New Zealand got off mercifully light with only 25 deaths to date from the Covid-19 pandemic. The massive capacity created by hospitals in anticipation of a deluge of patients, thankfully, was not required. The Employment Relations Authority (‘Authority’), however, has not been let off so lightly.
The backlog of cases (of the legal kind) that could not proceed through Covid-19 response levels 3 and 4 have been swelled by a larger number of personal grievances that have arisen as a result of redundancies and remuneration deductions during Covid-19. Cases are figuratively lying in the corridors, waiting rooms and out beyond the carpark.
As the first determinations start to be published, it is clear that what most employment lawyers were warning employers about, namely, that employment law had not been cancelled due to Covid-19 and breaches would be frowned on before the Authority, is proving true.
For those employers who struggled to understand their obligations while on the Government Wage Subsidy (‘GWS’), the case of Raggett v Eastern Bays Hospice Trust provided some answers on 30 June 2020. Eastern Bays Hospice Trust trading as Dove Trust (‘Dove’) operates six hospice shops in Auckland, all of which had to close during the Level 4 lockdown. On 23 March 2020, Dove applied for the GWS for its employees, and signed the required declaration which stated “You agree you will, using best endeavours, retain the employees named in your application in employment on at least 80 percent of their regular income for the period of the subsidy.”
On 25 March, Dove sent a memorandum to all staff stating that their normal salaries would be paid to the pay period ending 29 March, and that from 30 March to 22 April (the anticipated duration of the lockdown) they would be paid at 80 percent of their salary. The matter was then to be reviewed at that time. Dove did not mention if or when it would pay the shortfall and it is important to note here that staff were merely informed that this was happening, but were not asked for or gave their agreement.
During the period 30 March to 7 April, the employees each received a letter proposing a restructure that would disestablish their jobs, and were invited to give feedback, which they did. Between 7 April and 1 May, the employees each received letters informing them that their positions were being disestablished effective as at the date of the letter. They were informed there would be an extended notice period of eight weeks (rather than their contractual four weeks) and that the first four weeks would be paid at 80 percent and the second four weeks would be paid only at the GWS rate of $585.80 gross per week. The employees were not expected to attend work during this period.
The employees filed an urgent application with the Authority claiming that their employer’s deductions were unlawful pursuant to the Wages Protection Act 1983 (‘WPA’), their individual employment agreements (‘IEA’) and sought penalties against Dove for the breaches.
Dove first tried to argue that they had not breached the WPA or their employees’ IEAs, because due to Covid-19, the employees were not ready, willing and able to work. They also argued that the extended notice period was offered on specific terms, which the employees had agreed to.
The issue the Authority faced was whether, by accepting the GWS, Dove was released from its wage obligations pursuant to the employees’ IEAs and the WPA. The IEAs only contained the standard allowances for deductions such as overpayments, monies owed, unreturned property or insufficient notice period. There was no category in which deductions for Covid-19 or the non-performance of work would fit.
The Authority noted that the law did not allow for employment terms to be unilaterally altered and that where wages become payable pursuant to s 4 of the WPA they must be paid without deductions, unless for a lawful purpose and with written consent pursuant to s 5. The Authority noted that the workers had not provided agreement or consent to the deductions.
Regarding the deductions during the notice period, the Authority noted that although Dove had generously doubled the contractual notice period, that did not allow for them to pay it at a different rate than in the IEA. Dove’s argument that the employees had accepted this variation to the notice period was rejected, as the employees had merely been informed of, not offered or accepted, the changes. Dove could have consulted with employees and obtained their agreement, but did not.
Dove’s other arguments that the WPA didn’t apply because the workers were not working, that the definition of wages in the WPA was for work performed and that the employees were not ready and willing to work were also rejected. Dove was ordered to pay all outstanding amounts, and the issue of penalties was adjourned for a later date.
The take-home tip from this, and other cases that are starting to emerge, is that Covid-19 and the GWS did not relieve employers from their usual obligations under the relevant employment laws, and employers who are currently facing personal grievances over these matters should seek legal advice on what remedies they may need to pay. All employers are urged to update their employment agreements in light of what we now know.
