DHBs reported that 75% of resigningnurses have served less than 3 years.

Although turnover ﬁgures are detailed in a few DHBs, the variability in reported rates,
where these are available, and the methods of reporting makes it difﬁcult to compare
turnover. Thus, it cannot be established exactly what the nursing turnover rate is in New
Zealand.
Some DONs speciﬁed that turnover was an issue in certain areas only, for example inemergency or mental health services. Turnover is not evenly distributed: there is clearlya difference between DHBs in metropolitan and non-metropolitan areas, with limited
turnover in areas with stable populations and offering attractive lifestyles. For example, a
DON of a DHB in a large metropolitan centre commented on competition among multiple
employers, DHBs as well as private hospitals and rest homes. In contrast, respondents
from ‘popular areas’ described their DHBs as currently being privileged, with neither
turnover nor recruitment problems. However, they added that turnover was likely to
become a concern in the future as many in their nursing workforce approach retirement.
Two DONs gave additional statistical information on the nursing workforce that, although
it can’t be generalised, indicates some important characteristics of the hospital nursing
workforce which impacts on turnover. A largely female workforce was described, withwomen constituting 91.3-94% of the workforce (though with more males in mental healthservices); this compares with 90% of the total DHB workforce who are female. The
average age is about 43; 61% of nurses are over 40 years. The average tenure fornursing at one DHB was 6.94 years; at the other DHB 63% left between in the ﬁrst 5
years of service. Of the total nursing workforce, one DHB reported a distribution of: 45%
working part-time, 15% were casual and only 35% were full-time employees. Overall,nurses made up 39-40% of the total DHB workforces. Embedded in these ﬁgures is a
picture of a female, mid-aged, short-tenured and less than full-time workforce, with theassociated costs and risks.
There were reported several negative impacts due to nurse shortages. These included:
bed closures, restricted elective surgery, reduced inpatient admission and ED service
restrictions. The costs of underutilising expensive plant are high, but a dollar ﬁgure was
not provided. In these situations of shortage, there is likely to be a trade-off in costs
between protecting and supporting nursing staff stressed by endemic shortages (thereby

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60 North et. al.

potentially reducing further turnover) and full utilisation of plant.
In spite of current or anticipated high nursing turnover and nursing vacancies, many
DHBs exercised tight control over recruitment. Only ﬁve DHBs stated that there were no
freezes, reviews, restructuring or rationalising taking place. In almost every other DHB,
there are tight controls over recruitment of new staff. Vacancies were reported as going
through a review process before nurses were recruited, due to ﬁnancial constraints.
Several DHBs had a freeze on recruiting RNs, except for ‘specialist’ nurse roles. Fiveout of the 20 DHBs reported that they were currently or soon would implement a review
of Senior Nursing roles. One DHB had just gone through a full restructure. There werealso reported instances of redeployment and freezes on salary reviews.

Conclusions
Nursing turnover is a growing problem shared by many Western countries, including New
Zealand. Although there is a considerable body of overseas research on the reasons
why nurses leave, there is scant research in New Zealand. Yet health workforce researchis strongly endorsed by the Health Workforce Advisory Committee (2003). Furthermore,
the costs of nursing turnover are poorly understood: there has been little research on
costs, much of it is dated, and it is difﬁcult to generalise research ﬁndings because ofvariations in operational deﬁnitions and in the way costs have been determined. This
article has described a major new initiative into determining actual costs, in order toinform policy and practices relating to the nursing workforce. This initiative is currently
underway, driven by an international consortium of researchers and policy-makers innursing; New Zealand is a participating country and all the participating countries use acommon research design.
A pilot study was undertaken to identify availability of costs and the suitability of the
instrument. The pilot study highlighted methodological difﬁculties: some data were
unavailable, there were problems of recall, ﬁgures and deﬁnitions varied (for example,
for FTEs and turnover). As a result, the estimated costs grossly understate true costs.
Nevertheless, indicative costs were sufﬁciently high to justify a national study on a muchlarger scale.
The ﬁrst phase of the national study has shown that while nursing turnover is seen asa problem, it is not evenly distributed across public hospitals. DHBs in metropolitan
areas, where there is high competition for nurses from private hospitals and non-hospital
services, reported signiﬁcantly higher turnover rates than non-metropolitan areas.
Certain clinical areas also reported higher turnover than others (for example, in mental
health and emergency services).
Despite concerns over turnover, there was little ﬁrm data provided, and the data was not

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Turnover amongst Nurses 61

comparable across DHBs: estimates of turnover rates varied, and no information wascollected on how rates were determined, making it difﬁcult to state turnover rates withcertainty or compare them across DHBs. Further, the majority of DHBs were undergoingtight controls on recruitment and a number of DHBs reported reviews of senior nursing
positions and organisational restructuring. These are strategies that may add to nursing
shortages and stress, possibly leading to a dependence on temporary cover and further
increases in turnover (Lumley et al. 2004).
Finally, it is of some concern that this study is limited to medical and surgical units
in publicly funded hospital services only; it is important that the study is extended toinclude other sectors: for example, aged care, community and primary care services,private hospitals and specialised nursing units such as intensive care, emergency andoperating room services. Therefore, it is necessary to complement the current study
on costs of nursing turnover with further New Zealand studies on nurses’ reasons forleaving as well as on their reasons for staying. Determining the actual costs of nursing
turnover and the reasons for turnover will provide DHBs with the information they needto make strategic decisions regarding their nursing workforce; these decisions are vitalin improving retention and building a positive workplace and thereby providing better andmore efﬁcient health care.

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Wage Forfeiture Clauses 63‘Where’s My Pay?’: A Commentary on Wage
Forfeiture Clauses for Insufﬁcient Notice
JON HENNING AND JEN WILSON*

Abstract
Parliament’s intent in relation to wages protection has been that workers should exercise
control over and receive the full beneﬁt of the expenditure of their wages. The developmentof forfeiture clauses for lack of notice, especially in relation to the modern employment
environment of individual contracting, has undermined this principle. The clash between
principle and practice needs government attention and some action.

Introduction
Employers frequently deduct money from the ﬁnal pay of workers who give insufﬁcient
notice of leaving their employment.1 Such deductions are made with the apparently
speciﬁc written consent of the employee. This consent is usually included in theiremployment agreement, which appears to be lawful under section 5 of the Wages
Protection Act, 1983. This is supported by a number of employment law cases (forexample, Portia Developments v Taylor, Labour Inspector (Horn) v Valiant Holdings).
While these cases suggest that the deductions may be lawful, there are a number ofreasons for questioning the reasonableness of the practice. Principally, the practice does
not appear to be consistent with Parliament’s intentions. The deductions are not for thereal value of goods or services supplied and workers do not exercise effective control
over the deductions. The deductions applied as penalties also do not ﬁt well with theprovision in the Wages Protection Act that allows the withdrawal of consents to deduct
wages, they may promote termination without any notice, and they are regressive in thesense that they recall the operation of the old law of master and servant.
The following commentary provides: very brief outlines of the principles of wages
protection evident from parliamentary debates and the development of forfeiture clauses;* Jon Henning is a labour inspector and Jen Wilson is a solicitor, both in Dunedin. The views expressed in this article
are those of the authors, and are not intended to indicate or represent in any way the views of our respective employers.
We especially wish to thank Rosemary Mercer, Adrienne Lines, Walter Grills, and Erling Rasmussen for their assistancein relation to this paper.
There appear to be no speciﬁc ﬁgures kept on the number of these cases. The Department of Labour’s nationalcall centre records, however, show that it received nearly 9,000 calls on the issue of deductions from wages from the
beginning of October 2000 to the end of September 2004 and a further 1500 calls over the same period that indicatedunlawful deductions from wages in general. From our observations and those of our colleagues, a signiﬁcant proportionof wage deduction problems involve deductions on the basis of short notice.
1

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64 Jon Henning and Jen Wilson

a discussion of the mismatch between principle and practice; and a brief discussionof the other matters that also suggest that automatic forfeiture for not giving notice isinappropriate. For further information and references, a more detailed paper covering
the same issues is also available on the website for New Zealand Journal of Employment
Relations (see: www.nzjournal.org).

Background
Following on from British precedents, statutory wages protection has a long history in New
Zealand commencing in 1891 with the enactment of the Truck Act. The current principal
legislation, the Wages Protection Act, was enacted in 1983. For the immediate purposesof this article, the principles behind the legislation and the New Zealand Parliament’s
intentions on the matter are summarised brieﬂy below.
The overriding principle throughout has been that workers have a right to the paymentof their wages in full. In 1891, William Downie Stewart, a leading proponent of wages
protection, stated during the debate on the Truck Bill that the right of ‘the workman’ wasto ‘be free and untrammelled as to how, when, and where he shall spend his money.’(NZPD, v.73: 228-229). In 1983, during the debate on the current Wages Protection
Act, Jim Bolger noted that: ‘Nothing is more fundamental than the right of an individual
to spend his or her own pay’ and that the object of wages protection legislation was toallow ‘nobody but the worker himself to determine how his wages will be spent.’ (NZPD:
2338-3229).
Alongside this principle, Parliament has debated and allowed various deductions fromwages under certain circumstances. At ﬁrst these were itemised in detail, covering items
such as certain tools supplied by employers, food and drink, forms of personal insurance,and relief. Importantly, Parliament expressly prohibited deductions to cover employers’
insurance costs and also expressly provided that deductions should relate to the ‘real andtrue’ value of goods supplied (Truck Act, s. 19). In 1964, the mechanism of listing items
for which deductions could be made was replaced and the current provision whereby
workers are generally able to provide written consent for deductions was introduced. The
Minister of Labour at the time noted that the legislation was still intended ‘to protect thewage worker against exploitation by his employer’ but that he was prepared to abrogate
this principle ‘in some respects’. He was concerned in particular to ensure that workers
did not obtain goods from their employers and then demand full payment of their wages.
The Minister speciﬁcally cited the need to protect isolated farmers who supplied theirworkers with items such as clothing and tobacco and large retail stores that allowed theirworkers to purchase discounted goods on staff accounts. The legislation had to enable‘the value of those goods’ to ‘be deducted from the wages.’ (NZPD, v. 340: 2588-2589,
3006-3008).
From 1939, Parliament also placed registered collective awards and agreements outside

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Wage Forfeiture Clauses 65

the scope of the wages protection legislation. It did this on the basis that trade unions
under the industrial conciliation and arbitration system were powerful enough to safely
arrange and enforce their own qualiﬁcations to the general rule that wages be paid in full
without risk to their members.
This last development had particular importance in allowing unions and employers toagree to forfeiture clauses for lack of notice. An early example of the clauses appears
in the annual collection of industrial awards and agreements and orders of the Arbitration
Court for 1940. The purpose of the clause was clearly stated to ‘prevent workers leaving
without giving notice’. The agreement, however, also recognised the need to take carewith regard to the application of the clause and that the wages of a worker who left
without notice for ‘good cause’ were not to be deducted for the lack of notice. In addition,
any disagreements over the application of the provisions were to be referred to disputes
committees comprising representatives of the worker’s union and representatives of theemployer (New Zealand Dairy-Factory Employees Award 1940: 11, 18, 23). From thisrare provision in 1940, forfeiture clauses increased and were present in about 80% ofawards and agreements by 1983. Typically, they required a week’s notice or forfeitureof a week’s wages.
The enactment of the Employment Contracts Act in 1991 affected the pattern of forfeitureclauses in two ways. Firstly, it produced some reduction in the coverage of the clauses
through the development of greater individual employment contracting (including an
increased reliance on verbal contracts) not directly derived from registered awards andagreements. The second important development, clearly evident from and associatedwith the above, is that where forfeiture clauses have been included in written agreements
after 1991, this has been much more likely to be within the framework of an individual
rather than a collective employment agreement.
With regard to the form of forfeiture clauses in current employment agreements, these
are continuing to largely follow the traditional format, excepting that notice periods (withforfeiture of wages for the same period) are tending to be longer. Notice requirements incurrent employment agreements are often two weeks with some requiring four or more
weeks’ notice. In one extreme case the authors have seen, the agreement required
notice of twelve months or forfeiture of the same in wages in lieu of notice. Not so
extreme but still onerous was the provision considered by the Employment Court in Portia
Development v Taylor in 1997. In this case, the intended arrangement was:‘Termination of employment requires (21) days written notice andfurther requires that you fully train your replacement unless otherwise
agreed upon by both parties. .... In the event that proper notice
to quit is not given by either party and in accordance with … [therequirements outlined in the previous sentence], the defaulting party
will be liable to forfeit (21) days wages.’

