With the enormous global impact of COVID-19 and the New Zealand Governments “go hard and go early” response, employers across the country are facing unprecedented challenges.  Whether it be a complete closedown, economic downturn, operational disruptions, reduced staffing levels, or managing this new and serious threat to health and safety – the impact is very real and is creating a lot of uncertainty and anxiety for employers and employees alike.

In the past weeks, the Government has introduced an Economic Relief Package which contains a number of resources aimed at keeping employees in employment by relieving some of the strain on those businesses employing them.  We have seen a number of changes and clarifications since, as the situation continues to develop and new issues emerge.

This article is intended to provide general information about the employment space as at 9 April 2020, including the support systems in place at this time.

Essential services, confusion

Upon entering level four, businesses not considered “essential” were faced with the requirement to shut up shop, leaving only essential services operating. Determining whether a service was essential (or in some cases, which aspect/s of the service were essential) proved to be challenging for many businesses, as Government guidance continually changed.  Up-to-date guidance can be found at the Ministry of Business, Innovation and Employment webpage.

Essential businesses are expected to operate in a way that minimises the risk of COVID-19 transmission.  This may mean introducing alternative ways of working such as working from home, moving to split shifts or flexitime, establishing physical distancing protocols, finding different ways of interacting with customers and, of course, utilising standard good hygiene measures.

Although confined to their own “bubbles”, non-essential workers can work from home wherever possible – but this gives rise to a new set of considerations itself.  Employers will need to turn their minds to administrative implications, the availability of appropriate hardware/connectivity for staff, ensuring that confidential information remains secure, and how best to keep staff connected to the wider team. 

Legal and contractual obligations

Importantly, there has been no change to employment legislation or general legal principles, which continue to apply as they always have.  The State of Emergency has not somehow released employers from their legal and contractual obligations to staff, as some appear to have assumed. 

For essential businesses, health and safety obligations should be at the forefront. Failure to take reasonably practicable steps to protect employees and other people in the workplace from COVID-19 could be very costly from a health and safety perspective, with fines of up to $3million (for an employer who is an organisation) if the failure is reckless. Failing to take appropriate steps to protect essential workers against this known risk could be deemed reckless.  The Ministry of Health has up to date guidelines on how to manage infectious diseases in the workplace which may provide a helpful starting point.

Health and safety should not be overlooked where an employee is working from home either, because the employee’s home becomes their workplace. Employers will, therefore, need to engage with employees on health and safety matters relevant to their own homes.

Employers will be understandably eager to get a plan and, in many instances,  assistance in place but before tapping into any support available, or looking to make operational changes, it is important for employers to check employment agreements and policies for anything relevant to any path being considered.  Changes to any term or condition of employment (whether in the employment agreement, or “implied” through custom and practice) must be by agreement only.

An employer’s legal obligations concerning employee privacy also continue to apply. Applying for a wage subsidy or leave payment requires sharing the employee’s personal information, so this should not occur without the employee’s express consent.  

Pay problems

Where a non-essential worker’s duties are such that they cannot be performed from home, a primary and pressing issue for both parties will be pay during the lockdown period. As a general principle, an employer is required to pay an employee who is ready, willing and able to work, even where a third-party directive means that working is not possible.

This means that when an employer cannot provide work (whatever the reason), the employer must continue to pay its employees, despite them not working. Early on, we saw a huge surge in redundancies, as employers struggled to pay staff not performing work, and thus not generating the revenue they once had.   Support for the employer’s in carrying employees through this difficult period has come in the form of the wage subsidy.

Wage subsidy

The wage subsidy was announced on 17 March 2020, initially with a $150,000 per employer cap which was removed on 23 March 2020.  On 27 March 2020 further changes were made to tighten the qualifying criteria and obligations.  Where an employer applied before 4pm on March 27, the previous terms will continue to apply despite the changes. 

Both essential and non-essential services may access the wage subsidy, so long as they meet the qualifying criteria.  The key qualifier with which essential services may struggle will be showing a 30% decline in revenue related to COVID-19.  Full qualifying criteria, and application forms, can be found on the Work and Income website.

The wage subsidy is paid to the employer in a lump sum for 12 weeks, the rate of:

• $585.80 per week for employees who work 20 hours or more per week; and
• $350.00 per week for employees who work less than 20 hours per week.

Employers are then required to make best endeavors to continue paying employees 80% of their usual salary/wages.  This does not override the requirement at law to pay 100% unless otherwise agreed. An employer cannot unilaterally drop pay to 80% based on the subsidy eligibility criteria.

Where unable to pay 80% despite their best efforts, employers may come to an alternative arrangement with employees, so long as they pay at least the subsidy amount.  The only exception is where the subsidy amount is more than the employee’s usual wage/salary, in which case the usual wage/salary amount may be paid. Employers are encouraged to use excess subsidy amounts to pay other employees.

Essential workers leave support

An issue that many essential businesses have been grappling with is obligations to essential workers, for whom work is available, but who the Ministry of Health recommends staying at home due to their age or an underlying health condition.

