Covid-19 Employer Employment Obligations and information
Every non-essential business is closed for a minimum of four weeks; however, this could well be longer depending on the Ministry of Health, Government, and the public’s compliance.
While other national emergencies can provide guidance, the social, political, health and economic effects of a worldwide event of this magnitude may not have been seen since the 1918 influenza epidemic.
It is unfolding daily and information and laws are being passed under emergency by our Parliament. While this information is valid as at the date it was written, it is really important to understand that you will need to keep updated as things change.
Please note: this advice is current as at 12:00pm on 31 March 2020. While we will endeavour to amend this advice as soon as possible following any further changes or modifications to Government Policy, we recommend the following websites for current information:
- https://covid19.govt.nz– The New Zealand Governments official Covid-19 website;
- https://health.govt.nz/coronavirus– Ministry of Health website
If you are not sure who to talk to, you can contact Government Helpline on 0800 779 997 (8am – 1am, 7 days a week) for assistance.
2.0 What are your obligations as an employer?
Whatever your situation is, the legislation and the Government has made it clear that your normal employment obligations and law still applies. Whatever changes you may have to make in the coming weeks, the most important advice we can give you is to communicate with your employees and act in good faith.
From an employment standpoint, the most important pieces of legislation at this time are:
- the Employment Relations Act 2000,
- Holidays Act 2003 and
- Health and Safety at Work 2015.
However, you also need to be familiar with the Employment Agreements of your employees, as it will set out:
- what changes you can or can’t propose and make,
- the process you need to follow,
- what you can pay and what your employees are entitled to.
3.0 Holidays Act 2003
3.1 Public Holidays
Employees must be paid for their public holidays if it would otherwise be a normal working day. In the next 12 weeks, there are the following public holidays:
- Good Friday — Friday 10 April
- Easter Monday — Monday 13 April
- Anzac Day — Saturday 25 April or Monday 27 April
- Queen’s Birthday- Monday 1 June.
3.2 Annual Leave
As a first principle, employees should be able to decide when to take their annual holidays.
Employers and employees may agree to take annual leave during temporary closures of a workplace due to COVID-19. If an employer and employee cannot agree, only then is an employer able to direct annual leave be taken. If the employer requires an employee take annual leave, they must provide a minimum of 14 days’ notice.
If you are considering or have applied for the wage subsidy package you can’t force employees to use their annual leave to ‘top up’ the wage subsidy unless the employee agrees. The subsidy must be paid to them and they are not required to exhaust their sick leave and annual leave first.
3.3 Sick Leave
Applies to an employee who is sick or caring for a dependent who is sick.
You must pay the employee their accrued sick leave until it runs out, thereafter the employee will generally be on unpaid leave. We recommend that you check all entitlements under policies and employment agreements you have with staff.
3.4 Bereavement Leave
This will continue to apply as normal, and again check your contracts and policies.
3.5 Unpaid, Discretionary or Special Leave
You don’t have to provide this but check your policies and employment agreements to see if this is mentioned and consider if appropriate.
If it is not included you can pay it to individuals at your discretion based on their individual circumstances.
4.0 Hours of Work
If there is no flexibility in the ‘hours of work’ clause in the employment agreement and you want to reduce or change an employee’s hours, you will need the employee’s agreement to do this.
If the employment agreement says that an employer can change the hours of work, the employer still has to act fairly and exercise good faith. This will mean proposing it to your employee and allowing your employee time to get advice and comment and reaching an agreement.
Any agreement reached should be documented and must be in written agreement form if you have received the wage subsidy to avoid claims that you have disadvantaged the employee or misused the subsidy.
In general, an employer cannot unilaterally change hours or any other conditions of employment.
5.0 The Restructuring or Redundancy process
Before you make any decisions relating to restructuring or redundancies, we recommend that you contact your lawyer for tailored advice applicable to your situation.
Redundancy is not defined however it is generally when a role (not a person) becomes superfluous to the business.
You must not use a redundancy process to avoid managing difficult or poorly performing employees. The law is clear that you cannot terminate employment on the grounds of redundancy if the role still exists. If you do the dismissal is unjustified and will give rise to a personal grievance claim.
The usual rules of redundancy continue to apply. That means that employers are still required to consider reasonable alternatives prior to implementing any restructuring or redundancies. Examples include:
- Using the Government Wage Subsidy Scheme; or
- Negotiating with employees to reduce pay and/or hours as an interim measure with any agreement reached recorded from their staff in writing.
During this period, redundancies will only be justified if the employer was not able to get through this temporary situation, and could demonstrate that cost cutting was required now to keep the business viable.
