Lockdowns do not suspend employment law
The Government has restarted the Wage Subsidy Scheme to help protect jobs and income during Covid-19 restrictions. Other support — such as the Covid-19 Resurgence Payment — has been provided to help businesses with fixed costs. Support is also available through the Short-Term Absence Payment and the Covid-19 Leave Support Scheme to help cover incomes while waiting for Covid-19 test results.
During the first lockdown in 2020, legal questions were raised about the rights and obligations of working people under lockdown conditions. Many have been settled, through the courts or guidance from government departments, removing any doubt about how to proceed lawfully as an employer under lockdown and accessing government support.
Despite this, employees are telling us some employers are attempting to unilaterally reduce wages and conditions. This is against the law. New Zealand employers have never had the lawful right to unilaterally vary terms and conditions in an employment agreement.
One source of possible confusion is the declaration employers sign to qualify for the Government’s Wage Subsidy Scheme. The declaration provides that employers receiving the subsidy make their “best endeavours” to pay employees at least 80 per cent of their “ordinary wages or salary”. It seems some view qualifying for the scheme means that you can automatically reduce a worker’s pay to 80 per cent of their agreed rate. This is incorrect.
Employers have no right to unilaterally reduce pay. The declaration also requires employers to take positive steps to pay at least 80 per cent of their workers’ pay. An employer’s best “best endeavours” should be demonstrable. It should show the employer is prioritising employees; not prioritising profits or running the business without disruption.
The mention of “80 per cent” is also not intended to establish a new default wage rate when using the scheme. The declaration makes it clear that “at least” 80 per cent should be paid due through best endeavours, meaning that if best endeavours can deliver more than 80 per cent of a worker’s pay, then that is what should be expected from an employer.
In signing the declaration, employers acknowledge that the subsidy “does not override” existing obligations under the
Employment Relations Act, the Minimum Wage Act and the Health and Safety at Work Act. The employer “will not make changes to their obligations under any employment agreement” which includes pay, leave and hours of work — without written agreement from the worker.
Employers have duties to notify employees of any application for the wage subsidy scheme on their behalf. They must discuss any application with staff, and “inform the named employees of the outcome of your application and the conditions that apply to your receipt of the subsidy”. Staff must have consented “to the information about them provided to the Ministry of Social Development with respect to this application”.
In the wake of the last lockdown, the question of employers being relieved from ordinary legal obligations has been tested in the Employment Relations Authority. The response has been plain; minimum statutory rights and obligations remain and contractual obligations, including rates of pay, can only be varied by mutual agreement.
Some employers are also directing working people to take annual leave. This is unlawful, and annual leave is not meant to be used in this way. The provisions in the Holidays Act 2003 remain in place, and an employer cannot unilaterally direct a worker to take leave without first attempting to agree with the worker over leave usage. Where agreement cannot be reached, an employer may direct a worker to take some leave but must give at least 14 days’ notice and must act reasonably in doing so.
There is nothing to stop an employer and employee agreeing to a temporary change in terms and conditions to cover a lockdown but this must be the product of a fair and open negotiation in the context of the “good faith” fundamental to all employment relationships.
An employer who qualifies for the wage subsidy must take care to meet their obligations under employment law. While failing to fulfil their ordinary obligations may expose employers to conventional employment law liability, breaching a declaration and unlawfully receiving money will also expose them to additional criminal and civil liability.
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