By Hannah Ko

New Zealand has implemented one of the most severe COVID-19 responses in the world. Efforts at “stamping out” the pathogen have been promising. However, the lockdown imposed a sudden and complete chokehold on all sectors of the economy. Certain sectors—such as tourism, hospitality, and sports education—will be more impacted by this crisis than others. The Treasury estimates that unemployment rates could be as high as 26% by June 2021. It is already clear that the COVID-19 era will involve a serious reconsideration of staffing rosters. NZME cut 200 of its staff within the first three weeks of lockdown; on the same day, 2Degrees revealed that it would be reducing its staff of 1200 by 10%. It is clear that, now more than ever, workers need to know their rights under employment law.

Redundancy

Employers can make their employees redundant if they have a “genuine reason” for doing so. Business restructuring during the COVID-19 crisis will likely count as a “genuine reason”.

However, employers must also act in good faith. This involves discussing any changes to working arrangements with employees, and provide the rationale behind these decisions. If an employer does make an employee redundant, they must provide:

• A notice period as per the employment agreement

• An end date

• An offer for a meeting. The employee can bring a support person or a representative to this meeting.

• Compensation, but only if it is included in the employment agreement. There is no legal requirement in New Zealand for businesses to provide compensation after redundancy.

Financial Minister Grant Robertson said on 27th March that wage subsidy schemes had been introduced “to ensure that businesses… do not need to lay off staff.” He emphasised that businesses should aspire to keep employees in employment. Despite this, we have seen an increase in worker precariousness. SkyCity recently made hundreds of employees redundant rather than applying for the wage subsidy.

Reduced Hours/Pay

Employers such as SkyCity, the Warehouse and Restaurant Brands (the owner of KFC, Pizza Hut, Taco Bell, and Carl’s Jr) have been accused of pressuring their employees to choose between reduced pay or unemployment. Restaurant Brands has asked staff to accept an indefinite reduction in their hours, and to be available at two hours’ notice for a shift. Staff had until 12pm to accept these terms, or the company would otherwise “assume that [they] are not able to and/or do not want to work [their] shifts when stores reopen.” Restaurant Brands has been hiring takeout delivery drivers as independent contractors rather than employees. This means that the company does not have to pay workers minimum wage, sick pay, or provide other employee protections.

Unfortunately, these “bullying and intimidation tactics” may be legal employer-employee interactions. According to common law doctrine, employees must be “willing, ready, and able” to work in order to be paid. If the employee is working—either from home or on-site—their hours of work should be paid according to their contracted rate. Employers cannot change the pay or hours of work in an employment contract without the employee’s consent. Suspending pay without the employee’s consent is a breach of the Wages Protection Act 1983. Employers must thus give employees a fair opportunity to consider any proposed changes.

An exception to the above may arise if the employment contract contains a “force majeure” clause. A force majeure is an event that is beyond human control. If a party breaches their obligations under a contract because of a force majeure event, the usual rights of the injured party would not arise. Assuming successful invocation of the clause, there would be no consequences for breaching the contract. Could COVID-19 be a force majeure event? This will depend on the exact phrasing of the force majeure clause and the facts of the relevant situation. DLA Piper notes that the phrases below will likely cover COVID-19:

• “Epidemic” or “pandemic”

• “Acts of government”, “acts of god”, “acts of nature”, and “civil emergency”

• Events that are “beyond a party’s reasonable control”

If an employee is not “wiling, ready, and able” to work because of state-enforced lockdown procedures, the employer is not legally obliged to pay the employee. Susan Hornsby-Geluk of Dundas Street Employment Lawyers notes that in this situation, paying the employee “potentially becomes a state responsibility, not an employer one.” It is not unreasonable under the law to advise employees to accept reduced pay rates or otherwise consider redundancy.

Employers may be prosecuted when the employee is induced to enter into the agreement by “oppressive means, undue influence, or duress.” However, the legal threshold to incite worker’s protections are high. Sawyer v Vice Chancellor of Victoria University of Wellington distinguished between an individual who is “under pressure” and one who is “under duress.” Duress requires objective proof that a party coerced the other to enter into the contract. Hornsby-Geluk notes that as most employees who are negotiating settlement with employer are under pressure of sorts, agreements are not generally invalidated on this basis.

Working in Unsafe Conditions

The Health and Safety at Work Act (HSWA) 2016 obliges employers to consider the safety of their employees. Sick employees should not be obliged to go to the workplace. Buddle Findlay notes that as sick employees are not “willing, free, and able” to work, employers are not required to pay them. However, when employees are ill, the Ministry of Business, Innovation, and Employment recommends that employers and employees discuss options such as paid sick leave and paid special leave. The Holidays Act 2003 entitles paid sick leave to employees who are either sick themselves, or need to care for a sick spouse or dependent. Employers can require proof of illness from employees who have taken sick leave for three or more consecutive days.

Are employees obliged to work in conditions they believe to be unsafe? Under the HSWA, employees technically have the right to refuse to work if they have reasonable grounds to believe that working conditions will cause them serious harm. However, the employee must discuss alternative solutions with employers (e.g. working from home). Buddle Findlay also suggests that if the employee refuses to work under these grounds, the employer has no obligation to pay them.

Conclusion

The government recognised the economic impact of the lockdown with the wage subsidy scheme. Unfortunately, the financial crunch of COVID-19 has also exposed weaknesses in workers’ protections. Even in the scant handful of months after the imposition of the lockdown, numerous accounts of unfair employer-employee accounts have arisen. It is difficult for employees to legally hold their employers to a consistent, clear and fair doctrine of treatment. Workers can only gain the protections of employment law in the most extreme of situations. Even when they possess rights—such as the right to refuse to work in unsafe situations—employers can legally refuse to pay them, which undermines the practicality of such a right.

Although the wage subsidy scheme is a welcome attempt to reduce the impact of COVID-19 on workers, it is hampered by its heavy reliance on passive recommendations that have no legal force. To truly substantiate workers’ protections, the government needs to introduce more secure and absolute guidelines. The pandemic may pass, but it will shape the social, cultural, and economic spheres of New Zealand for years to come. As employees, it is critical for us to understand employment law—both to ascertain our rights, but also to understand the limits of the law’s protection.

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Featured image source: Photo by Priscilla Du Preez on Unsplash