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68 Jon Henning and Jen Wilson

A further example of a recent forfeiture clause is cited in Labour Inspector v Valiant
Holdings. In this case, the employment agreement ‘provided for two weeks’ forfeiture ofwages if no notice were given.’
Both Portia Development v Taylor and Labour Inspector v Valiant Holdings show that
forfeiture provisions are being actively applied. The Valiant Holdings case also shows
the need for concern over the current application of these provisions. The Employment
Relations Authority found in this particular case that the employer had breached her
agreement with the worker, causing the worker to leave without notice, and then deducted
for lack of notice. The Authority held that the worker had been entitled to leave without
notice and required the employer to pay the worker the wages she had deducted. The
following four cases reported to the authors provide further examples of problems andcommon themes relating to the current application of forfeiture clauses. Because ofprivacy concerns, the details have been reduced to brief sketches.
Case 1An ofﬁce employee, temporarily working in New Zealand, described being penalised forinadvertently giving the incorrect notice. Her written employment agreement required afour week notice period of termination and forfeiture of four weeks’ wages in the eventthat the four weeks’ notice was not provided. Apparently unaware of the provision, theworker gave eleven days’ notice of leaving and worked the eleven days. She was leaving
to return home overseas earlier than she had anticipated. The employer did not pay theworker on termination. The worker, on asking for her missing pay, was shown the fourweek notice requirement in her agreement. The forfeited four weeks’ wages exceeded
the ﬁnal pay and holiday pay she was expecting to be paid on termination. She left New
Zealand without receiving any further payment.
Case 2A worker in a motel reported that she had lost wages after verbally agreeing with her
manager to leave her employment without notice. The manager subsequently denied
the agreement and implemented the forfeiture clause in her written agreement. Because
the change to the agreement had been made informally between the manager and theworker without witnesses, the worker believed she would be unable to show that her
contractual obligation to provide notice had been waived. The employee later found thatthe employer had not found it necessary to re-ﬁll her position.
Case 3
An employee in the fast food industry reported the application of a forfeiture clause after
walking off the job because of what he regarded as abusive and culturally insensitive
behaviour on the part of his manager. The worker found, on inquiring about the failure of

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the employer to direct credit his outstanding wages after the termination, that the employer
had deducted two weeks’ wages for lack of notice. The two weeks’ wages exceeded thesum due on termination, including his ﬁnal holiday pay. The worker sought advice about
his problem and was informed generally of his right to initiate action under personal
grievance procedures in the event of unfair and unreasonable behaviour by his employer.
The worker expressed concern over the possible legal costs of such action and that hemight not be able to provide sufﬁciently clear evidence to establish his grievance.
Case 4
A worker in a retail outlet operating under a nation-wide franchise left without noticebecause of continuing delays in the payment of her due wages. Payment was due
two days before Christmas. As payment was not made on the due date the worker
complained. Wages had still not been paid by Boxing Day, so the employee abandoned
her employment and returned to her home town. The employer refused to pay the wages
or holiday pay due on the basis of the clause in her employment agreement that provided
for forfeiture in the event that the required notice period was not worked out. The worker
considered taking an action for breach of contract and a personal grievance against
the employer but was also concerned at the possible cost of legal action and potential
difﬁculties associated with travelling back to the town in which the outlet was located forhearings.
The facts of this last case are very similar to those of Valiant Holdings and highlight the
difﬁculties of obtaining effective redress for the worker. The inspector’s case against
Valiant Holdings, however, also indicates that redress may take some time to achieve.
The wages in dispute in Valiant Holdings were due in September 2002. The Employment
Relations Authority made its determination almost two years later. This elapse of time isof course signiﬁcant, the more so because any delay in receiving expected earnings canbe especially hard for workers whose margins for living are small. In part the delay may
be an indictment of available disputes resolution processes. It may also be that the black
and white terms of the written provision encouraged the employer in her simple approachto the application of the clause and her determined refusal to subsequently budge fromher position.
Generally, the authors have been acquainted with a considerable number of reports ofdeductions for lack of notice, particularly in relation to small businesses and businesses
in the rural sector. In a signiﬁcant proportion of these cases, inappropriate deductions
are relatively easy to identify because of the lack of written employment agreements.
As written agreements become more common, however, this will probably change.
Deciding the accuracy of the application of such clauses may often only follow themore difﬁcult determination of counter-claims of personal grievances and breaches ofcontracts, sometimes in the absence of willing witnesses. The need to prove a personal
grievance or breach of contract to overturn the application of the forfeiture clause tends

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68 Jon Henning and Jen Wilson

to put workers who genuinely have some ‘good cause’ for leaving at a disadvantage.
They have to weigh their prospects of proof, particularly in circumstances where willing
witnesses are not readily available, against the costs of time, emotional distress, andlegal fees involved in the pursuit of personal grievances or breaches of contract.
In some ways, forfeiture clauses have changed little since they ﬁrst appeared. They
remain ﬁrst and foremost penalty provisions seeking to deter workers from leaving workwithout giving required notice. There is no necessary connection between the real costto the employer of the worker leaving prematurely and the penalty imposed, as illustrated
by the motel case above (see Case 2). The wording of the clauses also tends to follow
a very distinct and simple pattern. There is a difference, nonetheless, in that the notice
periods associated with the forfeiture clauses are tending to be longer and thus more
restrictive. The shift presents an interesting contrast to the general, modern push for
employers and workers to adopt more ﬂexible market-driven decision-making in theiremployment relations.
There has also been a signiﬁcant change in the process of including and enforcing
forfeiture clauses in employment agreements. Before 1991, the inclusion of theseclauses was subject to union negotiation. Difﬁculties in relation to the application of theclauses were also invariably subject to union scrutiny, thus limiting the opportunity for
employers to take matters into their own hands. For most workers, neither protections
now apply. At best, workers on individual employment agreements generally have tonegotiate for themselves the inclusion, exclusion, or modiﬁcation, of the forfeiture clauses
and either represent themselves or obtain costly legal advice in the event of a dispute
over the application of the clauses. At worst, some workers are faced with ‘take-it orleave it’ agreements and have no real prospect of excluding forfeiture provisions fromtheir contracts.
The cases above show some of the types of incidents that are arising in this industrial
environment. Important themes in these cases include the lack of worker awareness of:
how much notice was required under their employment agreements; the consent they
had apparently provided within the body of their employment agreement for forfeiture in
the event of insufﬁcient notice; and their right to amend their consent to the forfeiture.
The cases also indicate sharp practice and unlawful behaviour on the part of employers inapplying provisions relating to forfeiture for lack of notice, and the sense among workers
of a relative inability to challenge the employer’s use of their, the worker’s, ‘consent’.

Practice versus Principles
The current practice of including and applying forfeiture clauses for insufﬁcient noticein many individual employment agreements does not match Parliament’s intentions inrelation to wages protection. The clauses do not provide for the recovery of real costs;
individual workers are not negotiating or acting from positions of industrial strength or in

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Wage Forfeiture Clauses 69

a safe labour relations environment; and workers are not exercising decisive control over
the application of the clauses.
Parliament has worked from a fundamental principle that workers must receive their
entire wages when due, without being subject to the dictates of employers (who have thepower when unrestricted to compromise the workers’ ability to determine for themselves
how to expend their wages). Over time, it has made speciﬁc exceptions to the generalrule and allowed deductions for the recovery of the actual cost of things received, given
certain circumstances. The types of payments contemplated have included payment for
the tools to be owned by trades workers, actual premiums for insurance for accidents
outside work, and the actual cost of discounted purchases on staff accounts. These
examples are quite distinct from an exception to allow standard penalties against
employees in circumstances where the cost (if any) to the employer is uncertain. The
main purpose of the forfeiture clauses is punitive; the purpose of the exceptions relating
to goods or services supplied is recovery of the fair value of the goods and services
supplied. Parliament has never shown any intent in its debates on the enactment ofwages protection legislation to include the deduction of penalties against workers as an
exception to the general principle of wages payment in full.
Parliament excluded industrial awards and agreements from the protective scope ofwages protection legislation on the basis of the ability of powerful unions to negotiate
and uphold the equity of their agreements within the safety of the now defunct industrial
conciliation and arbitration system. Neither the exclusion nor its grounds apply in relation
to non-unionised workers in the post-1991 labour market. Today’s reality for many unrepresented workers is that employers set the initial terms of their individual employment
agreements. The terms in fact are often offered on a ‘take-it or leave-it’ basis. Often
workers appear not to recognise the inclusion of forfeiture provisions for lack of notice inthe agreements they are offered or the signiﬁcance of the provisions. Even more often
they are not aware of the optional nature of the provisions, that is that they do not needto consent. Of course, this option is largely illusory. To dispute the provision may leadto an employer not employing an applicant worker. This seems inevitable in the case of
take-it or leave-it employment agreements. In either case, the agreements are generally
completed under at least the suspicion of employer coercion. Similarly, workers areunlikely to be aware (until too late – that is after application of the clause on termination)that they can vary their consent at any time (as the Wages Protection Act permits). Even
if they are aware, they may be restrained from effecting change for fear of poisoning theiremployment relationships.
According to Jim Bolger, in 1983 the Wages Protection Act was intended to allow ‘nobody
but the worker himself to determine how his wages will be spent.’ As discussed above,
this intent is not matched by the reality of the inclusion of forfeiture clauses in individual
employment agreements. It is also not matched in terms of the practical application of
the clauses. Forfeiture clauses are usually very simply framed. This simplicity, however,4 Henning Wilson 10 May 05.indd 7

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70 Jon Henning and Jen Wilson

is at odds with the often complex circumstances of termination. The worker is notnecessarily in the wrong, for example, because he or she departs from their employment
without proper notice. As indicated in early awards, such terminations may be for, orin part based on, a ‘good cause’ (for example in cases of constructive dismissals) andin such circumstances an employer may have no or very limited right to any damages
under law in relation to the early departure of worker, and no or little prospect of a court
upholding a decision to implement a penalty against the worker. As Valiant Holdings andvarious other cases set out above illustrate, employers step into the gap between thesimply phrased forfeiture clause and the often more complicated circumstances of an
employee’s termination and determine for themselves whether or not the clause applies.
To return to Bolger’s statement that the worker must have the sole right to determine
how his wages are spent and the reason for his statement, decisive control by a worker
is exercised in the explicit consent of the worker to deduct a speciﬁc and fair sum forsome thing received, as in the case of the worker’s voluntary decision to pay union feesfor union services. It is not decisive control by the worker where an employer effectively
obtains the option to decide to deduct a standard penalty with or without regard to any
complicating circumstance relating to the employee’s termination, and subsequently actson this option.
Parliament’s stated intent is that workers’ wages should be protected from the prospectof the interference and control of the employer. It is grounded in a fear that the employer
may use his or her ability to control the worker’s wage and thus deprive the worker of
his earnings to the employer’s own advantage. However, employers are determining
the inclusion and application of forfeiture clauses in individual employment agreements.
The penalties involve the deduction of monies from wages earned by the worker and thesum deducted goes to the employer. Such arbitrary penalties of ﬁxed value applied by
employers in often problematic circumstances with no clear regard to actual damages
do not match Parliament’s intentions. At best, Parliament has indicated that employers
should be able to recover the fair value of goods and services they have provided to theworker, as equity would allow, on the informed written consent of the worker. Chilwell J
noted in 1978 in the wages protection case, McClenaghan v Bank of New Zealand, thatthe employer should not be ‘judge, jury and enforcement ofﬁcer in his own cause’. In thecase of forfeiture clauses, the employer is often the rule giver, judge, jury, and enforcer.