The risk of exposure to COVID-19 is heightened or those who fall into the ‘at risk’ group.  Employers must seriously consider whether their implemented measures effectively manage the risk to those who are particularly vulnerable.  The penalties for getting it wrong (not to mention the human consequence) can be severe. 

The basic starting position is that of an ‘at risk’ essential worker who wants to work, but the employer is not willing to wear the risk of having them in the workplace. The obligation to pay for time not working rests with the employer.  If the employee is not willing to work, but work they could safely do is available, the employer is not obliged to fund that time off, as the employee is not ‘ready, willing and able’ to work. 

From 6 April 2020 essential workers leave support has been available for those who find themselves in this situation but can only be accessed by essential businesses.  The payments are the same amount as the wage subsidy payments, with the same condition that employers use best endeavors to continue paying the employee at 80%. 

The support payment is paid to the employer in a lump sum covering four weeks, with an option to re-apply in the fourth week if a longer period is required.  The employee named in the application must be legally employed by the business, in New Zealand, and be unable to work (including from home) because they:

• have contracted COVID-19;
• have come into contact with someone who has contracted COVID-19 and are required to self-isolate in accordance with the official government public health guidance;
• are in the category of people most at risk of severe illness from COVID-19 as defined by the official government public health guidance; or
• have someone in their household/bubble who is ‘at risk’ and so need to stay away from work to reduce the risk of contracting COVID-19, and transmitting it to them.

There is no need to provide proof of the employee’s eligibility when applying, but employers do need to confirm that the employee has advised them that they meet the criteria, and that the employer agrees.  Before advising that it actually agrees, the employer may well seek proof from the employee themselves.

Full qualifying criteria, and application forms, can be found on the Work and Income website.

Drawing on leave and holiday entitlement

Where an employee has leave owing, it is tempting to draw on that to get through the lockdown period. At law, employees and employers are to agree as to when annual holidays are to be taken. Where agreement cannot be reached an employer may lawfully direct an employee to take annual holidays by giving 14 days’ notice.  This applies to annual holidays only (not any other form of leave) and only to actual entitlement (not accrued leave or leave taken in advance).

Many employers are offering employees the option of topping-up reduced wages (say from 80% to 100%) by drawing on their leave balance, or encouraging employees to take annual holidays during this period.  With schools and day-cares closed, and overseas travel likely off the table for some time, many employees will be receptive to that.   

Employers may also ask employees for whom a wage subsidy is claimed, to use their leave balance to top up their pay from the bare subsidy amount to 80%.  This is not expressly prohibited, so long as it occurs by consent.

Many employers are asking whether annual holidays continue to accrue during this time, and on wage subsidy and leave support payments.  The basic answer to that is yes.  Any income that an employee is receiving from their employer (with a few exceptions) will form part of their gross earnings. All holiday and leave entitlements are calculated using gross earnings. So the value of the leave/holidays may be less due to gross earnings being impacted, but the entitlement remains the same.

Consultation is key

In a time where anxiety is likely to be high, keeping employees informed and involved is vital to maintaining good employment relationships. 

Employers must discuss applying for a wage subsidy or leave support payment for an employee and receive their consent (ideally in writing), before the application is made.  Details of what the employee must consent to are found in the declarations made with the applications.

Regardless of whether or not any employer has applied for the wage subsidy or leave support payment, any adjustment to an employee’s conditions of employment (including their pay, hours of work, working times, or work location) can only lawfully be made by agreement. So long as the employee agrees, and there is no breach of minimum employment standards, employers can put in place more or less any arrangements they like. 

Getting employees to agree will be far easier where they feel included in decision making, heard, valued, have an understanding of the difficulties the business is facing, and the alternatives. 

As we head into the third week of lockdown, employers are coming out of the immediate panic and looking to the future.  This has led many to the realisation that arrangements put in place initially will not be enough in the long-term, and so further adjustment is necessary.  The worst-case means considering redundancies, but before getting to that point employers should explore every other avenue available. 

Socialising concerns, ideas, and possibilities early is often the best approach.  Even if there is no certainty yet, active communication prevents things coming as a shock, when possibilities become reality. This can in turn, make consent easier to come by. 

At the end of the day, a lot of employers will need to make some tough decisions knowing that employees will be entitled to challenge those decisions.  Even in these unprecedented times, all legal obligations, including good faith requirements, and the expectation of a fair and proper process, remain in force.  Ultimately, any decision that an employer makes must meet the ‘test of justification’, which is essentially what a fair and reasonable employer could have done in the circumstances at the time.  If you have any concerns, seeking legal advice at the outset may prevent a messy dispute later.  

Mark Hammond & Fiona Dalziel
Tompkins Wake

About our guest contributors:

Mark Hammond - Partner

Mark is an experienced advocate who has worked extensively in the employment, civil, health and safety, regulatory enforcement and commercial sectors. Read more.

Fiona Dalziel - Associate

Fiona practices predominantly in employment law and has particular expertise in Holidays Act compliance and minimum employment entitlements including remediation work and arrears claims. Read more.