In a recent decision the Employment Court said “The COVID – 19 pandemic, and response from the Government, upended employment in New Zealand. This meant that employers, employees, unions and other stakeholders in the employment framework, including government departments, were confronted with circumstances that are unique in the history of New Zealand and which required everyone to respond urgently. We acknowledge the pressure that this has placed on all those involved. The short point is, however, that the pandemic and the Government’s response, did not act to suspend employee rights or employer obligations”.
As the Court has acknowledged, during this period decisions were made and actions were taken under extreme pressure and in a context where there was no legal precedent for determining employment rights and obligations. At the time most employers were stressed and fearful for their own financial futures, and some reacted out of panic or perceived necessity.
We are now starting to see determinations coming through the Employment Relations Authority and Employment Court which hold employers to account for actions taken during lockdown. The general theme is that despite the unique circumstances, core requirements such as justifiability and a fair and reasonable process, still apply.
In one case involving Snell’s Beach Café, the employer gave notice to its employees on 19 March 2020 that their employment would be terminated in reliance on the “business interruption” clause in their employment agreements. That clause said that “If the employer’s business is interrupted by unforeseen events beyond its control (for example … pandemic), the employer may be unable to provide work for you to perform”.
The authority found that the circumstances did not justify invoking the business interruption clause. At the time of giving notice, New Zealand was under level 3 restrictions, and gatherings of up to 100 people were still allowed. The employer’s reasons for shutting the café down at that time, including that its clientele were elderly and social distancing was not being complied with, were not sufficiently compelling.
Further there was no consultation with employees, who may have been able to suggest ways to deal with these challenges. The applicants were each awarded 3 months lost wages plus between $5 – 8000 in compensation.
Another lockdown case where employees successfully challenged their dismissal due to redundancy relates to Solly’s Freight Limited. The company runs a trucking and general consultancy business based in Collingwood, and during lockdown was deemed to provide a mix of essential and non-essential services.
The employer applied for the wage subsidy on 25 March on behalf of its employees, including the two applicants in this case. However before receiving advice as to whether or not the subsidy would be paid, it developed a list of workers who it intended to make redundant. The selection criteria applied included work ethic, absenteeism, equipment damage, attitude and family situation.
The two applicants received notice of redundancy on 2 April. During the hearing it was revealed that the employer’s list of those who would be made redundant described one applicant as “mouthy and tries to dispatch himself. Hard work at times” and the other as “not particularly reliable”.
The authority found that the lack of consultation and selection criteria were unfair. It also held that the company should not have made the applicants redundant before hearing whether the government subsidy would be payable, particularly given that in applying for the subsidy it had declared that it would make best endeavours to retain the employees.
The other big legal issue that was hotly debated during lockdown was what an employer was required to pay employees in circumstances where the business shut down and no work was available. In a case brought against Eastern Bay Hospice Trust the authority has concluded that the employees were ready and willing to work, and it was only because of the COVID – 19 restrictions and the employer’s decision not to require them to attend work, that they were unable to do so.
The authority found that the employer was not entitled to unilaterally reduce employees’ pay to 80% and was required to pay them their full contractual rate.
In another case the Employment Court found that the employer was not required to pay workers the minimum wage under the Minimum Wage Act when they were not working. However, this case was based only on the definition of “work” under that Act, and therefore of limited application.
Both of these “pay” related cases are being appealed, so we do not have a definitive answer yet on the issue of what employees were entitled to be paid during lockdown. This will be further clarified as more cases are heard over the next months.
However what is becoming clear is that employers who acted unilaterally and without engaging and seeking agreement from employees may now pay the price.