LOCKDOWN – Employee Payment Obligations

As a result of the Government Announcement yesterday, we are suddenly plunged back into a Level 4 Lockdown – Auckland for seven (7) days and the rest of New Zealand for three (3) days – initially at least.

With the Delta Variant having been confirmed with the five (5) people now tested positive, one a vaccinated hospital worker, it is likely to only be a matter of time before further cases are identified resulting in a potential extension to the lockdown restrictions.

The potential of an extended lockdown period therefore raises the questions of what payment obligations employers have to workers who are unable to continue to attend work.

Based on the Case Law that emerged from the Employment Relations Authority as a result of the March/April 2020 countrywide lockdown, we are now in a better position to know what is acceptable and what is not with regards to employee payments.

The key learnings are therefore:

  1. Any agreement to reduce the employees’ weekly rate of pay must be in writing with this being acknowledged as being accepted by the employees on an individual basis, or in the case of Union Membership – by the Union on behalf of its members.
  2. The Government’s previous indication that “an employer should seek best efforts to pay employees at least 80% of their usual weekly earnings” is not an automatic right for an employer to impose this reduction on their employees without their written agreement.
  3. Unless you already have a signed agreement in place with your staff where they have already agreed to a reduction in their regular weekly payments in the event of a lockdown, you are obligated to continue to pay them at the current rates, even where you cannot provide them with work.
  4. This therefore requires you to commence a consultation process with staff around a potential reduction in the weekly rate of pay.
  5. Where a Government Wage Subsidy is available, this must be passed on in full to the employee (as part of their usual weekly earnings) unless the amount of the subsidy is greater than the employee’s ordinary weekly earnings.

The Government have confirmed that a Wage Subsidy Payment will be available for businesses affected by a lockdown of greater than seven (7) days, however, they have raised the threshold for those businesses who must now be able to show evidence that they have sustained a loss of at least 40% of revenue as a result of the lockdown period coming into place.

For those businesses that do qualify for the Wage Subsidy, the rates have been inflation adjusted since 2020 with these now being $600 per week for full-time equivalent employees and $359 per week for part-time staff.

Therefore, in practical terms, for businesses outside of the Auckland region, unless you already have a signed Lockdown Wage Reduction Agreement in place, you will be obligated to pay the employee 100% of their usual earnings for the first three (3) days of the lockdown.

If the lockdown is then extended beyond this initial period, you are entitled to consult with your staff (in writing) regarding a proposal to reduce their ordinary weekly earnings – with an agreement to this reduction being confirmed in writing by the employee.

As many employers will only be able to contact their staff via email or text, the message must contain sufficient information to enable the employee to make an informed decision (and should still advise them of their right to support and representation) with a text or email acceptance or acknowledgement from the employee being deemed to be confirmation of agreement.

If doing this, please ensure that all communications are saved to provide evidence of the employee’s acceptance in case these are needed at a later date.

If you need assistance with drafting the proposed reduction letter or are unsure as to what approach to adopt, please feel free to contact us directly:

russell@russellldrakeconsulting.co.nz or russell.drake@ema.co.nz

(07) 838 0018 or 021 686621

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