Covid-19 - Employment Law Update August 2021

We now know that Auckland at least will be in Alert Level 4 Lockdown (“Alert L4”) until at least 14 days from the commencement of Alert L4, with the rest of NZ awaiting further updates on Friday 27 August. With that relative certainty for Auckland-based businesses (i.e. the likely 14 day impact on the business’ revenue), we provide the following reminder of employment obligations and rights.   

General employment rights and obligations

• Employment law rights and obligations continue as usual. Employers and employees must continue to act in good faith (be active and constructive in maintaining a productive employment relationship; not do anything to mislead or deceive or is likely to have that effect). That means keep talking to each other, and if an employer needs to consider any changes to the employment relationship, the employee must be genuinely consulted about those proposed changes. 
• An employer cannot require an employee to take annual leave but may consult with employees about this. If, after consultation held in good faith, agreement cannot be reached, an employer can require an employee to take entitled (not accrued) annual leave if 14 days’ notice is provided.  
• Annual leave will be paid as usual pursuant to the Holidays Act 2003. 
• Where an employee has already had annual leave approved for any part of the period of Alert L4, this leave continues, unless the employer has a policy which provides otherwise.   
• If your employment agreement has a ‘force majeure’ clause, we recommend seeking specific advice prior to taking active steps with respect to that clause. 
• The Wage Subsidy is available to those eligible. Applications opened Friday 20th August. For more information see https://www.workandincome.govt.nz/covid-19/wage-subsidy/index.html or get in touch with one of our team for a discussion.  
•  The declaration can be found here: https://www.workandincome.govt.nz/covid-19/wage-subsidy/index.html

Key aspects of the Covid-19 Wage Subsidy

Some key points of the declaration are set out below: 

• The declaration requires you to confirm that your business meets the revenue decline test: 
• That the business has had/or is predicted to have a 40% reduction over the period 17 August to 30 August when compared to a typical consecutive 14-day period of revenue in the six weeks immediately prior to Alert L4 on 17 August 2021 
• There is a different comparator for seasonal businesses (a seasonal comparator period of the same 14 days in 2020 or 2019). 
• The calculation of revenue for the period does not include government payments such as the Wage Subsidy, Covid-19 Short Term Absence Payments etc. 
• The business must prepare and maintain records related to the decline in revenue for the August 17 outbreak. 
• The business must have taken active steps to mitigate the impact of the move to Alert L4. 

• The business must retain all named employees and use best endeavours to pay them at least 80% of their ordinary wages (defined as “the ordinary wages or salary as defined in the employee’s employment agreement or in accordance with the relevant statutory obligations at the time of the declaration”) 
• The declaration makes it clear that all employment related legislation continues, and an employer cannot unlawfully compel an employee to use annual leave in respect of the period the business receives the Wage Subsidy in respect of those employees. 
• Named employees must consent (in writing if practicable) to their personal information being provided in respect of the Wage Subsidy application. 
• The declaration also provides that there will be no changes to an employer’s obligations under any employment agreement (including to rates of pay, hours of work and leave entitlements) without the written agreement of the employee.  We consider this could cause difficulties for those employers who need to reduce wage costs, despite the Wage Subsidy, requiring written agreement for a reduction in wages, even where the employer meets the ‘best endeavours’ test to pay employees at least 80% of their ordinary wages. We recommend that specific advice is sought in these circumstances. 
• The business must notify the Ministry of Social Development any changes in eligibility within 5 working days of becoming aware of the change in eligibility, including the end of an employee’s employment relationship. 

This update does not cover a detailed analysis of the government’s support package and focuses on the employment relationship. It does not provide full details on the Wage Subsidy declaration, which can be found at https://www.workandincome.govt.nz/online-services/covid-19/declaration-wage-subsidy.html

For further details for employment related matters, you are welcome to contact our team of employment law specialists on 07 282 0174.  The DTI Lawyers team of commercial and property specialists can also be contacted on that number for commercial and property advice.