Tiwai Point faces $20m back pay bill

The chief executive of Rio Tinto-controlled NZAS, Gretta Stephens, said the company was "disappointed" by the decision and would consider its options.

New Zealand Aluminium Smelters, operator of the Tiwai Point smelter, has lost its Court of Appeal bid to overturn an Employment Court decision on payment for statutory holidays that fell on a weekend which it has said could cost $20 million in back pay and impose new costs into the future.

The Court of Appeal agreed that the relevant employment law doesn't require payment for unworked statutory holidays that fall on a weekend, but that the collective agreement between the smelter and its E Tu union members is constructed to require such a payment and, because the smelter moved to 12-hour working days in the 1990s, all such payments should be for 12-hour working days rather than the eight-hour days on which the smelter calculated workers' statutory holiday payments.

"The conclusion does not depend on the construction of the statute, but rather of the agreement, and therefore is not a matter admitting appeal," the appeal court bench of Justices John Wild, Helen Winkelmann and Stephen Kos found.

The collective agreement requires that shift staff "shall accrue a days (sic) leave in lieu of a statutory holiday as it occurs", irrespective of whether that day was worked or taken as a normal weekend day.

The appeal court upheld the Employment Court decision on the basis that "the conclusion draws more upon the judge's interpretation of the contracts than upon his interpretation of section 7A" of the 1981 Holidays Act.

As an appeal taken under the Employment Relations Act 2000, it was not possible to appeal a decision "on the construction of an ... employment agreement."

"This constraint recognises the specialist nature of the Employment Court and the need to avoid protracted appellate wrangling in employment disputes where the issues are confined to arrangements by particular parties only," the judgment says.

The chief executive of Rio Tinto-controlled NZAS, Gretta Stephens, said the company was "disappointed" by the decision and would consider its options.

My main focus at this time is making sure our employees have the information and support they need to keep working together safely in these tough market conditions.

Gretta Stephens

The smelter has a record of technology innovation and workforce flexibility that has allowed it to remain a competitive producer of high grade metal at a time when global over-supply and competition from lower cost, newer smelters are making life more difficult for all of the Australasian smelters held in Rio Tinto's Pacific Aluminium subsidiary, which last week reported a 49 percent fall in profitability to US$147 million.

Tiwai Point successfully renegotiated lower electricity costs for the smelter ahead of the 2013 partial privatisation of its primary electricity supplier, Meridian Energy, with further wrangling over the contract expected in the year ahead as key provisions in the revamped contracts come up for review and the smelter continues to struggle for profitability.

A First NZ Capital report earlier this year speculated the smelter, which uses one-seventh of all electricity generated in New Zealand, is currently breaking even and is therefore cheaper to keep open than to close. The Pacific Aluminium assets are for sale, but have yet to attract a serious bidder.

Meridian Energy reports its half-year profit on Wednesday and is likely to give an update on its expectations for the smelter contracts.