ERA and the Wage Subsidy

Valerie Raggett, Catherine Talbot, Francelle Burns, Nicholas Swan, Helena Nathan and Michelle Hood v Eastern Bays Hospice Trust t/a Dove Hospice [2020] NZERA 266 is the first determination issued by the Employment Relations Authority in relation to the COVID-19 wage subsidy scheme.

Summary of facts

The Employer in this case applied for and received the Government Wage Subsidy (GWS) as New Zealand went into COVID-19 level 4 lockdown (Lockdown). When making the application for the GWS, the Employer signed the Wage Subsidy Declaration, which stated “You agree you will, using best endeavours, retain the employees named in your application in employment on at least 80 percent of their regular income for the period of the subsidy.”

In this case, the Employer operated in the retail industry and as a result of lockdown, the stores were closed and Employees were therefore, not required to work. The Employees received a memo from their Employer on 25 March 2020, which stated that the Employer would continue to pay their normal salary and wages until the end of the week and then the Employees would be paid at 80% of their salary until the end of the Lockdown and the situation was reviewed.

About three weeks into the Lockdown, the Employer began consulting with their Employees on a proposed restructure. Following the consultation period, the Employees were advised that their positions were disestablished and they would receive eight weeks of notice of termination, which was double what they were contractually entitled to. However, the Employees were told that the notice period would be paid out on the following basis:

• The first four weeks of notice to be paid out at 80% of salary or wages; and
• The second four weeks notice to be paid out at the GWS rate of $585.80.

The Employees lodged in the Authority challenging the fairness of their dismissals and decreased pay rate. The Employees were granted urgency for part of their application concerning the payment at 80 per cent of normal wages and salary and the four weeks’ notice paid at the GWS rate. The determination did not deal with the redundancy/dismissal aspect (this will be heard at a later date).

Outcome

This determination confirms that a number of employment law obligations did not ‘go out the window’ during the Lockdown.

The Employment Relations Act 2000 provides that terms of employment cannot be unilaterally varied. The Authority held that the Employees had not agreed to being paid anything short of their normal wages and salary – meaning that the memo sent out by the Employer, fell short of the required consultation required to vary the terms of employment.

In addition to this, the Authority also held that just because the Employer extended the contractual notice period (paid at the GWS rate), it could not set out a remuneration rate different to that agreed in the relevant employment agreement. The Employer should have consulted with the Employees about a proposal to extend the notice period by four weeks and to pay that extended notice period at a different rate to their contractual wages or salary.

The Wages Protection Act 1983 provides that deductions must only be made from wages payable to a worker for a lawful purpose with written consent. The Authority held that it could not be argued that a ‘lawful purpose’ may include circumstances faced by the COVID-19 restrictions. As such, underpaying the Employees what they were contractually entitled to was unlawful.

The Employer argued, however, that they were discharged of their obligation under the Wage Protection Act 1983 to pay contractual salary or wages because the employees were not ‘working’. The Authority held that this stretched the wording of the legislation too far and that the workers were in fact, ‘ready willing and able to work’ but for the intervening event of the COVID-19 restrictions.

This case has confirmed existing law that reducing wages to 80% without the written consent of the employee is unlawful. As a result, the Employees have been directed to make a wage arrears claim if a settlement between the parties cannot be reached.

If you require advice about the application of your GWS, or advice on best practice if you are still receiving the extended wage subsidy, do not hesitate to contact a member of the Lane Neave Employment Law team to discuss this further.

Workplace Law team

Employment: Andrew Shaw, Fiona McMillan, Gwen Drewitt, Maria Green,  Hannah Martin, Joseph Harrop, Holly Struckman, Alex Beal, Giuliana Petronelli, Ana Fruean, Abby Shieh