Complicated issues that employers faced during the lockdown are beginning to be litigated
by Sarah Townsend, Partner and Hamish Rossie, Law Clerk, at Duncan Cotterill
A number of cases concerning COVID-19 employment issues have begun to move their way through the Employment Relations Authority. Recent determinations have explored redundancies, paying employees at “80%”, the minimum wage and issues surrounding pay during the lockdown.
The following is a summary of these recent developments.
De Wys v Solly’s Freight (1987) Limited
The first case concerning COVID-19 redundancies in the Employment Relations Authority (Authority) has resulted in two former employees receiving a combined pay-out of $58,039.
During the COVID-19 lockdown, the employer (Solly’s) applied both for the WINZ Wage Subsidy and for registration as an essential service. Some of Solly’s’ usual services were deemed essential, and some were not.
In response to these restrictions, Solly’s undertook a restructuring which, amongst other measures, led to the dismissal of a number of permanent employees by way of redundancy.
Solly’s had initially premised the redundancies on the fact that it had not yet received the COVID-19 Wage Subsidy. The Authority found that there had been essentially no consultation with the employees regarding the proposed restructure, and that once Solly’s had decided to make those employees redundant, their names were removed from Solly’s’ Wage Subsidy application.
The Authority criticized the fact that despite signing the Wage Subsidy Declaration (prior to the dismissals) which placed an obligation on Solly’s to make its “best endeavours“ to retain the employees, there was no evidence that Solly’s had taken any steps to keep the staff in employment.
In the case of both redundancies, the Authority found that there was no substantive or procedural justification for the decision. Lost wages and compensation were awarded to each employee, totalling $58,039.
This case emphasizes the importance of employers ensuring that their substantive justification for a redundancy is valid, and that their approach to the restructure is procedurally fair. This can be a complicated and finely balanced exercise and we recommend employers take professional advice.
Lockdown pay and minimum wage: Sandhu v Gate Gourmet New Zealand Ltd
In Sandhu v Gate Gourmet New Zealand, the Authority recently ruled on pay obligations and the minimum wage during the lockdown. The Employment Relations Authority has found that even in cases where employees’ agreement to altered terms of employment was obtained, some employers may fall foul of the law if these altered terms had the effect of denying the employees their minimum entitlements.
The employer (Gate) is a business which provides in-flight catering services on passenger aircraft.
Although Gate was an essential service, the huge business downturn in the aviation sector led to Gate implementing a partial shut-down, as it had little work for its employees. Presented with a number of options, the employees initially agreed to be paid at least 80% of their normal pay, with the option to use their annual leave entitlements to supplement their income up to 100%.
At the time this agreement was made, the employees were all on the minimum wage. Subsequently, on 1 April 2020, the minimum wage increased to $756.00 per week for full time employees. At that point, Gate maintained that it would pay employees who were not working the agreed rate of 80% of their normal pay (including the minimum wage increase), or $604.80 gross per week. This was however below the new minimum wage level. The employees challenged Gate’s actions in the Authority.
The Authority rejected Gate’s arguments of “no work, no pay” and “partial performance, partial remuneration”. It also rejected the argument that the employees were “not ready, willing and able to perform work”, given that Gate was an essential service (albeit operating on a reduced level), and had made the decision to instruct the employees not to come to work.
Whilst the employees had agreed to be paid at 80%, Gate was not able to pay them less than the minimum wage.
The Authority took into account that the employer had acted in good faith at all times and had sought legal advice to confirm its obligations in a “difficult and complex situation”. It declined to impose any penalties against the employer and ordered the repayment of the difference between what the employees were paid and their entitlement to the minimum wage.
Conclusion
As the dust settles on the COVID-19 lockdown, the complicated and challenging issues that employers faced at the time are beginning to be litigated. While the Authority’s approach to these issues has been consistent so far, it seems very likely that there will be an appeal to the Employment Court at some point.