Are employees entitled to be paid during lockdown if they cannot work from home? Despite this being a pretty fundamental issue for the many thousands of New Zealanders whose workplaces are closed, there remains a surprising lack of clarity.
The MBIE website does not provide any clear guidance and conflicting and/or caveated advice appears on the websites of many leading employment law firms.
This was understandable during the first lockdown as the situation was genuinely unprecedented. There had never before been a case in which employees were practically prevented from attending work, and employers were stopped from conducting their businesses, by order of the New Zealand Government. Who then should wear the cost of this?
Unfortunately the situation was further complicated by reason that the government wage subsidy was stated to be conditional upon employers using their best endeavours to pay employees at least 80% of their usual pay. Many employers took this to mean that they only had to pay their employees 80% inclusive of the wage subsidy, and could effectively unilaterally reduce their employees’ pay.
In the period since the first lockdown there have been two Employment Relations Authority decisions which provide some answers. The first was Raggett and Others v Eastern Bays Hospice Trust. In that case the authority was required to resolve whether, in accepting the government wage subsidy, the employer was released from its obligation to pay its employees pursuant to the terms of their employment agreements and/or under the Wages Protection Act, when they were unable to work due to the lockdown.
The authority found that there was no agreement between the parties to pay employees less than their full contractual wages, and nor was there any clause allowing the employer to suspend payment in the circumstances created by the lockdown. Authority member Marjia Urlich held that the employees were at all times ready and willing to work, but for the intervening event of the COVID -19 restrictions. Accordingly the employer was held to be in breach of its obligations and liable for back pay.
A similar approach was taken in Bates v Major Motors where the employee was a Sales Manager earning a combination of salary plus commission. During the lockdown Major Motors paid Bates only the wage subsidy. The authority found that the employer was required to pay Bates his full salary for his contractual hours of work. However it held that he was not entitled to payment of commission on an “averaged” basis, as he had not sold any cars during the relevant period.
Given that these two authority determinations are quite clear as to an employer’s obligations, the question is why is there still a perceived lack of clarity on this issue. The reason is that there has been just one case heard by the Employment Court, and it did not directly address the issue. The case involving Gate Gourmet New Zealand Limited was focussed more specifically on the application of the Wages Protection Act and whether the obligation to pay the minimum wage applied when employees were unable to work.
The Court found that the Wages Protection Act did not apply in this instance and this has been interpreted by some as throwing into question the authority decisions referred to above. However the only comments in that case that were directly relevant to the overriding issue actually supported the approach that the authority had taken. In this regard, in a dissenting judgement, Chief Judge Christina Inglis said that “the reason why they could not work the 40 hours had nothing to do with their default, illness or accident, and so no deduction could be made from the minimum wage they would otherwise be entitled to receive.”
Interestingly, the Employment Court expressed surprise that this was the first case that had come before it relating to employment rights and obligations arising during the pandemic. The case was heard in October 2020.
Whilst it is true that the Employment Court has not provided a definitive answer to this question, there appear to be enough indications from both the authority and court that normal employment laws continue to apply. In general an employer is required to pay employees pursuant to the terms of their employment agreement, unless they agree to an alternative arrangement. It would be a reckless employer to assume that the rules are somehow different in a lockdown.