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Wendy's fast-food restaurant in Dunedin is among 23 across the country ordered by the Ministry of Business, Innovation and Employment to give alternative holidays (or the equivalent pay) accumulated by all past and present employees.
However, the fast-food restaurant's New Zealand chief executive disagrees with the finding and is considering whether to appeal it.
The MBIE found Wendy's stores across the country had breached sections 56 and 60 of the Holidays Act (2003), for failing to give staff a lieu day after working on a public holiday.
Section 56 says an alternative holiday must be provided to an employee who works on a public holiday if that day would otherwise have been a working day for them.
Section 60 sets out how those employees should be paid for the alternative holiday.
Wendy's has been ordered to comply with the two sections, conduct a review of its restaurants, and keep records of staff contacted, rosters and leave.
It has been ordered to give all past and present employees from the Hornby (Christchurch) and Dunedin restaurants their alternative holidays, or the equivalent pay since the restaurants were opened.
Wendy's has also been ordered to do the same for all its other restaurants across the country, backdated to July 1, 2012.
Wendy's New Zealand chief executive Danielle Lendich said like many other businesses in the industry, the company used the ''three week rule'' to ascertain if a public holiday was a normal working day for someone who works a public holiday.
''Essentially, what this means is that a person who works the same day of the week as the public holiday for the three weeks prior to the public holiday, and the public holiday itself, is due an alternative day.
''We believed this to be a correct interpretation of the law.
''Employees at Wendy's have been receiving an alternate day if they met this criteria.
''It is incorrect to say that employees of Wendy's have not been receiving alternative days.''
Ms Lendich said the labour inspector could not initially tell Wendy's what the correct formula was for ascertaining who was entitled to an alternate day, and there was no case history.
''When the labour inspectorate came up with an answer, we didn't believe that the inspectorate's view was correct.
''We therefore chose to go to the Employment Relations Authority for a determination.''
She said neither party won in the determination, and the authority member came up with an alternative interpretation of law which was not based on either parties' submissions.
''During the proceedings, the authority member said that the law seemed outdated and did not fit with today's 24/7 workforce.''
Ms Lendich said laws that related to pay needed to be ''black and white'' and not left to employers, employees, unions, payroll companies or labour inspectors to try to interpret.
''The Holidays Act needs a total overhaul so that a 16-year-old school student can understand how their pay packet is made up.
''There is no confusion over minimum wage. All laws that relate to pay should be as black and white as this.''
Ms Lendich said the company was still interpreting the finding and no decision had been made whether to appeal or not.
It has been estimated it could cost Wendy's $1.6 million to pay back its employees' lieu days.
- Additionally reported by NZME