Additional Important Matters
To justify deductions for insufﬁcient notice, employers make a number of arguments. The
following brieﬂy considers what appear to be the three most common justiﬁcations.
Employers argue that there should be symmetry in the treatment of employers andworkers. In particular they note that they are required to give notice to workers (excepting
in cases of summary dismissals associated with misconduct) and to provide payment inlieu of notice if proper notice is not provided. The provision of a standard notice period by

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employers, or payment in lieu of the same standard notice is not only generally accepted
as fair and reasonable practice in employment relations but it is also made an explicit
term in many written employment agreements. Employers argue that if they have tomeet these requirements then workers should be required to do the same or similar.
Symmetry and a general equality of treatment between employers and workers may be
a virtue. This is not easily achieved, however, and certainly does not directly stem from
simply placing similar penalty clauses against workers and employers alongside eachother in employment agreements. Even the perfect and fair application of penalties
in cases of ‘bad’ workers and employers is unlikely to produce any general equality of
impact on workers and employers. The loss of two weeks’ wages will likely hurt workers
dependent on earned income more than it will hurt employers, who generally havegreater ﬁnancial resources. For a similar reason the loss of work will likely be moredamaging to a worker than the loss of a worker to an employer. A general equality ofpenalty in such circumstances would seem to be unfair. The issue at the heart of wages
protection is also important here. The fundamental concern underlying the developmentof wages protection legislation is a strongly perceived asymmetry in the power of workers
and employers. As keepers of the purse, employers have more effective power over the
implementation of notice provisions than workers (at least those who are not represented
by powerful unions). In disputed cases about costs to either employer or employee on
termination, the employer as the payer either of wages due or wages payable in lieu of
notice, is always in a position to defeat a worker by withholding payment. The intent ofwages protection legislation is to limit this power.
In reality, the argument for the fairness of the same notice and forfeiture clauses applying
to employers and workers is crude and the clauses do not achieve a genuine equality oftreatment for employers and workers. It is also worth emphasising that wages protection
is not designed to stop employers from obtaining fair damages from workers. It should,
however, prevent employers from using their possession of wages not paid to remedy
damages which they decide are owed without submitting their claim to an objective
authority, such as a court. Again, the intent of the legislation includes the stopping of theemployer from being judge, jury, and enforcer in his or her own case.
A second argument advanced is that workers need to be subject to an automatic penalty
because they may escape a lawsuit for damages by moving to an undisclosed address
or by spending their wages before damages are awarded and can be enforced. To
accept this, however, is to accept discrimination against workers as a special categoryof debtors. The possible movement and the inability to pay of any debtor at the time thedebt is determined (which, as above, should not be by the employer on termination) arenormal hazards of debt recovery. It is also not unknown for employers to not pay wages
by reason of bankruptcy and their own change of address.
Third, employers argue that the absence of an automatic penalty means that they must

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72 Jon Henning and Jen Wilson

take the more time consuming and costly step of pursuing the matter to the courts, if
they are to recover their due damages. This is, however, largely an argument for theconvenience of employers over equity for, or the convenience of, workers. The interest of
the employer is served by an automatic penalty but at the likely expense of the worker’s
right to pay only fair damages (if any). Further, the inconvenience of initiating court action
falls on workers if they wish to pursue a change in the status quo following the impositionof automatic penalties.
The issue of forfeiture clauses also raises several other matters. These are: the incongruityof penalty clauses that may be arbitrarily rescinded (without detriment) by those who
stand to be penalised; a public policy consideration with respect to the deductions of astandard penalty for varying insufﬁciencies of notice; a similarity between the objects offorfeiture clauses and nineteenth century master and servant law; and the advantage tothe employer of a worker leaving without notice.
At least nominally, workers are able under the Wages Protection Act to freely give andwithdraw written consent to any deductions they choose. This provides an understandable
convenience for workers in organising the payment of fees and debts within the frameworkof their personal and family budgets. Such voluntarism, however, is less easy tocomprehend with respect to forfeiture clauses that penalise workers for lack of notice.
Workers appear to have little to gain by agreeing to the clauses which contain only risk
to their wages. A forthright informed worker who initially agrees to a forfeiture clause isalso able to easily neutralise the punitive effect of the clause by withdrawing consent. In
other words, the worker seems to be in a position to allow the penalty clause to subsist
merely as long as it poses no threat to him or her. In practice, forfeiture clauses only
seem to work if workers are ignorant of their statutory right to agree to, not agree to, varyor withdraw consent to such deductions, or they are intimidated by their circumstances
into not exercising the right.
A public policy consideration seems to exist in relation to the apparently common viewthat the forfeiture clauses provide for a standard deduction regardless of the degree of
insufﬁciency of notice. To illustrate: in the case of the requirement to provide two weeks’notice or forfeit two weeks’ wages, an employer will usually deduct two weeks’ wages
regardless of whether the worker provides one week’s notice or gives no notice at all.
The effect of this interpretation is to strongly encourage those who may want or need togive less than the required notice, and who have little holiday pay at stake, to give no
notice at all. In such cases, the worker is unlikely to receive any ﬁnal pay on termination
regardless of how much notice is worked short of the required notice. It is possible thatan employer may seek the balance of the forfeiture, if any remains after calculating theﬁnal pay, but this does not usually occur.
Forfeiture clauses also recall the rejected historical requirement of speciﬁc performance
under master and servant law. The law was widely enacted and enforced against workers

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Wage Forfeiture Clauses 73

throughout Britain and its colonies and former colonies through to the nineteenth century,
but never enacted in New Zealand. Under the master and servant statutes, workers
were required to work out full terms of their employment including often long periods ofnotice. Failure to serve out required terms of service was generally punishable by severe
penalties including imprisonment. Proposals for a master and servant statute wereconsidered by the New Zealand Parliament in 1864 and 1865 and rejected. Participatingprominently in the debates in 1865, James Fitzgerald, the Minister of Native Affairs andone of the Parliament’s leading opponents of the measure, stated that ‘In the earlier
times of history the idea of slavery had crept into all the relations of the servant with themaster; but, as civilisation advanced, that idea of compulsory service had gradually been
eliminated’. He further argued that ‘any breach of agreement to labour should be dealt
with as a civil action’ (see Henning 2004: 36-50, 130, 222-223, 329-333).
Edward Gibbon Wakeﬁeld, the most prominent of the early promoters of the organised
European colonisation of New Zealand and a strong promoter of ‘free labour’, also included
a powerfully pertinent argument in A Letter from Sydney for not retaining unhappy workers
any longer than need be. He argued that an employer who sought to make a reluctant
worker remain as an employee ran serious risks in that the worker ‘might contrive to doless than’ the value of his wages, and worse - ‘and this is no uncommon case – secretly
do more than’ the worth of his daily wages ‘of injury per day to his master’s property.’ (see
Lloyd Prichard 1969: 109). In such a case, far from damaging an employer, the employer
could be rewarded by a worker’s termination with insufﬁcient notice.

Conclusions
There are a number of reasons to change current practice in relation to forfeiture clauses
for insufﬁcient notice. The practice is inconsistent with Parliament’s stated intent. The
clauses go beyond dealing with actual true debt and involve employer control over the
expenditure of workers’ wages to the detriment of the rights and interests of workers.
Worker difﬁculties with forfeiture clauses are also exacerbated by the reduced levelof unionisation in New Zealand which has deprived workers of strong and informed
representation since 1991. Naturally, many individual workers have little expert
knowledge of employment law (including the provisions of the Wages Protection Act),and are generally unable to match the industrial bargaining position of employers in
relation to the establishment and enforcement of the terms of employment agreements.
The clauses are also: functionally inconsistent with the terms of the Wages Protection
Act; against public policy; and regressive.
The government in particular can play a signiﬁcant role in securing change to this current
practice. The Employment Court and the Employment Relations Authority have bothindicated that forfeiture provisions in relation to the failure of workers to provide sufﬁcient
notice of termination are enforceable. If this is so, it seems necessarily equitable thatboth parties are fully informed of their rights and obligations in relation to the provisions.

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74 Jon Henning and Jen Wilson

As a ﬁrst step, this should involve ensuring parties are fully aware of the inclusion of
forfeiture provisions in their written employment agreements. This may be achievedby ensuring such provisions are speciﬁcally acknowledged by workers by asking themto initial the appropriate section of their agreements. Alternatively and perhaps making
the fact of consent more certain, written consent could be provided separately from themain employment agreement. Possible ambiguity in the meaning of ‘forfeiture’ should
also be clearly rectiﬁed. Further, employees must be advised of their right to withdraw
their consent to deductions under the Wages Protection Act. This might well be set out
as a plainly worded note to a separate consent document. Given the hardship of losing
immediately anticipated earnings, it is also important that workers understand and are
given immediate and affordable access to disputes and personal grievance resolution
services where there is any dispute over the fairness of the application of forfeitureprovisions by the employer. Another matter that might be considered is an increase in
the certainty of penalties for the misuse and misapplication of forfeiture provisions, thus
an increased deterrence against such action. For government these issues may entail
action to amend the requirements of the Wages Protection Act, changes to its institutional
response to complaints of unfair deductions on termination, and would certainly entail
greater effort in educating workers as to their rights under the Act and under employment
law generally.
These suggestions of course deal with the amelioration of the provision and applicationof forfeiture clauses. The overall argument of this paper, however, is that forfeitureprovisions in relation to insufﬁcient notice are inappropriate and should not be lawful. This
is not to deny that employers may suffer damages as a result of the action of employees
ending their employment without sufﬁcient notice. Nor does it deny employers’ legal
recourse to recover their damages. These will always be available to employers andworkers for all types of debt and can be remedied through various disputes procedures
and before various disputes tribunals, authorities, and courts. The issue is simply thatneither penalties nor damages should be recovered through arbitrary self determinationand self enforcement by employers. In the circumstances, the best change to current
practice may be secured by an amendment to the Wages Protection Act that makes
forfeiture clauses clearly unlawful.

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Wage Forfeiture Clauses 75

References
Henning, J. (2004), ‘A Rejection of Bondage’, Unpublished M.A. Thesis, Otago University.
Lloyd Prichard, M.F. (1969), The Collected Works of Edward Gibbon Wakeﬁeld, Auckland. (see p.109: E.G.Wakeﬁeld,
A Letter from Sydney, (1829)).
NZPD = New Zealand Parliamentary Debates.
‘New Zealand Dairy-Factory Employees Award’, ss.11,18, 23, BA, 1940.

Court Cases
Deighton v Deighton Intergraphika (NZ) Ltd, unreported, Auckland High Court, 30 May 1991, CP33/91, (p.4).
Labour Inspector (Horn) v Valiant Holdings, unreported, Auckland Employment Relations Authority, 12 August 2004, AA
253/04.
McClenaghan v Bank of New Zealand [1978] 2 NZLR, 542.
Night ‘n Day v O’Conno r, unreported, Christchurch Employment Relations Authority, 28 January 2005, CA 12/05.
Portia Developments v Taylor, unreported, Auckland Employment Court, 9 September 1997, AEC 100/97.

