Crediting James Warren, Dentons Kensington Swan, ph 09 375 1199
Announcement this evening: Level 3 restrictions continue
Auckland will now remain in level 3 lockdown at least until Wednesday, 26 August 2020. Unlike in level 4, many businesses beyond those which provide “essential services” can continue to operate. However, this is subject to them meeting a range of strict legal requirements, which for most businesses include:
physical distancing (keeping workers 1 metre away from other workers, so far as reasonably practicable);
contract tracing (including ensuring the QR code is displayed in a prominent place at or near the main entrances to the workplace); and
prohibition of customer entry to the premises – other than to collect goods through a method that minimises physical contact and does not involve entering a building.
Should employees be paid?
Where employees can work at home or attend work during level 3 they will be paid in the normal way. However, businesses which are closed during level 3 must determine whether to pay staff who are not able to work. In general, when employees can work but employers choose not to let them do so, then they will be entitled to pay. The position is more complex when work stops because of the impact of the level 3 restrictions.
Businesses which close
Businesses which are unable to open because of the physical distancing, tracing and contactless service requirements can legitimately assert that the level 3 legal restrictions prevent employees from attending work, and they are therefore not entitled to be paid (because staff are not ‘ready, willing and able’ to work – they are obliged to remain at home). However, where it is technically possible for businesses to make the necessary adjustments to operate under level 3, that position may be more open to challenge. Perhaps especially if a business chooses not to take the necessary steps to open because it considers it would be financially better off staying closed. Even then, while that approach might be attacked, we consider there is a reasonable argument that there is no requirement to pay staff as the level 3 restrictions directly prevent them attending work.
There have been some recent decisions which suggest the Employment Relations Authority will take the view that in these circumstances employees should be paid, but the Employment Court has not yet examined the law in this area. Although there may be a risk of legal claims, the starting point for many employers is not to pay staff when they are not working as it may be better to have an argument later about whether that was the right approach, rather than to incur significant costs during a time of economic strain and without any prospect of reclaiming them. As we have said, there is a reasonable argument that there is no requirement to pay and this has not yet been tested by our higher courts.
Annual Leave, pay reduction and other measures
It remains open to employers to agree with employees that they can take paid annual leave during Level 3, but it is unlikely that employers can force holidays upon staff when in most situations they cannot leave their homes. As we saw during the earlier lockdown, it may also be possible for businesses to agree changed hours, pay or other cost saving measures with employees, so long as they follow a fair consultation process before obtaining such agreement and ensure employees have the opportunity to take advice on any proposal.
If the new restrictions are the final straw for some businesses, then there may now be a need to restructure. Other businesses may have already commenced a redundancy process and be wondering how to manage it during level 3. Generally, a redundancy process can be undertaken even if meetings must be physically distanced with masks, held using Zoom or other video technologies, or even over the phone. However, special care must be taken, with an eye out for any relevant new Government initiatives or measures which may be relevant to restructuring decisions.
The Government has tonight tentatively indicated that the wage subsidy scheme will likely be extended to cover the new lockdown.
Employers who received the extended wage subsidy or will receive the new subsidy (which will likely have similar restrictions) should not forget that during the subsidy period they must use best endeavours to pay employees 80% of their normal wages or salary. That applies whether or not employees are able to work, and generally no one should have their employment terminated before the subsidy period expires.
Minimum wage issues with the wage subsidy?
There is a recent case from the Authority around how the minimum wage applies to the subsidy (which we understand is being appealed), so if you are proposing to only pass on the subsidy to your full-time employees, or if paying at 80% brings your employees below the minimum wage, then we suggest you take further advice on this point.
For more information contact Michael Barnett, mobile: 0275 631 150.
Michael Barnett, Chief Executive, Auckland Business Chamber.