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When the Holidays Act 2003 came into force and updated New Zealand’s employment scheme, possibly the most widely felt change introduced by the Act was the reformed pay entitlements for employees who work on a public holiday. Public holiday workers are now entitled to minimum penalty rates at time-and-a-half plus an alternative holiday (i.e. a day in lieu).

Increased entitlements
These increased public holiday pay entitlements have increased the labour costs of a business opening on a public holiday. As a result, there has been an increasing trend among hospitality businesses, service providers and other retailers who open on public holidays to apply a surcharge in an effort to recover these increased labour costs.

The introduction of these surcharges has stirred animosity with public holiday patrons and consumer institutes alike, who cite the addition of this surcharge as being in breach of the Fair Trading Act 1986. So how legal is it for businesses to apply this surcharge on public holidays?

The Fair Trading Act 1986
The Fair Trading Act protects consumers from being misled or treated unfairly by traders or shops by prohibiting “misleading or deceptive conduct, false representations and unfair practices”. Under the Act, businesses must clearly identify all costs or charges that the buyer of the goods or services will incur at the time an offer or representation is made.

What does this mean for a business trading on a public holiday?
Take the example of a café that opens on a public holiday and adds a surcharge to its prices. In legal terms, the discretion to add this surcharge is entirely in the hands of the business owner and is not illegal – in a free market traders can charge whatever they think the market will stand. However the provisions of the Act mean that customers must be made aware of any holiday surcharge that applies before they make a decision to dine at the café. This is of immense importance and a customer who is not made aware that a surcharge applies and who goes ahead and orders and eats their meal, has good legal grounds for refusing payment, as the café has acted in breach of its obligations under the Act.

Actions to ensure legal compliance
A business that opens on a public holiday and intends to apply a surcharge needs to make sure every customer is made aware of the surcharge before that customer decides to transact with the business.
The mere use of a sign at the payment counter will not be sufficient as the customer may only be made aware of the surcharge after the offer was made. Use of signs in or outside the premises or notices on blackboard menus, do go some way in giving notice of the surcharge, but one cannot assume that just because the sign is there every customer has seen it. The safest approach to ensure compliance with the Act is to make staff aware that they need to verbally inform every customer that a surcharge applies before that customer decides whether or not to transact with the business. For example, a waitress would need to communicate this information to potential patrons before they make a decision whether to order a meal or not.

The Commercial Corporate Team provides legal services to corporate and larger business clients at Norris Ward McKinnon, in Hamilton. Specialist areas include intellectual property, trademarks, custom commercial contracts, joint ventures and charities. For more information contact Norris Ward McKinnon on (07) 834 6000 or email commercial@nwm.co.nz