Over the past few weeks there have been a number of significant developments affecting employers, including introduction of new privacy and employment legislation, and the first (of likely many) cases dealing with employers reducing wages to 80% without consent during lockdown. Information about these are set out below.
New privacy legislation
New privacy legislation was passed by Parliament in late June. There are a number of new obligations on businesses, including:
- A legal obligation to notify both the Office of the Privacy Commissioner, and affected individuals, of any breach of privacy if that breach poses a risk of serious harm. Penalties can be awarded for a failure to notify;
- The Privacy Commissioner will now have the power to demand release of personal information (before it could only make recommendations);
- The Privacy Commissioner will be able to issue compliance notices: failure to comply may result in fines of up to $10,000. New criminal offences are also introduced;
- The new legislation governs cross-border disclosures, with controls on disclosing New Zealanders’ personal information overseas; and
- Application of the new law to businesses dealing with New Zealanders’ personal information, whether they have a legal or physical presence in New Zealand or not.
This new law comes into force on 1 December 2020. Please let us know if you require any advice on this.
Triangular Employment Relationships
A new law came into force on 27 June 2020 allowing employees to raise a personal grievance against not only their employer, but also any “controlling third party” who has control or direction over the employee’s work. Employers can also apply to add a “controlling third party” to personal grievance claims brought by their employees.
A triangular employment relationship is where a worker is employed by one employer, but works under the control or direction of another. Secondment arrangements may be impacted, as well as organisations who engage temporary workers/contractors from labour hire or personnel/recruitment companies (as well as the labour hire or personnel/recruitment company itself).
The criteria for adding a controlling third party to a grievance claim include that there is an arguable case the third party’s actions caused or contributed to the grievance, and notification timeframes were complied with. Different 90-day timeframes apply for notification to the controlling third party by either the employer or employee:
- By the employee: 90-days beginning with the date on which the action alleged to amount to a personal grievance occurred or came to the notice of the employee (the standard timeframe);
- By the employer: within 90-days of the personal grievance being raised with the employer (this is new).
This means that a “controlling third party”, previously shielded by contractual arrangements being between the worker and labour hire agency (or other employer), now has legal exposure to any grievances that an employee may raise. Assuming the employee is successful on their claims, and that the actions of the controlling third party caused or contributed to the grievance, the controlling third party may be ordered to pay reimbursement of wages and/or compensation. The extent to which the actions of both the employer and the third party contributed to the situation must be taken into account in determining what remedies are payable by each.
That means that where the controlling third party no longer has work for the person to do, it might not be as simple as notifying the original employer/labour hire company. As usual, the best defence for any personal grievance is by acting justifiably, including by being as fair and reasonable as possible in the circumstances. This could involve the third-party consulting with employees hired on contract if a situation that will affect them arises.
If you are a labour hire or recruitment company, your legal position is not necessarily altered, but we suggest that it is best practice for you to keep communication lines open with your employees and clients, addressing any problems before they arise. If a personal grievance is raised, you and your client might both need to respond to the employee.
Recent Employment Relations Authority determinations consider whether an employer’s decision to pay staff 80% of their wages during lockdown, without the consent of those employees, constituted an unlawful deduction under the Wages Protection Act 1983 and/or their employment agreements. The result in both cases was the same: reduction of wages to 80% of usual salary or wages, without the consent of employees, was unlawful.
In one case, Sandhu and others v Gate Gourmet New Zealand Limited  NZERA 259, reduction of wages to 80% resulted in employees being paid less than their minimum wage entitlements, which was unlawful under the Minimum Wage Act 1983. The employer argued that no money was owing as the employees were not working. The Authority disagreed.
Gate Gourmet provides inflight catering services at Auckland airport. Although it is considered an essential service, there was very little work to do and it had to partially shut down operations. Employees were entitled under their employment agreement to be paid minimum wage for full time employment (minimum 40 hours a week). Employees were offered three options: (a) take all of their entitled annual leave, (b) be paid 80% of their normal pay, or (c) be paid 80% of their normal pay and use their annual leave entitlements to supplement their income to receive 100% of their normal pay. Although there was initially some agreement, the union later objected on the basis Gate was not entitled to reduce the pay of any employee below the minimum wage of $756 per week for a full-time employee.
