When annual leave, sick leave, or other forms of statutory leave under the Holidays Act 2003 or Employment Relations Act 2000 don’t neatly apply, employers may consider granting special paid leave.

Special paid leave can be a useful, pragmatic option in situations such as:

• where an employee is subject to an investigation or disciplinary process;
• where an employee has raised concerns engaging health and safety obligations (including bullying or harassment complaints);
• as an alternative to suspension;
• where the employer considers it appropriate in the circumstances; and/or
• where it is mutually agreed between the employer and employee.

Discretionary tool – not an entitlement

Special paid leave is not a statutory entitlement. It is a discretionary benefit, meaning employees have no automatic right to it unless it is expressly provided for in their employment agreement or otherwise agreed.

Many individual employment agreements include a clause confirming that special paid leave may be granted at the employer’s sole discretion. Where there is no agreement on duration, the employer generally retains discretion over:

• how long the leave is granted for; and
• when it may be brought to an end.

However, that discretion must still be exercised consistently with the employer’s duty of good faith under the Employment Relations Act 2000.

What the case law tells us

In Chief of New Zealand Defence Force v Darnley [2022] NZEmpC 4, an employee was facing disciplinary action and was granted two weeks’ of special paid leave. The employer informed the employee that such leave was at the discretion of the manager.

When two weeks had lapsed, the disciplinary process remained ongoing, and the employee sought further special paid leave but was denied. The employee said her employer treated her differently and less favourably than others in similar circumstances who were granted leave without question for whatever part of the disciplinary process they needed it for. The employee did not provide any evidence of other cases where such leave had been granted in this way.

The Court held that in these circumstances:

• an employer’s refusal to extend discretionary special paid leave will generally not breach its obligations
• claims of disadvantage will not succeed without evidence of inconsistent or unfair treatment

In Watson v Capital & Coast District Health Board [2015] NZERA Wellington 47, an employee was subject to numerous complaints and reached an agreement with her employer that she would receive special paid leave while dealing with the stress of being the subject of an investigation.

The employee’s stress meant she could not remain at work or consider redeployment options at this time.

The investigation took longer than expected (six months), and special paid leave was ceased at roughly the three-month mark, and the employee was invited to come back to work. Neither party, when initially discussing special leave, considered the length of the investigation or the duration for special leave.

The employee claimed the decision to cease payment of special leave before the investigation had finished amounted to a disadvantage to her employment and was a breach of contract. The Court held there was no agreement to provide special leave for the entire investigation, only for the time she was dealing with the initial stress. The grounds on which special leave had been granted no longer existed and considered it was open and reasonable of the employer to revisit and discuss the issue of paid special leave.

The employer’s payment of special leave was always discretionary, and the employee had no contractual entitlement to receive it. The Court referred to Alliance Freezing Co (Southland) Ltd v New Zealand Amalgamated Engineering & Related Trades IUOW to outline that there cannot be a disadvantage personal grievance claim to cease providing a discretionary benefit.

In this case it was found that:

• Where no agreement exists as to duration, special paid leave does not need to continue for the entire period of an investigation.
• An employer may revisit and discontinue leave where the original reasons for granting it no longer apply.

The Court noted, however, that a fair and reasonable employer would have consulted with an employee before making its decision.

Practical guidance for employers

• Keep discretion intact
  Avoid creating unintended obligations when granting special paid leave (for example, by implying it will last for a fixed period unless that is intended).
• Be clear upfront
  Communicate that the leave is discretionary, including any expectations about duration and review points.
• Consult before changing arrangements
  While not always legally required, consultation is consistent with good faith and reduces risk. But remember when consulting – it is a discretionary benefit, not an entitlement.
• Act consistently
  Ensure similar situations are treated in a similar way to avoid claims of unfairness or disadvantage.
• Document your approach
  Include a clear discretionary special leave clause in employment agreements and apply it consistently in practice. When offering special paid leave, document the arrangement and include any key details.

Need advice? The team at Copeland McAllister is happy to support you across any employment law, health and safety or immigration matter. Give us a call on 03 211 0153 or email admin@cmalaw.co.nz. 

Disclaimer: This update provides commentary on employment law, health and safety and immigration topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek legal advice from your lawyer for any questions specific to your workplace.