With the arrival of the COVID-19 Delta-variant in the community the country has swiftly returned to Alert Level 4. Despite the unprecedented difficulties of COVID-19, the Employment Relations Authority (“Authority”) has clearly stated that Employment Law was not ‘paused’ during the height of the pandemic in New Zealand.
COVID-19 case law to date has confirmed that:
- An employer is always required to consult with someone before disestablishing their role;
- An employer cannot unilaterally reduce an employee’s pay (even if the employer is in receipt of a wage subsidy); and
- If an employee’s pay is reduced by agreement, they must still be receiving at least minimum wage for hours worked.
The default position is that employers are obliged to pay employees in full during Alert Level 4, if those employees are “ready, willing and able” to work.
In Raggett & Ors v Eastern Bay of Plenty Hospice Trust t/a Dove Trust  NZERA 266, the employer reduced its employees’ pay to 80% once it received the Government Wage Subsidy, without obtaining agreement. The employer argued that it was entitled to reduce wages to 80%, because the employees were not, “ready, willing and able” to work, due to the COVID-19 restrictions.
The Authority noted that, but for the COVID-19 restrictions and/or the employer’s ‘decision’ that they not attend work, the employees would have worked and were therefore ‘ready and willing’ to work. The Authority did not expressly consider whether that meant employees were ‘able’ to work.
The Authority found that, unless there was agreement to a reduction in wages, or, possibly, a force majeure clause in the employment agreements allowing for a pause in the obligation to pay wages, the employees were entitled to payment in full, pursuant to their employment agreements and the Wages Protection Act 1987.
This case has attracted considerable controversy and has been appealed to the Employment Court. In the interim the safest approach is to abide by its principles.
Accordingly, if an employer needs to reduce hours and wages during this current lockdown, the safest approach is to consult with employees and obtain written agreement, even if the employees are not able to attend work or work from home. If agreement cannot be obtained and the lockdown ends up lasting longer than current predictions, restructuring may need to be considered as a last resort.
The government has announced that businesses with a 40% drop in revenue will be able to apply for the wage subsidy from this Friday on the Work and Income Website. The Finance Minister has said that payments are likely to be made around three days after applications are lodged. Businesses will be eligible for $600 per week per full-time equivalent employee, and $359 per week per part-time employee. All amounts must be passed on to employees.
Resurgence Support Scheme
An additional subsidy is the Resurgence Support Payment (RSP). To be eligible, the employer must experience at least a 30% drop in revenue or a 30% decline in capital-raising ability over a 7-day period, due to the increased alert level. This decrease in revenue or capital-raising ability is compared with a typical 7-day revenue period in the 6 weeks prior to the increase from Alert Level 1. Applications can be made if this drop is expected, rather than waiting for it to happen.
Applications for the RSP are via Inland Revenue Department’s website, which should begin accepting applications from early next week. The RSP is worth up to $1500 plus $400 per full-time equivalent employee, up to a maximum of 50 full-time employees (so up to a total of $21,500). IRD advises that receiving any other Government COVID-19 support does not affect eligibility for the RSP, so it appears eligible employers should apply for both the wage subsidy and the RSP.
Short-term Absence Payment
Employers can apply through Work and Income NZ for a one-off payment for an employee whom cannot work from home and is following public health guidance to stay home whilst awaiting a COVID-19 test.
Leave Support Scheme
Employers can also apply through Work and Income NZ for a 2-week lump sum for an employee whom has been directed to self-isolate by a health official. This arguably extends to anyone at present, but we do not think it will be limited to where there is a specific individual direction from a health official to self-isolate.
Where an employer is applying for a wage subsidy, best practice is to seek written agreement from employees to apply for the Wage Subsidy on their behalf and seek their written consent to provide their personal/private information to the Ministry of Social Development.
We understand that some of the issues above can be incredibly difficult to navigate. Please do not hesitate to reach out to a member of Lane Neave’s Employment Law Team if we can assist.