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South Canterbury Strike 77

Downing Scalpels and Stethoscopes:
The 2003 South Canterbury Senior Doctors’
Strike and the Challenges facing their Union
IAN POWELL*

Abstract
South Canterbury senior doctors conducted unprecedented strike actions during 2003.
The negotiations and strike actions provide important insights to the employment relations
climate in the health sector and illustrate various union strategies to gain member andpublic support for the doctors’ position. The strike actions were part of a decentralised,single employer collective bargaining pattern which localised employment conditions
and collective action. This bargaining pattern has subsequently been abandoned for anational collective employment agreement.

Introduction
During February 2003, senior doctors, mainly specialists but also medical ofﬁcers ofspecial scale (MOSSs),1 employed by the South Canterbury District Health Board (DHB)
took four separate strikes over a four week period in response to an impasse overtheir collective agreement negotiations with the DHB. A ﬁfth strike scheduled for the
7th of March was called off following a new proposal from the DHB that was sufﬁciently
attractive to lead to a resumption of mediation and, subsequently, to a settlement. The
strikes were all of six hours duration commencing at 9am each day and involved thewithdrawal of labour for elective (non-emergency) services, largely operating lists andoutpatient clinics; emergency and inpatient cover continued to be provided.
Although junior doctors (resident medical ofﬁcers) had on a number of occasions
previously taken strike action in New Zealand, this was unprecedented for seniordoctors and posed strategic and tactical challenges for their union, the Association of
Salaried Medical Specialists (ASMS), including the role of and relationship with themedia, the reaction from the public, the effectiveness of the strikes, and potential politicalresponses. Leading up to the commencement of the negotiations, 26 senior doctors outof an estimated potential of 29 were union members (the ﬁgures do not cover locums– temporary appointments).

* Ian Powell is Executive Director, Association of Salaried Medical Specialists.
A fuller narrative account of this dispute was presented to the Australian Medical Association’s Industrial Coordination
Meeting and is available on www.nzjournal.org.

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78 Ian Powell

The Negotiations
Since 1993, the core terms and conditions of employment of senior doctors by DHBs
and their predecessors had been determined by single employer collective bargaining(see Powell 1995). Although the union had succeeded in achieving discernible beneﬁts
for its members, inevitably senior doctors in some DHBs beneﬁted less compared withthose in other DHBs. This was the case in South Canterbury. On the 1st of July 2002, theSouth Canterbury specialist mean full-time equivalent (40-hour week only) base salary
was the lowest out of the 21 DHBs, $7,386 behind the highest and $4,375 behind thenational mean of $125,289 (based on annual salary surveys conducted by ASMS whichwere based on data provided by DHBs and their predecessors – (see www.asms.org.nz).
Further, by the expiry of the former collective agreement on the 30th of June 2002, theSouth Canterbury specialist salary scale was also well behind specialist scales in theother 20 DHBs. Its lowest step was 20th and its ultimate step was 21st. In addition,
another seven DHBs also had at this time collective agreement negotiations underway,
all of which were to be settled without recourse to industrial action.
A major issue of frustration facing South Canterbury senior doctors was the effect of having
to work without registrars (doctors in usually ﬁve-year specialist training programmes
following their ﬁrst two years as house surgeons). South Canterbury lacked the criticalvolumes to ensure sufﬁcient work to meet the training needs of locally based registrars
compared with larger DHBs. Registrars make a critical difference in the workload andwork pressures of senior doctors when on onerous and potentially risky rostered afterhours acute care duties, compounded by high frequency rosters (usually between 1:2
and 1:4).
Part of the remuneration for working these rosters was an availability allowance, usuallycalculated as a percentage of the base salary, as a retainer for being on rostered afterhours’ call duties. These allowances varied considerably between DHBs, due to thegreat variability between rosters and, therefore, comparisons between them are difﬁcult
to make. The South Canterbury availability allowance had three main components frequency of roster; response and attendance requirements; and ‘no registrar cover’.
The third component had a value of 1% which was to become a central issue in the
direction and settlement of the dispute.
Negotiations commenced on the 24th of June 2002 and continued through until the 20thof March 2003. They included six days of mediation which commenced on the 14thof August in response to an impasse. The ASMS lodged an ambitious claim seeking
several ﬁscal enhancements while the DHB had its own ambitious counter-claims which
would have removed or eroded existing terms and conditions.
The impasse between the parties remained after the third day of mediation on the 27th

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South Canterbury Strike 79

of November. But, by then, the issues of dispute had narrowed considerably. Two key
union claims had largely been addressed—a $3,000 salary increase to existing salarysteps (the DHB’s original position was $1,000) and extending the virtual automatic annual
salary step advancement to the top of both scales, consistent with most other DHBs. The
DHB had also withdrawn all its claw-back claims.
By the time union members voted to proceed with strike action, the disputed issues
were the strategically selected ‘no registrar’ component of the availability allowance (noemployer offer), backdating of the $3,000 salary increase, and the length of the term.2
The union conducted a secret postal ballot of all its members, during the 2nd to the 19thof December, over its recommendation for the ﬁve six-hour strikes over elective services.
The ballot result was clear but not overwhelming. With a response rate of 84%, 68%
voted to support the strike proposal while 32% voted against it.
Challenges for the Union
The ASMS was conscious that undertaking strike action was unprecedented for seniordoctors in New Zealand and raised serious challenges for it to overcome. Consequently,
its focus shifted once it became evident strike action was likely. Based on the belief thatpublic support and media empathy would be more achievable, the main emphasis wason after-hours emergency cover rosters. It also adopted a form of industrial action thatwas intended to cause inconvenience rather than harm to patients, affect the politicallysensitive issue of elective volumes, and be more consistent with the ethical values of
medical practitioners. Further, it continued to call upon the DHB to agree to independent
arbitration as an alternative to the strikes.
Membership Support
Membership support and identiﬁcation with the direction of the ASMS’s strategy wascritical. In fact, negotiations commenced with a high degree of membership ownership.
The draft claim forwarded to union members did not seek any change to the availability
allowance. However, the responses led to the ﬁnalised claim seeking to increase the ‘noregistrar cover’ component from 1% to 6%. Then, in reaction to further membership feedback, the claim was again modiﬁed on the eve of negotiations to 15%.
Regular well-attended union meetings were features of the dispute, often scheduled inconjunction with negotiation rounds. These meetings made decisions over whether toaccept or reject speciﬁc DHB proposals, invoke mediation, and hold stopwork meetings.
Two well-attended two-hour stopwork meetings were held, during which all elective
services were cancelled. The ﬁrst, on the 11th of November, provided the union’s
negotiating team with the authority to develop a strike action strategy for consideration
in a secret postal ballot. The second, on 11 March, determined the ASMS’s approachafter the cancellation of the ﬁfth strike. Further, the decision to undertake strike action

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80 Ian Powell

was based on an afﬁrmative secret postal ballot. Only four doctors did not participate in
the strike ‘more because they were philosophically opposed rather than against what thedoctors stood for.’ (Timaru Herald, 20 Feb. 2003).
The main sign of membership discord over the union’s handling of the dispute came laterin 2003 when, while being prepared to renew union membership, one member wrote
to the union advising that a number of members ‘feel we have been the victims of theagendas of others gathering power to themselves, with the senior medical staff in theﬁnal result being cast aside with little to show for all the anguish the recent events havecaused, as the sideshow moves on.’ (ASMS member, 16 Sept. 2003). Nevertheless,despite the criticism, union membership increased from 26 to 29 during the strikes.
Effectiveness of Strikes
In the context of raising the proﬁle of the dispute and putting pressure on the DHB to
improve its bargaining position, the form of the strike actions had a two-fold objective:
to target the sensitive political issue of elective volumes and to conﬁne the impact
on patients to inconvenience only. The ﬁrst strike, on the 3rd of February, proceeded
without incident with all scheduled surgical lists and outpatient clinics cancelled. Nearly
70 hospital appointments were cancelled (Timaru Herald, 4 Feb 2003). The second
strike led to the cancellation of all four scheduled surgical operating lists involving
approximately 14 patients, two endoscopy sessions involving 10 patients, and outpatient
clinics affecting another 66 patients. The DHB acknowledged that there had been no
major problems but also that there were ‘lost opportunities’ of missed elective surgery(ibid, 12 Feb. 2003).
By the time of the third strike the DHB had, of necessity, adopted a modiﬁed approachto the cancellation of elective procedures. Only ﬁve patients had operations cancelled
for the day with another nine out-patient consultations also cancelled. The cancellations
were low because patients had deliberately not been booked for clinics and operating
lists in advance (ibid, 20 Feb. 2003).
Media Strategy
In contrast with the DHB’s reluctant and low key approach, the ASMS adopted a proactive
strategy seeking to inﬂuence and shape the direction of media coverage, including formal
statements and organised interviews. This contributed to and was helped by empathic
newspaper headlines, particularly through the locally inﬂuential Timaru Herald. The ﬁrst
report was the ASMS’s claim that South Canterbury senior doctors’ conditions ‘compare
very unfavourably with the rest of the country….The sticking point was management’s
refusal to increase the allowance for being on-call to reﬂect the lack of registrar cover.’(Press, 30 Oct. 2002). In a reference to a four-day radiographers strike that had justcommenced at the Auckland DHB, the Press had also speculated that South Canterbury

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South Canterbury Strike 81

senior doctors were ‘poised to join in a wave of industrial action hitting the health sector’(ibid, 29 Oct. 2002). The sympathetic media account immediately after the stopwork
meeting resolutions focused on the pressure of the after-hours rosters, comparability ofconditions with those in other DHBs, and recruitment and retention. Dr Matthew Hills,
a geriatrician and member of the union’s negotiating team, commented that he hadcome to Timaru ﬁve years ago for lifestyle choices but it was hard recruiting doctors for
those reasons now because their conditions were falling behind (Timaru Herald, 12 Nov.
2002).
In addition to further coverage by the Timaru Herald, the ASMS’s strike ballot result
achieved national coverage when the union was interviewed on Radio New Zealand’s
Checkpoint programme on the 19th of November emphasising the after-hours rosters
and recruitment difﬁculties. The ASMS’s focus on after-hours rosters continued to bereported during December and January in both the local and national media leading up
to the ﬁrst strike on 3 February.
On the eve of the ﬁrst strike, in an attempt to turn the media and the public against thesenior doctors, the DHB made one of its few media statements arguing with much detailthat its offer was generous. While this achieved prominent coverage, so did the ASMS’s
response which described it as inaccurate, and deliberately misleading (Timaru Herald,
1 and 5 Feb. 2003).
The absence of negative media coverage continued throughout the strikes. The ASMS’sreiterated call for independent arbitration received national radio coverage (eg. Mid-Day
Report, Radio NZ, 11 Feb. 2003). The Press gave extensive coverage following the third
strike with a feature article titled ‘Specialists face tough call’. Although the DHB’s views
were reported the tone of the article was sympathetic towards the senior doctors (Press,
20 Feb. 2003).
The ASMS’s National President Dr Peter Roberts achieved national coverage whenreporting ‘strong national support’ for the striking doctors and accusing management ofbeing prepared to ‘die in a ditch’ over the dispute. He blamed the DHB’s management
style which had ‘forced the doctors to act.’ (8am News, Radio NZ, 22 Feb. 2003). Dr
Roberts’ visit to Timaru in support of his union members on the day of the fourth strike,the 27th of February, attracted further media interest.
Doctors Speaking Out and Resignations
In some instances, in recognition of the status of doctors within smaller cities, seniordoctors participating in the ASMS’s negotiating team spoke on behalf of the union. A
related feature was doctors themselves speaking out. Between the ﬁrst and second
strikes, the Timaru Herald ran a sympathetic feature article based on an interview withorthopaedic surgeon John Rietveld, one of the DHB’s most recently employed senior

