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Airline fails in bid to recover sky-high pay blunder

THE DOMINION POST - Monday, 14 May 2012


We all wonder how our lives would be different if we won Lotto. But what if instead of Lotto our employer overpaid us and then did nothing about it? This is the problem Clint Foai faced when he was overpaid more than $70,000 by Air New Zealand over a 16 month period.

After working at Air New Zealand for five years as a part time loader, in 2007 Mr Foai was given a temporary assignment as the Time and Attendance Administrator. This full time administrative role “was perfect” for Mr Foai. At long last he no longer had to do shift work and he could spend the weekends with his daughter.

Because Mr Foai was still classed as a part time worker, his pay was based on his “average earning hourly rate”. This amount was the total of the last 52 weeks earnings divided by the number of hours actually worked. Mr Foai had difficulty understanding how this translated into a precise wage. But he accepted the explanation that he was receiving a top up from his original hourly rate.

When Mr Foai began receiving more money than he had been receiving as a loader, he shared his concerns with his manager that he was still being paid overtime. She assured him that the system would be amended to his average earnings rather than the part-time loader rate.

Mr Foai continued to receive greater than expected pay. He asked the Human Resources Manager what he was supposed to be paid because his payslip said “average earnings”. The HR Manager said that if it said average earnings on his payslips then that was what Mr Foai was getting.

While these two managers were responsible for confirming his wages with payroll, Mr Foai raised the issue with the Auckland payroll staff himself and brought the matter to the attention of the HR manager a second time.

Having been assured time after time that his pay was correctly calculated Mr Foai made some major changes to his life. He moved out of home and bought what he needed to live independently. He also took his parents to Samoa to celebrate their 35th wedding anniversary and visited friends and families living overseas.

After years of struggling as a part time worker Mr Foai wanted to ensure that he kept his position. He was careful to check “through all the correct channels” that his wages were correct. There were no performance issues with Mr Foai carrying out his new role and Air New Zealand was happy to extend his assignment at the end of each three month period.

Indeed Mr Foai was known for his initiative in the workplace. He organised outside of work events for staff and their family. He had demonstrated this sort of initiative before he was appointed to the new role, when he organised a family day for the loaders in Wellington to boost staff morale following a restructure announcement. Rob Fyfe was invited, and as a result the CEO later worked as a loader for the day. Mr Fyfe later thanked Mr Foai and gave him Hurricanes’ tickets.

Once Air New Zealand became aware of what it had overpaid, it could not recover all of the money under section 6 of the Wages Protection Act because too much time had passed. Employers can recover overpayments, but only if notice is given shortly after the overpayment and the actual recovery is actioned within two months of that notice.

Instead Air New Zealand made a claim under the common law of restitution. This law allows a party to recover money paid at its expense to another party in circumstances that the law considers unjust. Air New Zealand claimed that the overpayments to Mr Foai were unjust because they were a mistake. However, in overpaying Mr Foai, Air New Zealand was unable to establish that it had in fact been mistaken. At law Air New Zealand could not then claim that Mr Foai had unjustly been enriched and would have to pay the monies back.

For the sake of precaution, the Employment Court looked at whether Mr Foai could defend a claim. He had two defences. Essentially both defences came down to whether Mr Foai acted in good faith and whether he changed his position, or acted in reliance on the overpayments to his detriment.

The Court found Mr Foai had acted in good faith. He was careful to bring the problem to the attention of Air New Zealand and he was entitled to have a reasonable expectation that Air New Zealand would not misrepresent his pay. Mr Foai was not dishonest in not showing his payslips to his managers. Having been made aware of the issue they could have brought up his payslips themselves.

Mr Foai’s rationalised his pay with the naive belief that it had something to do with Rob Fyfe pulling some strings on his behalf. The Court was satisfied that Mr Foai would not have entertained these thoughts unless he had a clear conscience.

Added to this Mr Foai had changed his position and relied on the money to his detriment. He lived beyond his real means for a period of 16 months and in the process spent everything he had been overpaid.

Air New Zealand has said that it will appeal the decision, but it is difficult to see how this will pay off, given Mr Foai no longer has the money. Mr Foai has declared that a loss would bankrupt him.

By the time the appeal is concluded, it is likely that Air New Zealand will have spent more in legal costs than the net amount over paid to Mr Foai of more than $42,000. If Air New Zealand fails in its appeal, it could also be subject to an award of legal costs.

The moral of the story is that the law looks favourably upon timely action and less favourably upon tardy action. Employers should be careful to probe deeper into payment concerns and to act promptly. A few minutes spent looking into an issue can save tens of thousands of dollars in the long run.

Cullen - The Employment Law Firm is one of only eleven law firms in New Zealand approved to provide employment law services to Government and the public sector.

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