The Authority found that the parties cannot contract out of the Minimum Wage Act 1983, so the agreement or otherwise of the parties to the proposal was irrelevant. If the employees were ready, willing and able to carry out their function in an essential industry, then Gate was required to pay at least the minimum wage regardless of any agreement they may have made to the contrary. The employees were entitled to be reimbursed the shortfall in wages. No penalty was awarded however because of the difficult and complex situation the parties found themselves in as a result of the pandemic.
In the second case (Raggett and others v Eastern Bay Hospice Trust t/a Dove Hospice  NZERA 266), after Dove Hospice’s retail stores were closed, employees were paid 80% of their wages and then made redundant. The employer extended the notice period to provide employees with additional financial support during lockdown, with the first half of the notice period to be paid at 80%, and the second half at the wage subsidy rate. This was also considered to be unlawful:
- None of the grounds for deducting money from wages set out in the employment agreement covered the circumstances caused by Covid-19 restrictions;
- The workers were ready and willing to work. They would have been able to fulfil their obligations under their employment agreements had it not been for the Covid-19 restrictions and Dove Hospice’s decision to not require them to work;
- There was a contractual obligation to pay, and no consent to deduct from, full wages;
- Where Dove Hospice extended the contractual notice period, it could not then set a different remuneration rate for that. The extended notice period at a new rate would have been allowed had employees agreed to that – here it was imposed on them.
The Authority ordered Dove Hospice to pay the shortfall in wages. The question of whether a penalty should be ordered has been left open, until the second part of the claim dealing with the dismissal on grounds of redundancy has been heard.
These are early cases and the approach taken by the Authority cannot be taken as the last word on the subject.
The Employment Court also dealt with an application from a former employee to freeze the assets of the employer on an interim basis, which was granted. The employee’s claim includes that she was only paid the wage subsidy during lockdown, instead of her usual wages, and was eventually dismissed. The Court has not yet considered this claim, or issued a decision on reduction of wages during lockdown – watch this space.
In the meantime, several recent cases have dealt with the more general issue of remote participation in the Covid-19 environment. The Employment Court has shown a willingness to progress matters by allowing the hearing of evidence by audio-visual link. The Court has also granted applications to serve documents on defendants living outside of New Zealand. It is assumed there will be no opportunity to attend a hearing from overseas (at least in the near future) and so those cases are likely to proceed by AVL also.
Wage Subsidy Extension
In other Covid-19 related news, the Wage Subsidy scheme has ended. The Wage Subsidy Extension scheme is currently available. Applications are open from 10 June to 1 September 2020. Employers can apply to cover the wages of their employees for an 8-week period.
There have been some changes to the criteria for accessing this support. To qualify, employers must have experienced at least 40% decline in revenue for a continuous 30-day period, as compared to the closest period in 2019. The relevant 30-day period must be in the 40 days before an employer applies for the Wage Subsidy Extension. The decline must be Covid-19 related. The business must also have taken active steps to mitigate their loss.
The employees named in the application for the Wage Subsidy Extension must be retained for the duration of the subsidy extension. If an employee has been made redundant, a Wage Subsidy Extension application cannot be made for that employee, unless the redundancy notice is cancelled and the employee is re-hired.
Employers must try their hardest to pay employees at least 80% of their usual wages. There is no criterion about what ‘trying their hardest’ looks like. If that is not possible, then at least the wage subsidy extension rate must be paid. Consent issues will arise.
The Government has confirmed there will be no further wage subsidy support available after 1 September, though other support remains available, including income relief for people who have lost their jobs as a result of Covid-19 and small business loans.
For advice from our employment law specialists, either call us on 04 801 5427, or contact us via email:
Paul McBride (Partner) – email@example.com
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Emma Rose Luxton (Solicitor) – email@example.com
Disclaimer – this newsletter is necessarily brief and general in nature. You should therefore seek professional legal advice before taking any action in relation to any matter addressed above. © McBride Davenport James