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82 Ian Powelldoctors, who highlighted the pressures of the after-hours rosters on patient safety andfamily life, decried the lack of trust in management, noted the disparity in key employment
conditions with other DHBs, and questioned why ‘would anyone want to come here?’(Timaru Herald, 8 Feb 2003).
This was followed by a more signiﬁcant collective action, an open letter, which achieved
front page prominence in the Timaru Herald, from 25 senior doctors, including all theclinical directors and the minority opposed to strike action, calling for board members
to become more involved in the dispute, and accusing management of misleading themand wrongly portraying the senior doctors’ position. In reference to the ‘unprecedented’
strike action, they afﬁrmed that:
Such actions are not taken lightly and when this action involves
the most long-serving and dedicated senior medical staff at Timaru
Hospital, all with a proven commitment to the South Canterbury
dispute, it begs the question why? (ibid, 21 Feb. 2003).3
This was quickly followed by extensive publicity associated with another event, thesudden resignation from the DHB of Dr John Doran, a physician who had worked at
Timaru Hospital for 31 years, believing that he could no longer safely work there. Under
the banner heading ‘‘Distressed’ doctor quits’ and a sub-heading ‘I won’t be the only one’,
Dr Doran reluctantly attacked the management style with the observation that ‘I havenever criticised Timaru Hospital or its managers before and it distresses me to do it now.’(ibid, 22 Feb. 2003).4
Then, after the ASMS’s decision to cancel the ﬁfth strike and return to mediation, an
experienced general surgeon, Neil Harding-Roberts, announced his resignation leading
Chief Executive Craig Climo to acknowledge that he ‘was a very good surgeon andhe [Climo] was sorry that he had decided to resign….negotiations were debilitating forall staff and was obviously affecting public conﬁdence in the hospital….it is a timely
reminder to both parties of the need to reach a speedy settlement.’ (Timaru Herald, 20
March 2003).5
Public Response
More so than the senior doctors anticipated, there was already at the commencementof the strikes much public goodwill towards them. Immediately after the ﬁrst strike theTimaru Herald called on the 4th of February 2003, under the heading ‘Have a say’, for its
readers to ring a speciﬁed telephone number on how the strike affected them and whatshould happen next. The following day, the newspaper reported that ‘South Canterbury
people yesterday came out in support of the striking senior doctors’ with all but one caller‘was right behind the doctors and encouraged them to stick to their guns.’ Subsequently,
the DHB’s chief executive acknowledged that the senior doctors’ after-hours on-call

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South Canterbury Strike 83

roster was ‘onerous’ and did not ‘begrudge the doctors one cent of the money they earn.’(Timaru Herald, 13 Feb. 2003).
Inevitably the pressure of public sympathy for the striking senior doctors was to take its tollon the DHB. Internal divisions emerged among the DHB’s board members over whether
they should also participate in the negotiations along with management representatives.
The cumulative pressure of these developments led to signs of internal dissension on
the board over the DHB’s direction. Under a front page heading of ‘Fears grow otherdoctors may resign’, board member Terry Kennedy called for a special meeting reportingthat he had been ‘inundated with calls from the public’ following Dr Doran’s resignation.6‘My phone started ringing at 8am on Saturday morning and did not stop until Sunday
evening.’ (Timaru Herald, 26 Feb. 2003). The callers were worried that more doctors
might resign. Next, the Mayor of Timaru spoke out criticising the DHB’s approach, inparticular the refusal of the board to intervene in the dispute and the effect on communityand hospital morale (ibid and Morning Report, Radio NZ, 27 Feb. 2003).
In addition to many letters supporting the senior doctors in the Timaru Herald and thecriticism of the DHB by the Mayor, the most signiﬁcant initiative was taken by Grey Power
who convened a public meeting on the 5th of March which was attended by a reported
450 people. The strong sympathy of the meeting for the senior doctors was evident withseveral of them speaking, along with the DHB chair and deputy chairperson (Timaru
Herald, 20 Dec. 2002).
Political Responses
Although it had a bias in favour of the DHB, the government did not publicly side witheither party. Despite being approached following the ASMS’s announcement of theoutcome of its strike ballot, Minister of Health Annette King declined to comment.
Ironically, given their underlying negative attitude towards unions, while not endorsing the
strikes, the opposition National and ACT parties expressed empathy towards the positionof the senior doctors. National’s health spokesperson Dr Lynda Scott commented thatthe planned strikes of senior doctors ‘shows their absolute frustration’ who were ‘feelingthe strain because of understafﬁng’ (Timaru Herald, 24 Dec. 2002). Dr Scott linked thissituation to under-funding and criticised the Health Minister for inaction.7 Both parties’
health spokespeople also pointed the ﬁnger at the government following the ﬁrst strike on
the 3rd of February (ibid, 4 Feb. 2003).
On the day of the third strike, the Health Minister was drawn into the dispute with anoral parliamentary question from Dr Scott. The Minister declined to become involved.
The tenor of her response, however, reﬂected a bias towards the DHB as she quoted
uncritically its assertion of the ﬁscal beneﬁts of its offer, despite the veracity being
disputed by the ASMS. When invited to comment on the resignation of an experienced

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84 Ian Powellgeneral surgeon, she said that ‘she was continuing to follow the issue with interest but
was unable to intervene in an industrial dispute.’(Timaru Herald, 20 March 2003).
Nevertheless, the Minister was conscious of the level of public support for the seniordoctors and sensitive to the need for a resolution. In late February, she sent her Principal
Medical Adviser to Timaru for extensive discussions with senior doctors and management,
although he was not involved in discussions over possible settlement proposals.
Lessons of the Dispute

Conclusions
It is possible to identify tangible beneﬁts arising out of the decision to take strike action.
Several issues in the negotiations had already been resolved before the ASMS gave
its informal notice of the strikes on the 19th of December 2002. As a result of the strikeactions the ﬁscal beneﬁt to senior doctors was further enhanced in the following fourareas:
1.
2.
3.

4.

The ‘no registrar cover’ component of the availability allowance increased from 1%
to 3% effective on the 1st of October 2002 and then to 5% on the 1st of June 2003.
The term of the new collective agreement was reduced from 18 to 13 months after
the expiry of the previous collective agreement.
The effective date of the $3,000 salary increase for specialists became the 1st of July
2002 (expiry of the previous collective agreement) instead of the date of ratiﬁcation.
The practical effect of this change was to extend backdating by at least six months.
The $3,000 salary increase for medical ofﬁcers of special scale (MOSSs) was
increased to $4,000 with the backdating similarly increased by at least six months
to the 1st of July 2002. Further, these salaries were further increased by another$1,000 effective on 1 January 2003.

Despite being unprecedented, the South Canterbury strikes conﬁrm that under certain
circumstances a professional workforce can be prepared to undertake industrial
action and can achieve tangible beneﬁts as a result. The prerequisite was an alreadydissatisﬁed workforce frustrated by unfavourable employment terms relative to many of
their counterparts in other DHBs, onerous working conditions (after-hours’ rosters) andan unresponsive management.
A focused strategy to address the anticipated challenges was also required in order toneutralise possible negative political responses (and which achieved unusual opposition
party empathy) and win public support. This strategy was based on a high level ofmembership involvement in union decision-making, adopting a form of strike action
designed to maximise political sensitivity for the employer and government but reduced
impact for the public (including advocating arbitration as an alternative), focusing

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South Canterbury Strike 85

the dispute on the issue considered most likely to achieve public empathy while still
being directly relevant to working conditions and remuneration, utilising sympathetic
public predisposition towards the senior doctors, an active media strategy, and doctors
individually and collectively being prepared to speak out.
The context of the strike – particularly the growing disparity in employment conditions
across the health sector – and the strike itself illustrate how disruptive and personally
difﬁcult localised employment bargaining can be. The recent return to national collective
bargaining has overcome some of these difﬁculties and it has also prompted an
overhaul of employment conditions for senior doctors with a new national DHB collective
agreement including some of the key issues originally sought in the early stages of theSouth Canterbury negotiation.8 The strike also indicates that some managers may haveto take a hard look at their management styles and consider how they can best interact
and communicate with staff in order to facilitate staff commitment and better quality
health services.

References
Powell, I. 1995. ‘The Experience of Collective Bargaining for Salaried Senior Doctors under the Employment Contracts
Act’, New Zealand Journal of Industrial Relations. 20(2): 195-210.

Footnotes
1

2

3
4

5
6
7
8

In contrast to its similarly titled predecessor 1968 legislation, under the Medical Practitioners Act 1995 ‘specialist’ is aterm of convenience rather than a statutory term. There are two main forms of registration for medical practitioners:
vocational which covers the secondary care specialties and general practice and general which requires some formof oversight and includes MOSSs.
The union wanted the salary increase backdated to the expiry of the previous collective agreement (1 July 2002)
whereas the DHB wanted it to be effective from the date of settlement. The union was seeking a 12 month termfrom the expiry of the previous collective agreement whereas the DHB wanted it to be 12 months after the date ofsettlement (ie, at least 18 months).
The article also reported the Board’s chairperson rejecting the call for its intervention and for arbitration while thechief executive also defended the DHB’s position.
This front page article included a resolution of the ASMS National Executive in support of the striking senior doctors
and was accompanied by a separate interview with Dr Doran and reply by the DHB (Timaru Herald, 22 Feb. 2003).
Radio New Zealand also reported the resignation on the 22nd of February in its hourly new bulletins. Finally,
Dr Doran’s resignation led to several letters of support from the public.
The ASMS was also interviewed by Radio New Zealand over Harding-Roberts’ resignation (Mid-day Report,
20 March 2003). As with John Doran’s earlier resignation, this also led to letters of support from the public to the
Timaru Herald (e.g., 22 March).
Board chair Joe Butterﬁeld rejected Kennedy’s call for a special meeting on the grounds that there were enoughmeetings scheduled anyway.
Dr Scott is a medical practitioner who had been employed by the Nelson Marlborough Hospital and Health Service(predecessor of the DHB) in geriatric care.
New Zealand District Health Boards Senior Medical and Dental Ofﬁcers Collective Agreement (1 July 2003-30 June
2006). The national settlement included time-and-a-half for average hours worked on rostered after-hours callduties, six weeks annual leave, further enhanced salary scales (including widened margins between steps andextending the length of the scales), and enhanced employer subsidised superannuation.

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Employee or Independent Contractor? 87

Employee or Independent Contractor?
Comments on: Three Foot Six Limited v Bryson(CA 246/03, 12 November 2004)
PAM NUTTALL AND FELICITY REID*

Abstract
The recent Court of Appeal decision in Three Foot Six Limited v Bryson provides theﬁrst interpretation at appellate level of section 6 of the Employments Relations Act
2000. Although the majority judgment acknowledged that the deﬁnition of employee
was different under the new legislation, it viewed this alteration as a “nudge” rather thana radical change in the law. The outcome of the case reﬂected this view. Industry
practice and the intention of the parties carried signiﬁcant weight in establishing that Mr
Bryson was a contractor rather than an employee. While the Court endorsed the use of
the “fundamental” test in determining the real nature of the employment relationship, it
preferred a more “open-textured” enquiry to establish Mr Bryson’s employment status.
This approach casts doubt on the relevance of the traditional “tests” in deﬁning who isan “employee”.

