COVID-19 and the Employment Relationship

Employment Law
Apr 02 2020

Wage Subsidy Scheme – Employer ‘top ups’

Prior to 27 March 2020, employers receiving the wage subsidy were required to undertake that they:

  • Will use best endeavours to retain the relevant employees in employment; and
  • Will use best endeavours to top up their relevant employees’ pay to 80% of their normal income.

From 4pm on 27 March 2020, employers receiving the wage subsidy are now required to undertake that they:

  • Will retain the relevant employees in employment; and
  • Will use their best endeavours to top up their relevant employees’ pay to at least 80% of their normal income.

The Government has confirmed that for those employees whose usual pay is less than the subsidy, they can be paid the lesser amount and the difference between that employee’s usual pay and the wage subsidy can be used to subsidise the pay of other affected employees. For example, where an essential worker’s normal hours are less than 20 hours a week, and their ordinary pay is $250, they will receive $250 gross, and the remaining $100 of the subsidy can be used by the employer to apply towards other employee’s pay.

If an employee’s normal income is more than the amount of the wage subsidy, an employer must use their best endeavours to pay the employee 80% of their income, in addition to the full amount of the subsidy. ‘Best endeavours’ is not defined, and the Government acknowledges that if this is not possible the employer can pay less, including simply passing on the subsidy if appropriate.

An employer must not unlawfully compel or require an employee subject to a wage subsidy application to use their leave entitlements the for the period they receive the subsidy in respect of those employees.

An employer can agree with the employee that they will use their annual leave entitlement to ‘top up’ the wage subsidy. Such an agreement should be recorded in writing, and would not be appropriate where the employee is still required to work.

Subject to the wording of his/her employment agreement, an employee usually only qualified for sick leave if they are genuinely unwell, and cannot compel the employer to pay sick leave if the employee does not qualify.

Obligations of good faith
The requirement for employers to act in good faith and be responsive and communicative in the employment relationship, does not change as a result of COVID-19. This includes in dealings with essential workers regarding working arrangements and health and safety, and dealing with remote workers around their arrangements and pay.

For many employers, receipt of the wage subsidy means a ‘hold’ on restructuring. They are entitled to use the 12 weeks to assess the impact on their business and determine what further steps may be necessary as a result of the business disruption. This could ultimately include implementing a restructure and redundancies as a result. Good faith consultation obligations continue to apply and must be followed, albeit that processes may be run quicker than in less pressing circumstances.

Consultation may include:

  • Circulation of the proposed change to all employees likely to be affected, along with a constructive and clear explanation as to why this is sought;
  • Allowing employees reasonable time to respond, comment, take advice if required, and suggest other options; and
  • Genuine consideration by the employer of the employees’ responses before any final decisions are made.

By following a clear process and adhering to good faith obligations, the employer will reduce the likelihood of an employee raising a personal grievance and/or the employee being ultimately successful in a claim.

Restructures
We understand that certain employers have unilaterally implemented changes to employee’s employment conditions without consultation. For example unilaterally reducing employees’ hours or rate of pay. If an employer wishes to do this then it must consult with employees first, and attempt to obtain agreement. If agreement cannot be reached, then advice should be sought regarding potential restructure action.

We anticipate that, in relation to the employers above, there may be personal grievance claims arising from unilateral actions (with affected employees having 90 days to raise a personal grievance in respect of the employer’s actions).

We have also heard indirectly of employers implementing restructures affecting multiple people in the same role, without any selection criteria being applied or consulted on. Again, this creates an avenue to challenge the process and may give rise to personal grievance claims later.

Personal Grievances
The general obligations on an employer, including the overriding duty of good faith continues to apply despite the pandemic circumstances. Disgruntled employees have 90 days from the date of which the alleged action occurred or came to the notice of the employee, whichever is the later.

We therefore encourage employers to remain cautious when making decisions that impact on employee’s employment, be mindful of the implications of the undertaking given for the wage subsidy and seek legal advice where appropriate.

Union Involvement
The New Zealand Council of Trade Unions (NZCTU) has recently announced an online tool created for employees who have been treated unlawfully to register their concerns and/or workplace issues.

The types of issues the NZCTU is expecting to identify includes:

  • dismissals/redundancies;
  • forcing workers to take annual leave and sick leave;
  • treatment of workers in relation to the wage subsidy;
  • changing terms and conditions of employment;
  • the treatment of casual and other precarious working people; and
  • breaches of health and safety laws.

NZCTU intends to identify where systemic breaches may be occurring, and work with Government to put measures in place to prevent these breaches or unlawful treatment of employees.

Summary
To the extent possible we advise care when dealing with employees, and encourage employers to seek advice where needed.

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