The one-eyed king in the land of the wage subsidy

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Firstly, I would just like to say congratulations to New Zealand on your stunning performance during the lockdown. Other than the occasional inevitable rogue breaching the rules, all in all, we rocked it and the statistics are now reflecting that.

During the lockdown, and although not classified as “essential workers”, employment lawyers were busier than ever dealing with employers’ questions, particularly in relation to the Government’s hastily drafted wage subsidy scheme, and a deluge of unjustified dismissals, where some employers misguidedly believed that employment law had perished during the pandemic—it had not.

Regarding the wage subsidy scheme, employment lawyers may have unwittingly become the one-eyed king in the land of the blind.

Employment laws in New Zealand are governed by legislation/statute created by Parliament. Where ambiguity exists in any piece of employment legislation, or where a statute is silent on a point of law, the matter goes before the Employment Relations Authority and/or the Employment Court. The resulting determinations and decisions form the case law which sets out the principles employment lawyers use to advise their clients.

Due to the rapid implementation of Covid-19 Response Levels 3 and 4 over a 48 hour period, there was no time to draft legislation on the wage subsidy scheme, and there will be no case law until the various personal grievance cases start making their way through the Authority/Court over the coming months, and possibly even years. In other words, during lockdown, employment lawyers essentially only had the same information from the Government’s website as everyone else.

On 24 April, I, along with 2500 other employment lawyers and HR practitioners attended a webinar on employment law issues during Covid-19. There would have been as many questions as attendees, which reflects just how many issues have arisen during lockdown, and given there was no legislative guidance.

This is not a criticism of the Government’s actions—done in haste solely to ensure that as many people remained employed during lockdown as possible, and that the wage subsidy got to where it was needed as quickly as possible, with minimal red tape.

However, the devil is in the detail, and the detail in this instance is as sparse as the supermarket’s hand sanitiser shelf.

One important point that employers need to factor into any decisions is that employment agreements (whether individual or collective) are still in force. They are what I often refer to as “workplace wedding vows” and clearly set out how the parties have agreed the relationship will work. Mandatory inclusions in these agreements are the “5 Ws”; Who (the parties), where (location of work), when (hours), what (duties to be performed) and wages. These factors have unquestionably all come under pressure during the Covid-19 response.

While terms of employment and workplace policies that are not contained in an employment agreement, can be changed following genuine consultation (which does not necessarily require agreement), the terms and conditions in an employment agreement can only be changed by written mutual agreement. Where the latter cannot be reached, then an employer may need to consider whether a restructure proposal needs to be considered, if they are really left in a position that they cannot continue to meet their obligations in an employment agreement.

Below are some of the more commonly asked questions that arose during lockdown and were discussed during the webinar, followed by the best answers employment lawyers can come up with at the current time.

Can an employer force an employee to take annual leave during the Covid-19 response? Section 18(3) of the Holidays Act 2003 requires employers and employees to agree as to when annual leave is to be taken, however, s 19 allows that where agreement cannot be reached, an employer can require an employee to take annual leave but the employee must be given 14 days’ notice that the leave must be taken. Employers may allow an employee to take annual leave before it has been accrued (in advance) but cannot compel an employee to take annual leave in advance of accrual. Where employers allow annual leave to be taken in advance, have employees sign an authority form stating that the employee agrees that any leave taken in advance must be paid back from a final pay, if the employment terminates prior to the leave accruing.

What if my employee already had annual leave approved prior to Covid-19, but now wants to cancel because they cannot travel? Once applied for and approved, the employer does not have to agree to the cancellation of annual leave. They may agree to cancel approved leave, but it is at the employer’s discretion.

Can an employer apply for the wage subsidy, then dismiss the employee the wage subsidy relates to and keep the money? In short, the answer is no. Employers who receive the wage subsidy are required to make a declaration that they will keep the employee employed for at least the 12-week period of the subsidy and must notify Winz of any changes to employment. If, for some reason, the employer cannot retain the employee, or if the employee was working out their notice period prior to lockdown, then the unused money should be returned. While it may look like a Winz lolly scramble when applying, the lack of documentation/red tape which would usually be required was significantly reduced to ensure the money went where it needed to, fast. The Government has employed a dedicated audit team to do nothing but retrospectively audit these applications. If you do not get dobbed in by a disgruntled ex-employee (employees can check with Winz whether an application was made for them) then it will no doubt be when, not if, you will get caught in the audit net. Do the right thing and voluntarily return the money before being asked. The Government has clearly indicated that civil and criminal prosecutions may be taken against cheats, so if you do have money that you probably should not have received, give it back now.

Can an employer unilaterally reduce an employee’s wages down to 80 percent or even down to the wage subsidy only? No. Again, first try to reach agreement with an employee so that any changes to hours or wages can be by mutual agreement and in writing. If it is genuine, you need to let the employee know that if agreement cannot be reached, then a restructure process may need to commence which may result in redundancy. Employers need to also consider that when reducing wages by a certain percent, then work hours (from home) should also be reduced by that percent. Paying the subsidy only for an employee working a 40-hour week, will result in breaching the minimum wage, currently $18.90 per hour.

At the end of the day, and in times of such uncertainty, employers should first attempt to obtain agreement on any changes to an employee’s employment and need to consult with employees before making any decisions such as implementing a restructure and making redundancies.

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About Author

Erin Burke

Employment Lawyer and Director at Practica Legal Email: erin@practicalegal.co.nz phone: 027 459 3375