The last Alert Level 3 Lockdown in Auckland has once again shown that businesses need to be prepared, at short notice, to make to significant changes to the way they work if required to move to Alert Level 3, or 4. As a result, it’s important to have a plan that you can put into action should this next occur.
An important part of this plan should focus on how you will, if necessary, seek agreement with staff on temporary changes to their employment terms and conditions.
During the lockdown in March, it became obvious that numerous employers were making decisions without first getting agreement with staff. The common situations included:
- Automatically reducing salaries to 80% or lower, or to the $585 subsidy level – without employee agreement, and
- Directing employees to take annual leave, leave in advance or leave without pay – without their agreement and without the 14 days’ notice required under the Holidays Act.
It was noted at the time, that irrespective of the disruption and confusion caused by COVID-19, many of these practices were illegal and it was widely expected that we would see these claims filter through to the Employment Relations Authority. We are starting to see the first of these cases appear [note: both of the below cases are being appealed].
Raggett & Ors v Eastern Bays Hospice Trust t/a Dove Hospice  NZERA 266
In addition to providing hospice services, Dove Hospice also operates a number of retail shops that were closed due to the COVID-19 Lockdown. Dove proposed restructuring the retail shop employees’ positions and invited feedback, which the employees gave. Dove subsequently sent letters advising the employees’ positions would be disestablished with an eight week notice period. The first four weeks would be paid at 80% of their wages and the second four weeks would be paid at the wage subsidy rate of $585.80.
The employees’ maintained they did not agree to be paid anything short of their normal wages and therefore Dove had breached the Wages Protection Act (WPA). Dove stated that due to COVID-19, the employees were not ready, willing and able to work, and therefore the WPA did not apply.
In this case the Authority found that:
- If employees could not work due to a Lockdown, the employer must pay 100% of wages unless otherwise ‘agreed’.
- There was no ability to only pay 80% of wages unilaterally.
- The employer must fulfill its Employment Agreement obligations.
Sandhu vs Gate Gourmet NZ Ltd  NZERA 259
Gate Gourmet provides inflight catering services and was therefore deemed an ‘essential service’. Business had fallen sharply and the company proposed a partial shutdown of its operations. The employees in question were all paid the minimum wage which was due to increase on 1 April. The company decided that only those employees at work would be paid the new minimum wage, and believed that those who were not rostered should be paid 80% of the old minimum wage. After some objection, the company agreed to apply the new minimum wage, but only at 80%.
The employees challenged this on the basis that 1) reducing wages required consent, and 2) the company failed to pay the minimum wage.
The Authority found that:
- The minimum wage increase on 1 April 2020 must be paid even if the employee was not required to work, and
- The company could not agree to pay 80% of wage rate if the employee was on the minimum wage.
While this might seem obvious now, during the confusion of the first few days of the March lockdown this was far from clear to many employers. While there is no doubt that employers were facing a unique situation, compliance with employment law should not be ignored.
To avoid this these issues arising it is important to note that all of your pre-COVID-19 employment obligations still exist – nothing has changed in this regard. Importantly:
- You cannot unilaterally make decisions regarding employees terms and conditions, including wages and hours of work.
- Any agreed changes should be recorded in writing confirming that agreement.
- If you cannot get agreement and need to reduce costs, you have the ability to restructure the positions in your business.