Barbara Buckett and Associates Barristors and Solicitors

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the option of lockout

Lockouts have been the subject of much media attention lately in relation to the Service and Food Workers Union case. In that case the Employment Court ruled that the lockout of hundreds of hospital cooks, orderlies and cleaners was illegal. This article will focus on the law relating to lockouts, including when a lockout is lawful. By touching on some of the positive and negative consequences of lockouts this article will give employers something to think about when considering whether to stage a lockout.

what is a lockout?

A lockout is an act that:

Is the act of an employer -

in closing the employer's place of business, or suspending or discontinuing the employer's business or any branch of that business; or
in discontinuing the employment of any employees; or
in breaking some or all of the employer's employment agreements; or
in refusing or failing to engage employees for any work for which the employer usually employs employees;

AND is done with a view to compelling employees, or to aid another employer in compelling employees, to —

accept terms of employment; or
comply with demands made by the employer.

when can a lockout be used?

A lockout must be lawful. A lockout is lawful if:

it relates to bargaining for a collective agreement which will bind each of the employees who are locked out. It follows that it is unlawful for an employer to lock out employees who are not directly affected by the collective agreement or the bargaining.
the employer believes on reasonable grounds that the action is justified on the grounds of health or safety and that the safety concerns pose imminent and significant danger.

A lockout will be unlawful if:

it occurs while a binding collective agreement is in force.
it occurs during bargaining for a proposed collective agreement that will bind the employees who will be affected by the lockout, unless the bargaining has been going on for over 30 days, or the previous agreement had expired before bargaining again.
it relates to matters such as personal grievances, freedom of association or disputes.
it is in respect of essential services and the required notice has not been given.

essential services

Special rules apply to employers engaged in an essential service (listed in the Employment Relations Act 200). These employers are required to give three or 14 days notice (depending on what kind of essential service they provide) written notice of a lockout to the employees’ union/s and to the Chief Executive if the proposed lockout will affect the public interest.

do I have to pay the wages of locked out employees for the period of the lockout?

Employees are generally not entitled to be paid during the period they are locked out, unless the lockout is unlawful. Locked out employees should however have their employment treated as continuous for any service-related entitlements.

can I hire replacement workers for the lockout period?

Only in limited circumstances can an employer employ replacement workers for the lockout period.

Replacement workers may only be used if:

there are reasonable grounds for believing it is necessary for the work to be performed for reasons of safety or health; and
the person is employed or engaged to perform the work only to the extent necessary for reasons of safety or health.

A person can only be employed to perform the work of a locked out employee if:

they were already employed by the employer at the time the lockout commenced; and
they are not employed principally for the purpose of performing the work of a locked out employee; and
they agree to perform the work.

Thus, employers are effectively prevented from hiring contractors or casual workers from doing the work of those who have been locked out, and from forcing other employees who are not locked out from doing the work of those who are.

tactical use of lockouts

The ability to lockout workers is a powerful bargaining tool of an employer that, if exercised, puts pressure on a union to accept the employer’s terms of a collective agreement, or to come to the bargaining table if negotiations fail. It is not, however, a tool that employers use often as lockouts can be harmful to an employer’s public image, the employer’s relations with employees and the union, and result in loss of profits. It is extremely important that an employer that is considering staging a lockout has carefully weighed up the potential benefits and losses before commencing the lockout. To help with this and to ensure that the lockout is lawful and conducted in a procedurally fair manner, contact us, your employment law specialists.

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Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication. Please refer to our "Legal Notices".