NEWSLETTER
#2 – EMPLOYMENT IN the COVID-19 ERA
Changes to
COVID-19 Subsidies – What you need to know
The
Government’s COVID-19 response has evolved since our last newsletter on this
topic dated 18 March 2020. We’ve put together some FAQs to guide you through
the changing landscape. This is correct
as at time of issue, however in a fast moving environment, with regular
changes, the position on each point should be checked:
Can we
dismiss an employee for misconduct during the subsidy period?
There are no
apparent changes to established employment law regarding dismissal (including
dismissal for misconduct/serious misconduct). That means a dismissal must still
be justified as a course of action open to a fair and reasonable employer in
all of the circumstances at the time, including the process followed in making
the dismissal. One applicable ‘circumstance will be the current lockdown. Another consideration might be practical
inability to recruit/replace. ‘We also note
the possibility that the Government may reclaim a portion of any wage subsidy
paid out relating to a dismissed employee.
What
do we do with subsidy funds if the employee employment is terminated within the
12 weeks?
WINZ has
emphasised that, where wage subsidy applications have been made after
4pm on 27 March 2020, employers will be in breach of their obligations under
the subsidy if they do not retain those employees over the 12-week subsidy
period.
In receiving
the subsidy, employers also agree to repay the subsidy or any part of the
subsidy paid if they fail to meet any of the obligations about how they must
use the subsidy. It is not crystal clear whether repayment is required in cases
of termination for misconduct (see above) but funds received for employees who
are made redundant inside the 12 weeks are, in our view, likely to be reclaimed
by the Government. The safest view is that while the subsidy is payable to the
employer, it is ultimately for the benefit its employees, and so not for the
employer to distribute or withhold in any manner it otherwise considers
appropriate. The sole exception to that
seems to be where the subsidy received exceeds the usual wages of the employee
(in which case the excess can be used for other wage costs).
Can we
submit another claim if we find we have not claimed correctly or the rules have
been subsequently modified?
Yes,
additional applications can be made for employees not already covered by
previous applications. (You cannot however apply for the same employee more
than once).
What
if staff refuse to work based on a fear of contracting COVID-19?
Only ‘essential’
staff may work at all during the level 4 lockdown (other than remotely), so we
confine our answer to that. You can check if your business is essential
here: https://covid19.govt.nz/government-actions/covid-19-alert-level/essential-businesses/
Staff may
refuse to work under the Health and Safety at Work Act 2015 if they believe, on
reasonable grounds, that carrying out the work would expose them (or any other
person) to a serious risk to their or the other person’s health or safety
arising from an immediate or imminent exposure to a hazard.
Staff can
also refuse to work by way of a (lawful) strike under the Employment Relations
Act 2000 if they have reasonable grounds to believe such action is justified on
grounds of health and safety. The assessment of risk made by staff must be
“real and not far-fetched,” and must be sufficiently serious as to justify
participation in such a strike.
These are
high thresholds for staff members to satisfy. Given this, a staff member’s
subjective, generalised fear is not likely to satisfy the high threshold
required.
That
situation may change. For example, if
the rate of the virus’ spread within New Zealand increases, there is widespread
non-compliance with the lockdown, or should the circumstances change at any workplace
(any staff member at that workplace contracting COVID-19, for example). Changes
by Government could also impact.
For you this
means that, if the risk remains generally low in New Zealand, and specifically
low in your workplace, our view is that you are not required to pay essential
staff who refuse, on a generalised basis, to work and have not agreed to use
any of their leave entitlements to cover their absence (notwithstanding the
requirements of the wage subsidy, see the FAQ below).
There are however
reasonably practicable steps that you can and should investigate taking to
lower the risk (such as PPE, hygiene procedures, and arranging shifts to limit
any spread). We note also that an
employee’s refusal to work where a specific issue is raised but not addressed,
could very well mean payment was still required. Worksafe’s general guidance on potential steps
can be found here: https://worksafe.govt.nz/managing-health-and-safety/novel-coronavirus-covid-19/workplace-preparedness-for-novel-coronavirus
We also
recommend that before taking any steps not to pay essential staff, you discuss
this further with them, with a view to their understanding what steps you have
taken, and the consequences of refusing to work (in terms of payment). Ultimately there are very real practical issues: what can you realistically do in this
environment if staff maintain refusal?
Legal action or disciplinary action (even if possible) are unlikely to
achieve a motivated / committed workforce.
Discussion and seeking to accommodate any real issues is more likely to
maintain staffing.
Can we
claim the Wage Subsidy for all full-time workers regardless of their sector
worked in? i.e. can we claim for staff being paid in full who are still working
in essential services?
Yes, you can
apply, subject to the eligibility requirements.
