Covid-19: Employment Court releases Minimum Wage obligations judgment

Challenge to the Employment Court

On 21 December 2020, the Court published its judgment related to the challenge, made on a limited basis, to the Authority’s decision in Sandhu v Gate Gourmet New Zealand Limited [2020] NZERA 259 (i.e. the correctness of the Authority’s determination that the entitlements under the Minimum Wage Act 1983 (“MWA”) applied to the employees, despite them not performing work at the relevant time due to the COVID-19 Level 4 Lockdown (“the Lockdown”)). 

The Full Court considered the interpretation of the MWA, specifically an employer’s obligation to pay the minimum wage to its employees if they were ‘ready, willing and able to work’ but who were not working (where the employees’ work was not deemed to be an essential service) in Gate Gourmet New Zealand Limited v Sandhu.

It is important to note that this judgment relates to the specific circumstances of this case, as it related to the application of the MWA.  

Key facts of the case

For completeness, the key facts were as follows:

• On 23 March 2020 the Government announced the COVID-19 Level 4 Lockdown period to commence from 26 March. Gate was an essential service and permitted to stay open throughout the Lockdown. However, it was required to restrict its services to only those that were essential.
• Each of the employees’ employment agreements provided for fulltime employment. Prior to 30 March, they were paid the then minimum wage of $17.70 per hour on a weekly basis.
• Following the imposition of the Lockdown, Gate advised its employees and the unions representing them, that as a result of having little work to offer employees because of the pandemic, it would need to partially shut down operations.
• On 26 March, Gate proposed to its employees:
• The implementation of a partial closedown;
• Employees being paid at 80% of their normal pay, conditional on Gate receiving the Wage Subsidy;
• Employees could choose to use their annual leave entitlement to supplement the 80% of normal pay being offered, meaning an employee could receive 100% of pay by using one day of annual leave per week.
• On 26 March, Gate confirmed to employees and the union that, if an employee had not been rostered on, and Gate had not asked them to come to work, that meant there was no work for them and they should stay home. The Wage Subsidy was applied for by Gate that day.
• On 27 March, Gate emailed all employees with notice of closedown setting out the following options:
• Option 1: employees take all entitled leave until exhausted, at which point they could move to option 2;
• Option 2: conditional on Gate receiving the Wage Subsidy, it would pay the employee at the rate of at least 80% of their normal pay;
• Option 3: conditional on Gate receiving the Wage Subsidy, it would pay the employee at the rate of at least 80% of their normal pay; and they could use their annual leave entitlement to top up their pay to 100%.
• Options 2 and 3 were agreed at the time. On 1 April, when the minimum wage increased, Gate emailed all employees to advise that only employees who worked would be paid at the new minimum wage rate, and the other employees would continue to be paid as agreed. This was challenged by the employees – resulting in the case being heard by the Authority and then challenged to the Employment Court.

Summary of findings

The majority of the Court found that:

1. section 6 of the MWA did not require the minimum wage to be paid to the employees who were ‘ready, willing and able to work’, but were not working; 
2. as the employees were not working[1] during the Lockdown, even though they would otherwise had been working but for the pandemic and the effect on the employer’s business, the employer was not in breach of the MWA. There had not been any unlawful deductions under the MWA because it was not applicable to the payments in question. 

The employer was obliged to pay the employees the amounts agreed with the unions during the Lockdown, including the Wage Subsidy.

Further, the Court was clear that other obligations to pay, outside the MWA, may arise when an employee is not working; including the obligation to pay holiday pay in accordance with the Holidays Act 2003; the requirement for compensation to be paid for periods when an employee is required to be available for work outside their guaranteed hours of work pursuant to the Employment Relations Act 2000; and any other contractually agreed payments.

The Chief Judge of the Court took a different view on the interpretation of the MWA; and would have found there was a breach of the MWA. We will watch with interest to see if there is an appeal to the Court of Appeal.

Employee rights and Employer obligations not suspended during Lockdown

As expected, the Court confirmed that the Lockdown did not act to suspend employee rights or employer obligations, including those for parties to act in good faith, and consult over any changes to working hours and payment of wages. 

Employment Law advice

The fact of a split decision of the Employment Court, contrary to that of the Employment Relations Authority, reflects the complexity of issues that have arisen within the workplace as a result of managing in the COVID-19 environment. If you have specific questions related to your employment rights; responsibilities; and obligations, please contact our Specialist Employment Lawyers on 07 282 0174.