New Zealand is once again experiencing an Alert Level 4 lockdown, during which the vast majority of businesses are either operating remotely or not at all. While this feels like déjà vu, employers will need to ensure they meet their employment law obligations in light of cases relating to previous lockdowns.
Since the lockdowns last year, there have been two main cases which have discussed an employer's obligations during a government-mandated lockdown. These cases should guide employers as they consider what steps can be taken in relation to their employee's hours of work and remuneration during this lockdown.
Raggett v Eastern Bay of Plenty Hospice Trust
In Raggett v Eastern Bay of Plenty Hospice Trust [2020] NZERA 266, the Employment Relations Authority was asked whether employees who were unable to work due to the lockdown were still entitled to be paid. The employer took the view that it could reduce wages to 80% without consultation, because the employees were not, “ready, willing and able” to work, due to the lockdown.
The Authority held, in the absence of an agreement to reduce wages (or possibly a force majeure clause), the employees were entitled to payment in full. This finding was made on the basis that the employees were "ready and willing", it was only circumstances outside of their control which prevented them from doing so. Notably, the Authority did not discuss the importance of the employee being "able" to work.
Gate Gourmet NZ Limited v Sandhu
In Gate Gourmet NZ Limited v Sandhu [2020] NZEmpC 237, the Employment Court considered whether employees who were unable to work during lockdown were nonetheless entitled to receive at least the minimum wage. Gate Gourmet is a catering company which reduced staff's wages to 80% during lockdown. There was a disagreement as to whether the employees had actually agreed to the reduction, but this particular issue was not considered by the Court.
The issue before the Court was that many of the employees were receiving the minimum wage and therefore the reduction to 80% meant they were being paid less than the minimum wage. The Court was therefore asked whether it was lawful to pay an employee who was unable to work during lockdown less than the minimum wage. Section 6 of the Minimum Wage Act 1983 provides that, a worker covered shall be entitled to receive from their employer payment for their work at not less than that minimum rate (currently $20.00 per hour).
The Court held the employees were not working when they stayed home because (1) Gates did not place any constraints on them while they were at home (2) the employees had no responsibilities and (3) there was not benefit to Gate. Therefore, employers are entitled to pay below the minimum wage to employees who are not able to work during lockdown provided agreement has been reached with the employees as to a reduction of their ordinary pay. It should be noted this decision has been appealed to the Court of Appeal so there is the potential for the decision to be overturned.
Key principles to follow
In light of the above cases, employers should be guided by the following principles when meeting their employment obligations during lockdown:
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Employers cannot unilaterally change employees' terms of employment. Employees need to agree to any changes the employer wishes to make.
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Employees who are ready and willing to work but are prevented from doing so by the lockdown are still entitled to receive their wages, unless alternative arrangements are agreed to in writing (this can include a pandemic clause in the individual's employment agreement).
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Any changes to an employee's terms of employment (including hours of work and remuneration) must be agreed with the employee and recorded in writing.
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An employee who is not able to work during lockdown can be paid less than the minimum wage provided they have agreed in writing to the reduction.
If you have any questions about your employment obligations during lockdown, please get in touch with our employment law team.
