Businesses across New Zealand will have to re-think how they deal with public holiday entitlements before Christmas - after a potentially precedent-setting Employment Relations Authority ruling.

The Holidays Act says employees must be given a day in lieu if a public holiday "would otherwise be a working day", and roster based businesses had applied black and white tests across all staff to determine what that meant.

Fast food chain Wendy's said if an employee had worked the same day of the week over the three preceding weeks, they were entitled to a day in lieu. McDonald's and Restaurant Brands, which owns KFC, Pizza Hut, Starbucks and Carls Jr, use similar tests.

But ERA says Wendy's determining day-in-lieu entitlements with a three-week test is illegal and it must now consider the circumstances of each employee on a case-by-case basis.

"An individual employee approach is simply part of the price Wendy's pays for the benefit of the convenience it gains by using variable rosters," the ruling said.

The ERA has ordered Wendy's to review all public holidays worked by all staff across all 23 stores since 1 July 2012 and credit anyone with a day in lieu if they should have been entitled to one, or pay them the dollar equivalent if they no longer work there.

The ruling is a result of a three-year battle by a Wendy's employee in Christchurch, Rose Williams, who believed staff were "getting ripped off" and "their lieu days stolen from them".

Wendy's may appeal the ruling.

Its chief executive Danielle Lendich told Checkpoint it was too difficult to assess staff entitlements on a case-by-case basis.

"You have to have something that can go into a computer system. You can't expect a human being to go over 500 employees," she said.

"The problem is the law is not clear, the law should be black and white and then people wouldn't have to decide - employers, payroll companies, and unions wouldn't have to try and negotiate."

Wendy's could give every employee that works a public holiday a day in lieu if it wanted - the Holidays Act welcomes employers to give employees "enhanced or additional entitlements".

Ms Williams said Wendy's rosters were purposely organised so employees don not work the three Mondays before a public holiday.

"I know of one person that's worked there nearly 12-years and never been paid a lieu day," she said.

"On a public holiday we work damn hard in the fast food [industry]. You don't get a lot of thank yous from the public, all they want is a meal, and you gotta work your butt off on a busy day for minimum wage."

Workplace Relations Minister Iain Lees-Galloway declined to be interviewed but said he is "taking advice" on issues with the Holidays Act.

McDonald's says it will review the ERA decision in more detail and "work in good faith to ensure people are paid correctly".

Restaurant Brands is yet to respond.