Introduction
While the “Lord of the Rings” has been enjoying worldwide acclaim, the case of Mr
Bryson, an on-set model technician, has been working its way through the Employment
Institutions and Employment Courts. The issue in Mr Bryson’s case is whether he wasan employee or an independent contractor. In November 2004, the Court of Appeal gave
a judgment in which the majority held that Mr Bryson was an independent contractor (CA
246/03, 12 November 2004). The case is signiﬁcant because it is the ﬁrst time the Courtof Appeal has considered the deﬁnition of section 6 of the Employment Relations Act.
It is also signiﬁcant because of the treatment by the Court of the traditional tests used
to determine the status of a worker and because of the weight they gave to the role ofindustry practice.
The Employment Relations Act, section 6 stipulates:“Meaning of employee(1)
In this Act, unless the context otherwise requires, employee(a)means any person of any age employed by an employer to do any
work for hire or reward under a contract of service; and* Pam Nuttall and Felicity Reid are Senior Lecturers in the Faculty of Business, Auckland University of Technology.

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88 Pam Nuttall and Felicity Reid

(b)

(2)

(3)

includes –(i) a homeworker; or(ii) a person intending to work; but(c)excludes a volunteer who –(i) does not expect to be rewarded for work to be performed as avolunteer; and(ii) receives no reward for work performed as a volunteer.
In deciding for the purposes of subsection (1)(a) whether a person is
employed by another person under a contract of service, the Court or
the Authority (as the case may be) must determine the real nature of therelationship between them.
For the purposes of subsection (2), the Court or the Authority –(a)must consider all relevant matters, including any matters thatindicate the intention of the persons; and(b)
is not to treat as a determining matter any statement by the persons
that describes the nature of their relationship.”

Both dissenting and majority judgments in the Court of Appeal reviewed the policy
intent behind section 6 and modiﬁcations to the wording of the section during the SelectCommittee process. The majority cited a submission by Department of Labour ofﬁcialsthat the “policy intent by clause 6 is to stop some employers labelling individuals as‘contractors’ so as to avoid the responsibilities that would arise if they were employees”(Three Foot Six Limited v Bryson, para 75). However, in his dissenting judgment McGrathJ. suggested that the importance the majority placed on industry practice could amountto “a label argument” (ibid, para 33) and that “….there is a risk in applying such anargument that a whole industry will be treated as excluded from the provisions of the
Act…” (ibid, para 33).
The predecessor to section 6 was section 2 of the Employment Contracts Act 1991
which was briefer and less speciﬁc. In the Bryson case, the Employment Court clearlyviewed the new section as moving away from the previous emphasis on statements ofparties’ intentions to a more objective analysis of the actual structure of the relationship.
However, the majority of the Court of Appeal viewed the change in legislation as a “nudge”
rather than a radical change in this area of law. In the end, the parties’ intention, in thelight of particular industry practices (see de Bruin and Depuis 2004), carried the mostweight. The majority speciﬁcally rejected (Three Foot Six Limited v Bryson, para 105)
the appellant’s contention that section 6 of the Employment Relations Act did not change
the law as stated in TNT Worldwide Express (NZ) Ltd v Cunningham. The judgment
acknowledged that this interpretation was not “tenable in light of the policy underpinnings 6”(ibid). However, the outcome does appear to resemble a decision that could havebeen reached under the approach taken in Cunningham.

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Employee or Independent Contractor 89

The Appeal Court case: background and key issues
Mr Bryson initially worked for Weta Workshop as an independent contractor. He wasthen seconded to Three Foot Six Limited for two weeks at the end of which he was invited
to continue working. He accepted, although no formal contract was entered into for six
months. The contract Mr Bryson eventually signed was called a ‘crew deal memo’ andwas fairly standard in the ﬁlm industry.
The crew deal memo referred to Mr Bryson as being a ‘contractor’ and speciﬁed that
he was not an employee of the company. On the other hand, there were a numberof features of the crew deal memo which were more consistent with an employment
relationship. These features included sick leave at the discretion of the producer;
payment for statutory holidays; the contractor had to work exclusively for Three Foot Six
Ltd unless approval was given not to; hours of work were stipulated and overtime waspaid if they were exceeded; and the company provided all tools except for a few basic
tools. In addition, Mr Bryson was trained for six weeks by the company. He was allocatedwork each day and if he ﬁnished that work he would be allocated tasks elsewhere.
Shaw J. held in the Employment Court that Mr Bryson was an employee. This was
based on the application of principles that had been developed in two earlier Employment
Court decisions that considered section 6 of the Employment Relations Act 2000 (Koia v
Carlyon Holdings, Curlew v Harvey Norman Stores). The principles were:
•
•
•
•

•
•

The Court must determine the real nature of the relationship.
The intention of the parties is still relevant but no longer decisive.
Statements by the parties, including contractual statements, are not decisive of
the nature of the relationship.
The real nature of the relationship can be ascertained by analysing the tests
that have been historically applied such as control, integration, and the‘fundamental’ test.
The fundamental test examines whether a person performing the services isdoing so on their own account.
Another matter which may assist in the determination of the issue is industry
practice although this is far from determinative of the primary question.

Applying those principles, Shaw J. held that Mr Bryson was an employee, citing thelack of evidence that Mr Bryson was acting as a separate business; his lack of other
employment; the requirement for six weeks training; and the content of the crew memo
which although referring to independent contractors, read much like a contract of service(as opposed to a contract for services).
The majority of the Court of Appeal, William Young and O’Regan JJ., acknowledgedthat the way Mr Bryson’s engagement worked out in practice “smacks very much of

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90 Pam Nuttall and Felicity Reid

employment” (Three Foot Six Limited v Bryson, para 97), but concluded that he was anindependent contractor. They held that the almost invariable practice in the ﬁlm industry
for workers to be engaged as independent contractors was a signiﬁcant factor in themdeciding that the “real nature of the relationship” was that of independent contractor.
In his dissenting judgment, McGrath J. cautioned against saying that all ﬁlm workers are
independent contractors because such an approach is a label argument. He viewed
the legislation as requiring a determination of the real nature of the relationship on
an individual basis and said that it is “not open…to the Court under the deﬁnition of“employee” in the 2000 Act to reach a decision that has general application to the ﬁlm
industry.” (ibid, para 35). The conclusion reached by McGrath J. was that there werea number of features of the arrangement which “strongly suggest that the underlying
nature of the parties’ relationship is one of employment under a contract of service.” (ibid,para 31). These features included the high degree of control; the level of integration into
the business; the set hours and allocation of further work if he ﬁnished his tasks early; theinability to work elsewhere; the lack of ability to proﬁt from the job; the provision of tools;
the lack of personal investment and the inability to delegate (ibid, paras 28-31).

Comments
Industry Practice
The decision raises a number of issues. The ﬁrst and most obvious is the role industry
practice should play in determining whether a person is an employee. McGrath J.
cautioned against ‘labelling’ all the workers in an industry, whereas the majority saw it
as determinative. In the course of the judgment, the majority ‘reconstructed’ the parties’arguments in terms of whether “services of the sort which Mr Bryson provided (ie. as amember of a ﬁlm crew)” are properly the subject of contracts of service or for services(ibid, para 80). This reconstruction moved the focus to the type of work performed in theindustry as being determinative of the status of the worker rather than on the structure of
the arrangements by which the work is carried out.
The majority recognised that in practice, Mr Bryson’s engagement “smacks very muchof employment” (ibid, para 97), and that although the signiﬁcance of contractual terms
has been downplayed, “standing alone” the contractual terms are not determinative (ibid,para 109). But then they held that a properly conducted “open textured inquiry” into
the real nature of the relationship would consider the “external reality…most obviously
relevant to the situation of the parties”, that is, the fact that there are hundreds andperhaps thousands of people who work in the ﬁlm industry in very much the same way
as Mr Bryson did, and do so as contractors (ibid, para 111). And so they held that “[i]nthe light of industry practice there is no basis for holding Mr Bryson’s relationship with theappellant was other than what was provided for in the contract he signed.” (ibid).

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Employee or Independent Contractor 91

On this analysis, industry practice appears to trump all other ‘relevant matters’.
Interpreting Section 6 in the Light of the TNT Decision
The leading decision under the previous Employment Contracts Act, TNT Worldwide
Express (NZ) Ltd v Cunningham, was used by all Court members as the basis for measuring
the changes that the new section 6 of the Employment Relations Act has brought to themeaning of ‘employee’. Initially, in a decision in 2001, the Employment Court had viewed
the TNT decision as meaning that the expressed contractual intentions of the parties
prevailed over everything else (Koia v Carlyon Holdings Ltd). Subsequently, however,that was considered to be “too simplistic an analysis” and instead the TNT decision washeld to require that all relevant factors evidencing the intention of the parties at the time
the contract was entered into were to be considered (Curlew v Harvey Norman Stores).
Both the majority judgement and the dissenting judgement in Bryson considered the
TNT decision as important in construing the wording of section 6 of the Employment
Relations Act. McGrath, J. considered it signiﬁcant because section 6 was directed as a“reforming measure” to the deﬁnition of “employee” under the previous legislation whose
principles are stated in the TNT case.
William Young and O’Regan JJ. considered that “the [TNT] case does not stand for
absolute deference to party autonomy”(ibid, para 70), but listed three important featuresof the case as respect for contractual form, acceptance of the choice made by the parties
and rejection of a pro-employment bias (ibid, para 69).
They rejected the applicant’s submission that section 6 “did not change the law as statedin TNT” and rejected the submission that section 6(3)(a) and (b) “merely reiterate theold rule that contractual labels are not determinative of status.” (ibid, para 104). They
accepted that section 6 “proceeds on the basis that ‘the real nature of the relationship’is not controlled by contractual terms and this is so even in cases where the contractual
form adopted by the parties cannot be stigmatised as a sham.” (ibid, para 105).
But although “the approach dictated by s6 is plainly not the same as that taken …in TNT”,
the majority still considered that “what was intended was more in the nature of a nudge
rather than radical change in this area of law.” (ibid, para 78).
The Traditional Tests and Intention
A ﬁnal matter that the judgment leaves open is the role of the traditional “tests” often
applied in these types of cases: the control test, the integration test and the fundamental
test (see Deeks and Rasmussen 2002: 98-99). The majority considered that an analysisof the “real nature of the relationship” should not be restricted to those tests. They
were concerned that an application of the traditional control, integration and fundamental

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92 Pam Nuttall and Felicity Reid

tests alone to determine the real nature of the relationship could leave little scope forsigniﬁcant weight to be placed on contractual intention (ibid, para 103).
Rather they held that there should be more “open textured” inquiry (ibid, para 101). They
considered the fundamental test, as applied in the leading case of Market Investigations
v Minister of Social Security (see para 184-185), encapsulated the intention of Parliament
but noted that the criteria set out there were not exhaustive and did not take into
account a case where the overriding industry practice was for workers to be engaged
as independent contractors. They held that Shaw J. had applied the fundamental test
incorrectly by comparing Mr Bryson with a builder or plumber rather than with others in
his industry.
In the end, it seems that it was the parties’ intention as expressed in the contractual
terms, viewed in the light of current industry practice, that carried the day and this wasseen as determining the real nature of the relationship.
So where does this leave the traditional tests as far as the new legislation is concerned?
The control test and integration test receive little favour but possibly still have a life aspart of the “open textured “ approach. The fundamental test has received qualiﬁed
endorsement – it can assist in determining what the “real nature of the relationship is”.
However, it seems it is not determinative if there is an overriding factor such as industry
practice. What is left open is what the “open textured inquiry” should include where there
is no overriding industry practice.
At the time of writing, an application has been ﬁled to appeal this decision to the Supreme
Court

Referencesde Bruin, A. and Depuis, A. 2004. ‘Flexibility in the Complex World of Non-Standard Work: The Screen Production
Industry in New Zealand.’ New Zealand Journal of Employment Relations, 29(3): 53-66.
Deeks, J. & Rasmussen, E. 2002: Employment Relations in New Zealand, Auckland, Pearson Education.