The subsidy is based on the financial effect of the virus on the
business overall, not on whether employees are still able to work.
How do
we claim for, and pay, casuals or part-time employees who only work for a few
hours per week? i.e. if a worker only works up to $100 worth of hours in a week,
what do we pay them via the subsidy?
The wage
subsidy is a flat rate, and for those working less than 20 hours per week, the
subsidy is $350 per week (gross) (up to 12 weeks).
What to pay
part-timers is now also relatively clear – you will need to pay any part-time
worker the full subsidy or if their normal weekly wage is less than the
subsidy, that lesser amount. “Normal”
may though create calculation problems, in which case WINZ currently suggests (if
hours are “variable”) averaging the worker’s hours each week over the last 12
months (or if employed for less, over the period of employment).
Casuals WINZ
currently says are to be approached in the same way, but the guidance indicates
that to be eligible, the worker would have to have been ‘expected to work’ during
the time you will receive the wage subsidy. If so, and if after averaging they
qualify for the full-time subsidy rate (over 20 hours), you will then need to
pay them accordingly.
Note though, for any worker, if their usual
pay is less that the applicable wage subsidy rate, you just pay usual pay (and
can retain the rest of that week’s subsidy in your ‘wage bucket’ for use
towards other wages payable).
Leave
Subsidy?
The
Government has announced folding the Covid ‘leave’ payment into the wage
subsidy scheme. You can no longer apply for this subsidy. Finance Minister Grant
Robertson has said: “We are working on arrangements for those in essential
work who require sick leave due to COVID-19.” We recommend that you check
for updates on how this may be addressed.
Issues also
arise for non wage subsidy qualifying employers, who had previously been able
to rely on leave payments. Government
is considering these issues.
We
have applied for the wage subsidy. Can we pay an employee only 80% of their
normal pay if they are not available to work due to the current ‘lock-down’?
You cannot
make unilateral changes to your employee’s pay. The Government has confirmed
that your usual legal obligations to staff remain unchanged by the lockdown.
That means that any change from a staff member’s current entitlement requires
an established legal basis. You cannot unilaterally reduce hours or pay;
agreement is ordinarily required. This will be complicated if staff are part of
a collective agreement, because you cannot agree anything inconsistent with a
collective agreement.
Next, and ordinarily
speaking, you are not required to pay staff who are not able to work (other
than through fault by the employer) and not on some kind of leave.
However, the
Government’s wage subsidy has changed that landscape. The stated intention of
the wage subsidy is to keep staff paid and in employment during the lockdown,
regardless of their specific scenario. That means you are required to use your
best endeavours to pay your staff at least 80% of their usual pay, and only
if you are unable to do this, the full value of their applicable subsidy (whether
full or part-time, or lesser if usual pay is lesser). This is therefore essentially
a new type of government subsidised leave. It does not affect any staff member’s
entitlements to annual or sick leave.
We view this
subsidy as an obligation to pay staff during the level 4 lockdown at least
the value of the applicable wage subsidy (unless usual pay is less, in which
case you can pay less), regardless of whether they are not able to work for
personal reasons (such as childcare requirements, or they are in self-isolation),
or cannot work because you are not operating. The Government has indicated that
audits following the lockdown will address any employer non-compliance.
Changes to
the Minimum Wage – What you need to know
Minimum Wage increase
The Minimum Wage increased with
effect from 1 April 2020. MBIE’s guiding
on that (relative to COVID-19) can be found here. https://www.employment.govt.nz/leave-and-holidays/other-types-of-leave/coronavirus-workplace/covid-19-minimum-wage/
The key point is that the minimum
wage relates to hours actually “worked”; it does not relate to hours where no
work can be done. MBIE appears to adopt
a similar view to our own of the (absence of) legal obligation to pay wages
where no work can be done, however an obligation to pay the wage subsidy and
80% of usual as a part of that.
Where businesses are unable to
process the increase due to the lockdown, they should communicate that openly
and clearly to employees. Employers will need to backdate pay at a rate of
$1.20 per hour worked since 1 April 2020.
The answers
provided here are general and may not apply to your own situation. For specific
advice, we recommend you talk to one of our experts (all currently working from
home). You can call us on on our mobile numbers, or contact us via email, and
please stay safe:
Paul McBride (Partner) – paul@mdjlaw.co.nz or 021 614 215
Guido Ballara (Partner) – guido@mdjlaw.co.nz or 021 782 891
Frances Lear (Senior Associate) – frances@mdjlaw.co.nz or 021 237 7811
Saadi Radcliffe (Solicitor) – saadi@mdjlaw.co.nz or 021 557 236
Emma Rose Luxton (Solicitor) – emmarose@mdjlaw.co.nz or 021 751 247
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