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COVID-19 Employment law update

6 April 2020

With New Zealand currently at COVID-19 Alert Level 4 everyone must now stay home, except those providing essential services. This produces a huge amount of economic uncertainty for businesses, particularly given the ‘lockdown’ may extend past the initial 4 week period.

This is an unprecedented situation that continues to change quickly.  Harris Tate recognises that it raises a huge number of questions and concerns for people - particularly in the employment space. 

In some cases, businesses will be able to require their employees to still undertake the majority of their usual duties by working from home.

However, there will be circumstances where the restrictions under Alert Level 4 have disrupted businesses in such a material fashion that an employer may be unable to determine with any real certainty how they will be able to resume usual operation.  Whether this would amount to a sufficient justification for the ending of an employee’s employment contract largely depends on the specific circumstances of each agreement, and the practical requirements of the job.

This is why the Government has introduced the Wage Subsidy Scheme -  to support employers to keep their workers employed wherever possible. The wage subsidy will assist in relieving the financial burden on the employer and hopefully support employment arrangements to stay in place (even if the employee is unable to work temporarily). 

The current wage subsidy scheme is encouraging employers to endeavour to at least pay their employees 80% of their normal wage. If that is not possible, the government is currently saying an employer may simply pass the subsidy through to the employee to maintain the employment relationship.  If an employee’s normal wage is less than the subsidy, the employer must pay them their normal wage, and any difference can be used for the wages of other affected employees.  The government has made several modifications to the wage subsidy scheme since it was released, so employers will need to look at how the scheme applies to their situation.

Generally, if an employment agreement sets out the employee's hours of work, then an employer can’t change them without the employee's agreement. If the employment agreement states that an employer can change the hours of work, the employer still has to act fairly and reasonably before they do so.  Employers and employees must discuss in good faith the implications of COVID-19 on their working arrangements, before any changes to working arrangements are made by an employer.

Where changes to current working arrangements are proposed by an employer, there are specific good faith requirements that must be followed.  Employers and employees may be considering changes that involve workplaces closing temporarily or reductions in hours. These changes need to be made in good faith, and require a reasonable process to be followed, otherwise the employer may have grounds for a personal grievance.  Getting this right is very important.

All businesses, including those using the Wage Subsidy Scheme, must follow legal requirements when making decisions about leave. An employer cannot unlawfully require or compel the employees named in their application to use their leave entitlements.

Employers and employees may agree to annual leave for during temporary closures of a workplace due to COVID-19 such as during a Level 4 lockdown. If an employer and employee cannot agree, an employer may direct annual leave be taken if they have first discussed this with the employee and complied with certain provisions of the Holidays Act 2003 and the Employment Relations Act 2000.

Unfortunately in many cases, the financial burden on the business may be too much and despite the financial assistance from the government, to survive economically a business may as a last resort need to look at terminating an employee’s contract. This requires careful consideration and a robust process undertaken on behalf the employer. Where there are other possible options to maintain the employee that could be considered, an employer may not be able to terminate the employment for frustration of the contract or redundancy.  

Harris Tate is able to assist with any employment advice required in relation to changes to your workplace or restructure as a result of the COVID-19 lockdown.

Please contact Oliver Moorcroft (Director) on 07 571 3663, or email oliver@harristate.co.nz