Court Cases
Curlew v Harvey Norman Stores (NZ) Pty Ltd [2000] 1 ERNZ 114.
Koia v Carlyon Holdings Ltd [2000] ERNZ 585.
Market Investigations v Minister of Social Security [1969] 2 QB 173.
Three Foot Six Limited v Bryson [2004] CA 246/03.
TNT Worldwide Express (NZ) Ltd v Cunningham [1992] 2 ERNZ 1010 (CA).

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CHRONICLE
October 2004
The passage of the Employment Relations Law Reform Bill through Parliament continued
to make the news during October. According to the Dominion Post, the National Party
claimed that one of the key aspects of the Bill was compulsory unionism by stealth.
The National Party’s Industrial Relations spokesperson, Wayne Mapp, stressed that thebargaining fee arrangements meant workers had to opt out, rather than into unions andthat the National Party would ﬁght its introduction. He claimed that no one, apart fromthe unions, wanted the changes and that the feedback from a number of submissions to
the Select Committee was that if ‘it ain’t broke, don’t ﬁx it’.
The business press also provided substantial coverage of the Bill. The Independentclaimed that Labour Minister Paul Swain sneaked the bargaining fee measure into
the Bill during the parliamentary recess, through a Supplementary Order Paper. The
newspaper suggested that the proposed changes made it clear that employers could
not object to the inclusion of a bargaining fee in collective employment agreements. The
National Business Review viewed the late introduction of the bargaining fee as a major
victory for unions at the expense of fairness and balance in employment law, especiallyat the expense of employees who choose not to belong to unions. An Employers andManufacturers Association survey showed that 63% of employers thought that a collective
would be bad for their business and 88% of employer respondents had a negative viewof multi-employer collective agreements.
There were a number of crucial negotiations in the health sector. National multiemployer collective agreement talks for nurses continued (see September Chronicle).
The Dominion Post reported that “signiﬁcant progress” had been made after three daysof negotiations between the Nurses Union and the 21 District Health Boards. It was also
reported that senior doctors had voted overwhelmingly in favour of a national collective
agreement giving them six weeks’ leave a year and a base salary between $111,000 and$161,000. Both the NZ Herald and The Press alluded to contingency plans preparedby the Health Boards as they faced a 6-day national strike by 2000 junior doctors. The
doctors claimed they were being worked off their feet and wanted reduced hours in placeof a pay rise. The Health Boards responded by saying that 27% more junior doctors
were on duty now than ﬁve years ago and working conditions were ‘pretty favourable’
compared with overseas.
The ongoing dispute at the Lyttleton Port Company (LPC) continued to receive media
coverage (see September Chronicle). Following the recent Employment Relations
Authority determination in its favour, the LPC was hoping that this would allow a swift
and successful conclusion to negotiations. However, unions held a stopwork meeting to7 Chronicle 9 May 05.indd 1

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update members on options which included appealing the ERA decision.
Bargaining at the Burnham Military Camp prompted a stand-off between members of two
different unions. Around 60 civilian workers represented by the National Union of Public
Employees (NUPE) went on strike for better pay but they felt that they were left “highand dry” by the Public Service Association (PSA) that had settled. The NUPE members
wanted an 8% pay rise but the Public Service Association (PSA), which has about 800
members among the country’s 2,000 defence force civilian workers, had decided toaccept an offer of a 2.5% pay rise.
Primary teachers and principals voted overwhelmingly to accept their new collective
agreements, which would provide an 8.74% pay rise over three years. The agreements
were estimated to be worth $420 million and would cover around 25,000 primary,intermediate and area school teachers and principals.
Salary negotiations were also successful in another part of the education sector where
early-childhood teachers won their battle for pay parity with primary and secondary
teachers. The collective agreement would cover around 1,000 teachers and it included
a four-step pay rise to lift the salary rates to the same level as primary, secondary andkindergarten teachers by July 2008. In that period, the salary of a teacher with eight
years experience and a bachelor degree in early-childhood education would rise from
$37,000 to $56,400.
The Transport and Industrial Relations Select Committee considered changes to thecontroversial Holidays Amendment Bill (see June Chronicle). Under proposals put
before the Committee, it was advocated that employers would not have to pay sick leave
if an employee failed to produce proof of illness or injury ‘without reasonable excuse”.
However, it was also suggested that employers would have to pay an employee’s“reasonable expenses” when they sought a medical certiﬁcate.
The Council of Trade Unions (CTU) reportedly wanted the Labour Department to widen
its investigation into the pay and conditions of foreign ﬁshermen. Minister of Labour,
Paul Swain, launched an investigation into the pay and conditions of foreign crews after
allegations in Parliament that some employers were making signiﬁcant deductions forfood and accommodation, effectively paying foreigners less than the statutory minimum
wage. The CTU claimed that this was problematic in the ﬁshing industry because few
commercial ﬁshermen were part of collective employment agreements and many were
paid on the basis of each voyage’s catch.
The Dominion Post reported that remuneration for top executives were rising at almost
double the pace of that of the average worker. A Victoria University study showed that,on average, chief executives’ remuneration had increased by 7% a year since 1997,
while the average wage for workers’ rose 3% over the last year. Thus, the average chief

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executive’s pay had leapt from $249,000 in 1997 to $355,000 in 2002, compared with the$38,900 average pay for workers. CTU President, Ross Wilson, said the pay difference
was hypocritical, as it was executives who had lobbied against moves to improve workers’
conditions through the Employment Relations Act and the Holidays Act.
An Australian union stalwart Max Ogden claimed in a Dominion Post article that unions
in New Zealand had a better chance of surviving than their seemingly brasher, tough-guy
Australian counterparts. He stated that “Australian unions are not showing anything likethe level of sophistication” found amongst New Zealand unions, who looked strategicallyat the bigger picture. Mr Ogden also claimed that Australian unions largely remained
trapped in the narrowly focused “labourist” model as they chased higher pay without
thinking where the money came from. Kiwi unions had shifted focus, he said, to a
European-style social-democratic model with a commitment to helping businesses create
wealth in a growing economy.
A personal grievance dispute between the NZ Police and former Superintendent Alec
Waugh turned slightly bizarre when NZ Police contested a minor pay-out sought by Mr
Waugh. According to the Dominion Post, NZ Police opposed granting the reinstatedsuperintendent a ‘bonus’ for cleaning toilets on top of the $1 million net compensation he
won for his ﬁve years out of the police. Mr Waugh was seeking a rehearing on part of his
successful compensation case. The sum included about $14,000 Mr Waugh earned in a
job cleaning toilets; this was used as an example of how badly Mr Waugh had fared after
being forced from the police over since-quashed charges of expenses fraud.
A long-serving Mt Eden prison guard was awarded $6,500 in a personal grievancecase prompted by management searching his car for drugs. However, the Employment
Relations Authority also found that he had not taken the necessary steps to familiarise
himself with the department’s new search policy for all staff, visitors and inmates. He
was on holiday when the new requirements were e-mailed to staff, and he deleted themessages, unread, when he returned to work. The Authority accepted that the guard
had suffered humiliation, loss of dignity and injury to his feelings, but dismissed further
compensation claims.
The Dominion Post reported that four long-term employees at a Paraparaumu information
technology company had been successful in their appeal against an Employment
Relations Authority decision, preventing them getting paid as much as new recruits (seeJune 2004 Chronicle). The Unisys New Zealand help-desk analysts had challenged acompany decision to leave them on existing annual pay of about $32,000 when new
operators, employed in 2003 to do the same job, started on $37,000. Judge Shaw of the
Employment Court ruled that Unisys should increase pay rates to within 10% of market
rates and reimburse the difference between what the plaintiffs had been paid and thereassessed salary, backdated to April 2003.

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November 2004
Business continued to attack changes to the holidays legislation (see October Chronicle).
The Dominion Post reported that New Zealand’s biggest meat company PPCS had been
hit with a $6.5 million hike in labour costs as a result of the changes to holidays legislation.
Changes to how statutory holidays were applied had doubled the cost to the company
to around $5 million a year and sick pay changes would add $4 million to a payroll of$130 million, according to PPCS Chief Executive Ofﬁcer Stewart Barnett. While thecompany though that the timing of the changes was wrong, it also made the interestingobservations that it had no issue with improving workers’ conditions and that the changes
were not extreme by international standards.
The country’s 21 district health boards and its junior doctors reached an interim settlement,
which still required ratiﬁcation by doctors and individual health boards. This followed thethreat by the doctors’ union, the Resident Doctors Association, to hold a six-day strike atthe end of October (see October 2004 Chronicle).
The Open Polytechnic faced possible strike action when negotiations stalled: the Open
Polytechnic had offered a one-off cash payment equal to 2.5% of staff salaries but staff
wanted their salaries to be increased by at least the same amount.
Strike action was adverted amongst workers in Taranaki’s onshore oil exploration industry
when they settled their bargaining over new employment terms and conditions. The
dispute was settled when workers won a pay rise of 5% for 18 months, backdated to
September 1, and a substantial allowance for working with new hazardous substancessuch as synthetic mud. Originally, the Engineers, Printers and Manufacturers Union
demanded a 10% rise in pay rates while the employer had offered 3.5%.
The Marlborough Express reported that Marlborough rest homes were struggling toretain and recruit workers since their wages were below those paid to vineyard workers.
A spokesman for the region’s operators said a large number of people leaving rest home
work were heading for the vineyards but, at current funding levels, rest home operators
could not afford to pay more.
The Evening Standard reported on an impasse in collective agreement negotiations
when workers at the McCain Foods plant in Feilding rejected concessions of any sort,
including pay cuts. When negotiations started the company sought considerable pay
adjustments since it maintained that the potato-processing plant was underperforming
after three poor growing seasons, and, without pay cuts, the plant might have to close(reported in August 2004 Chronicle).
In a split decision, the Court of Appeal ruled that a model-maker from Lord of the Rings

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ﬁlm production was an independent contractor and not an employee. Two of the judges
found that the agreement, signed by the model-maker, was in accordance with contractor
status and that the usual industry practice was to employ people on contract. The judges
also said: “Further, common sense suggests that any lessening in the competitive
advantage of New Zealand’s ﬁlm industry will have the tendency to reduce the work
which will be carried out in this country.”
The managing director of an Auckland baby products company, who set up a rival
business with his wife, was ordered to pay $295,000 to his former employer. The
managing director had set up the company after The Warehouse approached him, in
his role as managing director, about importing cheaper products. Instead of passing theinformation on to his company, he used the opportunity to import the desired products
through his own company.
The Employment Relations Authority found that a former Auckland-based Pitcairn Island
commissioner was unjustiﬁably dismissed but his “serious misconduct” contributed to hissacking. The Authority ordered that the commissioner be paid $16,000 in lost wages andcompensation, which was 50% of what he would have received but for his misconduct.
The sudden dismissal was found to be procedurally and substantively unjustiﬁed but
evidence showed there had been a breakdown in the relationship with which made it
impossible for him to continue his job.
A former Air New Zealand captain with assault and aviation convictions failed to get his
job back pending a hearing of his claim that he was unfairly dismissed. In declining
the application, the Employment Relations Authority said that safety was “a paramountconsideration” to Air New Zealand and that ﬁve aviation convictions from his use of aﬂying boat without airworthiness documentation amounted to serious misconduct, whichmight warrant dismissal.
An unpopular meat inspector, ﬁred for not doing his job properly, successfully challenged
an Employment Relations Authority decision against him but his bad behaviour prevented
him from getting his job back or any payout. In a written decision the Employment Court
said that the meat inspector’s summary dismissal was unjustiﬁed but as the case was“”far from ordinary” his behaviour ruled out remedies. While management had madeefforts to help improve his work, he continued to fail to meet standards and antagonised
his workmates.
The Corrections Department was ordered to reinstate a Manawatu Prison manager who
was dismissed after an inmate died in a jail cell. The Employment Relations Authority ruledthat the dismissal was unjustiﬁed and the manager had met all speciﬁed requirements ofan on-call manager. As well as reinstatement the Department was ordered to pay him$15,000 compensation.

