EMPLOYMENT RELATIONSHIPS

Covid-19 has generated a lot of change in a short space of time, but as Duncan Cotterill explains, employers and employees are still bound by their pre-Covid legal obligations

Earlier this year, when New Zealand entered a nationwide lockdown, businesses grappled with urgent and challenging employment decisions. Employment issues triggered by that lockdown are now being decided by the Employment Relations Authority (Authority) and it is likely that further appeals will be made to the Employment Court. These cases serve as a reminder of continuing employment obligations and what to be mindful of in your own employment dealings.

YOUR OBLIGATIONS REMAIN THE SAME

Although both employers and employees faced, and continue to face, increased pressure due to Covid-19, overarching employment obligations have not changed. Both parties bear the same legal obligations as before the pandemic. The Authority has confirmed that the lockdown and the continuing challenges of Covid-19 has not created a “free pass” for employees or employers, who fall short of their responsibilities.

Every employment relationship is governed by the principle of good faith. This requires employers and employees to be active and constructive in maintaining the employment relationship by being responsive and communicative with each other. Neither party should seek to mislead or deceive the other. The employer must also provide the employee with sufficient information, and the ability to comment on that information, before the employer makes a decision that may adversely impact the continuation of the employee’s employment.

MINIMUM RESPONSIBILITIES AND RIGHTS

Under New Zealand employment law, employers and employees both have rights and responsibilities.

Employer responsibilities include:

• Paying employees in accordance with their employment contract (and at least minimum wage).
• Not deducting money from wages unlawfully.
• Giving employees at least four weeks’ paid annual holiday.
• Giving employees the day off on public holidays, or giving them an alternative holiday if they work (and if an employee works on a public holiday, paying them at least time and a half).
• Giving employees at least five days’ sick leave annually.
• Providing a safe workplace.
• Providing rest and meal breaks.
• Acting in good faith and honesty.

Employee responsibilities include:

• Being at work and being willing to work at the agreed time(s).
• Following all reasonable and lawful requests.
• Exercising reasonable care, skill and knowledge.
• Exercising reasonable behaviour.
• Keeping yourself and others safe when you are at work.
• Acting in good faith and honesty.

RECENT CASE LAW

Sandhu v Gate Gourmet New Zealand Ltd is a recent case that dealt with pay obligations and the minimum wage during the first Covid-19 lockdown. Gate Gourmet New Zealand Limited (Gate), the employer, was an essential service. Gate had acted in good faith and obtained the employees’ agreement to receiving 80% of their normal pay, with the option to use leave to supplement their income back to 100%, during lockdown.

At the time the agreement was made, all of their employees were on the minimum wage.  On 1 April 2020, the minimum wage increased to $756/week for full-time employees. While Gate increased their employees’ normal pay by the minimum wage increase, because of the agreement to only receive 80% of their normal pay, the employees were only receiving $604.80/week.

The Authority did not accept “no work, no pay” arguments and found that Gate could not pay what would amount to less than the legal minimum wage for full-time workers. It also rejected arguments that the employees were not able to work or should only receive partial remuneration for partial performance, as Gate had instructed the employees not to come to work.

In summary, even though the employees had agreed to be paid at 80%, Gate was not legally able to pay them less than the minimum wage. The Authority ordered Gate to repay the difference between what the employees had been paid and the minimum wage.

REDUNDANCY AND RESTRUCTURING

The significant impact of Covid-19 on New Zealand businesses has meant that many employers have had to consider restructuring and redundancies. In all circumstances, any termination on the grounds of redundancy must be justified substantively and be procedurally fair.

Employers should consider whether their actions are what a fair and reasonable employer could have done in the circumstances at the time. Covid-19 provides no excuse to avoid these responsibilities or make a hasty decision.

A genuine reason may be:

• A significant downturn in sales or revenue.
• A loss of customers or suppliers.
• A shift in market requirements.
• These reasons should be well-documented and have evidence to support them.

A fair process includes:

• Acting in good faith.
• Complying with the terms of employment agreements
  and policies.
• Being open, communicative and constructive.
• Documenting the employer’s business case, reasons and proposals.
• Providing all relevant information to employees.
• Giving employees a reasonable opportunity to consider and respond to any proposals.
• Considering alternatives such as varying the terms of their employment.
• Genuinely taking the employees’ responses into account before coming to a decision.

RECENT CASE LAW

De Wys v Solly’s Freight (1987) Limited serves as a reminder to employers of the importance that there is a substantive justification for a redundancy, as well as a fair process, even during Covid-19.

The employer, Solly’s Freight (1987) Limited (Solly’s) applied for the Government Wage Subsidy (GWS) and for registration as an essential service during the first lockdown. However, only some of Solly’s usual services were deemed essential. In response to its reduced operations, the company initiated a restructuring process, which, among other measures, led to the dismissal of a number of permanent employees by way of redundancy.

The Authority found that there had been no consultation with employees and that there was no evidence Solly’s had taken any action to retain staff, despite signing the GWS Declaration, which required employers to make their “best endeavours” to keep staff in employment. In response, the Authority awarded two former employees a combined pay-out of $58,039 for lost wages and compensation for their unjustified redundancies.

NEED MORE INFORMATION?

If you have questions or would like to discuss any of the points raised in this article, please contact Alysha Hinton on (04) 471 9452 or at alysha.hinton@duncancotterill.com, or your local Duncan Cotterill advisor (duncancotterill.com).

 

Duncan Cotterill is a full-service law firm with offices in Auckland, Wellington, Nelson and Christchurch. Its dedicated construction and projects team can help make your business a success by working with you to put the deal together.

Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.