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Another Corrections Department employment dispute involving a former Napier probationofﬁcer who claimed that a judge had sexually assaulted her, reached a conclusion when
she was ordered to pay $3,560 costs for her failed personal grievance case. The woman
had sought $50,000 from the Corrections Department for alleged humiliation, loss ofdignity and injury to feelings after she was medically retired from her job 18 months after
the alleged assault.
The NZ Herald reported on the Employment Relations Authority endorsement of thesacking of a worker for serious misconduct. The worker refused to allow his ﬁngerprints
to be scanned for identiﬁcation when clocking on and off, based on that this would violate
his religious and ethical beliefs. Subsequently, the worker lodged a complaint with the
Human Rights Commission alleging discrimination of his religious beliefs.

December 2004
In a major policy change, the National Party had decided to revise its opposition to
the introduction of four weeks’ statutory annual leave in 2007. The National Party had
previously criticised changes to the Holidays Act as imposing an unacceptable cost on
business and the economy. The change in stance was thought to be based on theunpopularity of repealing the increase in statutory annual leave as well as the realisationthat by the time the party may come to power four weeks’ annual leave would probably
be entrenched in many employment agreements.
Both the Dominion Post and the Press reported that the CEO of Business New Zealand,
Phil O’Reilly, had claimed that some businesses could lose money if they were open on
public holidays because the Holidays Act could double pay rates for some workers (seealso June Chronicle). He also added that the companies may not even be aware of thepotential costs because the complexity of the new law made it hard to understand what
employers were liable for over the Christmas and New Year period. The President of theCouncil of Trade Unions, Ross Wilson, dismissed the concerns as just “rhetoric” and thatthe extra rates were “not a huge cost item”.
Despite the news of an increase in the statutory minimum wage to $9.50 an hour, theDominion Post reported that the Council of Trade Unions was disappointed. The CTU
wanted the adult statutory minimum wage to be lifted to about $11 an hour as it argued
that this would restore the minimum wage to just over 50% of the average wage as it wasin 1987.
A proposed law change that would guarantee the 4,000 disabled people working insheltered workshops the minimum wage may have adverse effects: it could lead to theclosure of sheltered workshops, according to the IHC Society. The government claimed
that the current law (where some workers earn as little as $5 per week) is outdated andthat people with disabilities should have the same employment and minimum wage rights

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as others employees.
There was widespread reporting on the long running negotiations (see February, April,May, July, September Chronicles) between the nurses’ organization and their employers
as the negotiations edged closer to a resolution, with an offer of a $380 million national pay
deal being unveiled. It was reported that the agreement, one of the biggest settlementsin public sector history, was due to be ratiﬁed by Nurses and midwives in February 2005.
The deal would bring pay rises of between 20% and 30% and an independent inquiry into
stafﬁng levels was also part of the agreement. However, the Dominion Post suggested
that the agreement raised fears that private sector nurses would be left behind and that
it would make it harder for the private sector to retain nursing staff.
Skill shortages continued to dominate media coverage with the NZ Herald reporting thatStagecoach was recruiting bus drivers from Samoa and was looking as far as India to ﬁll
staff shortages. The Corrections Department recruited 71 prison guards from Samoa to
ﬁll some of its current 300 vacancies.
The Westpac Bank claimed in the Dominion Post that skill shortages were one of thebiggest factors holding businesses back with businesses being unable to expand to meetdemand. A tourism and hospitality industry report revealed critical job shortages that
could damage the sector as domestic and inbound travel expands. It was projected that
16,500 employees would be needed to ﬁll new jobs created in the accommodation, foodand beverage areas by 2010.
The Dominion Post reported on a scheme where fruit and vegetable growers co-operated
with employment services in order to combat a severe labour shortage in the Kapiti Coastand Horowhenua area. The scheme involved creating a database of available workers
and a list of farms and orchards that needed staff. Workers would be able to move fromfarm to farm for longer periods, depending on the demand.
The Press unveiled that 100 Air New Zealand employees were under investigation
for breaches of internet policy breaches; this followed the sacking of 8 staff in lateNovember. Unions labelled the move over-zealous and said that it was worrying otherairline employees.
The Inland Revenue Department was accused of intimidating a staff member who wanted
to testify before the Employment Relations Authority in support of two colleagues sacked
from their Wellington service centre jobs in July 2003 (see April 2004 Chronicle). An
employee, who was also an executive member of the in-house union, was told that hewould have to obtain IRD permission before giving evidence on behalf of the two women.
In its ruling, the Employment Court found that the women should be reinstated upholding
an earlier Authority ruling. The judge agreed with the Authority ﬁnding that an unjustiﬁed
dismissal had taken place because three other IRD employees who had committed
similar breaches were given ﬁnal warnings rather than being dismissed.

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The Court of Appeal, conﬁrming an Employment Court ruling, dismissed an appeal by
the NZ Herald over the issue whether union members could be encouraged to leave
a collective agreement while it was in force. The case was sparked by the Auckland
newspaper’s decision to tell two senior journalists that they would had to leave thecollective if they wanted a pay rise.
The NZ Herald and The Independent reported that the Workplace Productivity Challenge
report suggested that the main ways workplace productivity could be increased were
through investing in capital, achieving economies of scale, investing in innovation andtechnology and adopting better business practices. The Government had already set
aside up to $2.5 million a year to implement the group’s recommendations.
A recent study on working time in households revealed that overall, there was an increasein the total average number of hours worked. The National Business Review publishedthe study which found that there was a noticeable increase in the hours worked by older
couples (those aged 50 and over) with well-qualiﬁed couples working longer hours thanthose with no formal qualiﬁcations. Couples with young children were also working longer
hours, especially where both were well-educated. While some employees said they were
working too hard and would prefer to have greater leisure time, many were happy to do
the long working hours.
The NZ Herald reported that an Employers and Manufacturers Association survey
showed signiﬁcant pay rises for some workers, especially electricians who recorded
average wage increases of 11.2%, lifting their average annual wage to $48,694. The
survey found that on average wages had increased by 3.5 per cent in the year toJuly, slightly less than the 3.8% increase of the previous year. The President of the
EMA Northern, Alisdair Thompson, claimed that the successive pay rises showed thatfurther law changes, which gave workers more bargaining muscle, were not needed.
The NZ Herald published a graduate survey that indicated future ‘brain drain’: around
31% of this year’s surveyed graduates would immediately leave New Zealand in favourof employment in Europe, Britain, the United States, Asia or Australia. The survey also
found that 67% of surveyed students planned to live and work in a different country by
the time they were 30 years old. In light of current skill shortages, it was surprising thatthe lack of enthusiasm for employment in New Zealand was sparked by fears about
employment prospects within New Zealand.
However, another survey concluded that most workers were conﬁdent that their jobs
were secure. This survey found that only 13% of the 974 surveyed employees thoughtthat there was an impending chance of unemployment; this compared with 41% 14 years
ago. President of the Council of Trade Unions, Ross Wilson said he believed the change
could be attributed to the more ‘inclusive’ workplace environment in New Zealand.

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January 2005
In the Dominion Post, the National Party’s Industrial Relations Spokesperson, Wayne
Mapp, stated that a National government would review the Holidays Act (see December
2004 Chronicle). A key focus would be the provisions stipulating a time-and-a-halfpayment and day in lieu, with a view to scrapping them. Mr Mapp said that the National
Party favoured giving workers a choice between the extra payment and the extra dayoff.
It was reported in both the Dominion Post and the Waikato Times that the business
community was waiting for a court case to clarify when they had to tell employees they
were selling the business. There was widespread concern amongst businesses aboutchanges in the Employment Relations Amendment Act which required employers to tellstaff about any plans to sell and to give staff an opportunity to comment before a decision
is made.
The ongoing dispute between the Lyttelton Port Company (LPC) and the waterside
unions continued with a three day meeting in a bid to resolve their protracted dispute (seeMay 2004 Chronicle). The Press reported that the talks had broken down and workers
had given a month’s notice of pending industrial action.
Maori Television Service (MTS) was cleared of discriminating against a former Pakeha
employee who claimed she was forced to resign. The employee complained to the
Employment Relations Authority that she resigned because she no longer felt able
to perform her role; she was not allowed to travel to overseas ﬁlm festivals with otherstation managers and MTS had failed to properly discipline an employee she was having
difﬁculties with. The Authority found that the allegations, that MTS had discriminatedagainst her on the grounds of ethical belief, colour and race, were “utterly without
foundation”.
The Employment Relations Authority ruled that a woman was unjustiﬁably dismissed andordered the former owners of a Wellington Kebab shop to pay her nearly $15,000 for lost
wages and humiliation. It was alleged that the woman was sacked because she hadrefused to marry a friend of her boss.
The Independent reported that the Inland Revenue Department planned to appeal an
Employment Court ruling requiring it to reinstate workers sacked for accessing family
members’ computer ﬁles (see December 2004 Chronicle).
The long-running saga at Radio New Zealand (see September 2004 Chronicle) took yet
another turn when Radio New Zealand and its retired Chief Executive, Sharon Crosbie,
were named in a defamation action ﬁled by the former Head of News, Lynne Snowdon,

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who claimed damages of almost $1.5 million. Ms Snowdon had been on sick leave onfull pay since the breakdown in her work relationship with Ms Crosbie in 2002.
In another joint effort to overcome shortages in the Horticulture Industry, the Southland
Times reported on a joint initiative between Work and Income NZ, the Immigration Service,
Inland Revenue and the Central Employment Trust in Central Otago. The scheme wasdesigned to assist with the picking of an expected record 700 tonnes of export fruit. A
free phone service for people wanting work had been getting an increasing number ofinquiries.
The Dominion Post reported that illegal workers were still getting seasonal jobs in Hawke’s
Bay, with immigration ofﬁcials catching 20 in the past two months. A spokeswomanfrom the Hawke’s Bay Fruitgrowers Association said that the fact employers were taking
on illegal workers each year did the industry no favours and these ‘rogue’ employers
undercut honest employers and exploited illegal workers. While the problem was blamedon New Zealand’s labour and skills shortage, a contractors’ group aimed to raise thestandards of seasonal worker employment with a new picknz website.
The death of well-known unionist Bill Andersen featured prominently in the media. Mr
Anderson, who took part in the 1951 waterfront strike, was for many years Presidentof the Auckland Trades Council and he was, at the time of his death, President of the
National Distribution Union and leader of the Socialist Party of Aotearoa.
In his annual Orewa speech, the leader of National Party, Don Brash, said that undera National government unemployment beneﬁts would only be paid if the recipient did
community work or approved training. As part of a policy to encourage employers to
employ people perceived to be risky, a National government would introduce a 90-day
trial period so employment could be ended without penalty. Brash claimed that New
Zealand’s “deeply entrenched” welfare dependency had little to do with the availability ofjobs and everything to do with systemic, structural problems in the welfare system.
The NZ Herald highlighted the difﬁculties of young refugees seeking permanent jobs
with a focus on an Afghan refugee from the Tampa. It was reported that poor language
skills and a lack of New Zealand work experience were big obstacles for young refugees
seeking permanent jobs and discrimination also seemed rife.
The Government unveiled plans to increase childcare support, including care in thehome, in an effort to encourage more women to join the workforce. The Government
was looking at British moves to increase paid parental leave to one year and provide‘dawn to dusk’ out of school care.
Erling Rasmussen and Colin Ross
The University of Auckland

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