PLEASE NOTE: If you have applied for the Wage Subsidy on or after 27 March 2020, you must retain the employees in the application for the 12 week period that you receive the subsidy (i.e. you cannot make those employees redundant).
If your policies or employment contract set out a process for restructuring and making an employee redundant you are bound by this process. However, in all situations, a redundancy or restructure must:
- Be for a genuine business reason/s; and
- Utilize a fair process
5.1 Genuine Business Reasons to Restructure and/or Make Roles Redundant
Employers have a right to make changes to their businesses, and structure their business in the way that they believe will be the most effective to deliver to their customers and their strategy.
However, changes impacting on employees’ roles require consultation in good faith with affected employees before a decision is made. Examples include, but are not limited to:
- merging two or more existing roles
- refocusing aspects of a role that are not minor
- removing roles that are not needed
- a combination of these things.
It is generally accepted that “genuine business reasons” for restructuring a company or making roles redundant include:
- improved technology
- more productive business processes
- product changes
- loss of suppliers or markets
- shifts in customer or market requirements
- financial reasons.
If restructuring roles or changing processes substantially change the nature of a position, then the former position has been disestablished and a new position has been created. Therefore, the original position is redundant.
If the new position is substantially similar to the position that has been created then generally there is no redundancy. The legal test for determining if there is a substantial change to a role is:
“would a reasonable person taking into account the nature, terms and conditions of each position consider that there is a sufficient difference to break the essential continuity of the employment?”
There is no hard and fast rule in terms of a percentage of a role that must change in order for it to be deemed a redundant role. Common practice is to apply a 20% change rule, but all factors should be considered i.e. duties, responsibilities, skills, delegated authority, salary, hours, location, personal circumstances of the employee ability to be retrained etc.
An employer also has a mandatory duty to redeploy an employee whose role is to be made redundant. This includes any newly created or vacant roles.
5.2 Fair Process
A redundancy can still be unjustified even if you have genuine business reasons if it is carried out in a manner that is unfair.
Again, you need to check your employment agreements and policies to see if a process has been set out.
You need to follow a consultation process for a reasonable duration before a decision is made as to whether a role is to be made redundant. Consultation involves discussing what you are planning before you decide to do it, and should only occur when you have enough details about the proposed change, but before a decision is so far down the track that it is predetermined.
Employees don’t have the right to demand assurances from and employer, but information given to them has to be sufficient to enable them to state their views and an opportunity to do so either in writing or orally. While you don’t need to ultimately agree or implement their suggestions, you have to make genuine efforts to accommodate and consider views.
In a nutshell, if you are considering changing any employment terms and conditions or making an employee redundant, you are required to act in good faith and communicate with your employees, providing them with all relevant information about what is proposed to give them an opportunity to comment on that information before any decision is made.
If any unions are present in the workplace must still be engaged with as part of the process.
Scenario One: An organisation who has employee[s] who can continue to work from home as normal
The employee is paid as normal and all employment obligations continue. If the employee becomes sick then you would pay sick leave and if this runs out they could agree to use annual leave or the leave would be unpaid. Sick leave is for employees who are sick or their dependants or the people in their bubble become sick and they are caring for them.
If your staff are unable to work because there is nothing to do you should apply for the wage subsidy. The wage subsidy is a government payment to help employers pay wages that can show the downturn required. See attached information on the wage subsidy [keep checking the website for updates].
It does not change any other employment law obligations, meaning employees must be paid appropriately under their employment agreements for the hours they do if they work during the lockdown.
Plan and implement a business continuity plan in case staff get sick at any time. Now is the time to consider what skills are transferable and discuss these with your employees and consult around who will take over what areas of the business if someone gets sick. Ensuring current staff have the resources and training to take over systems that will prevent your operations from closing.
Scenario two: Your employee[s] can’t work during the lockdown and the future is uncertain but you are not yet insolvent
You may have already applied and have received the wage subsidy and spoken to your accountant. If you haven’t, we recommend doing this as soon as possible.
It is extremely important that you have read and understood your obligations as an employer when applying for the wage subsidy. As of 27 March 2020, the government changed the wage subsidy conditions.
If you applied prior to 27 March 2020 your obligations and undertakings can be found at https://workandincome.govt.nz/online-services/covid-19/wage-subsidy-declaration.html
If you applied on or after 27 March 2020, your obligations and undertakings can be found at https://workandincome.govt.nz/online-services/covid-19/declaration-wage-subsidy.html
You also need to discuss the subsidy with your employees and obtain their consent before sharing any information about them with the Ministry of Social Development when you put in your application.
Businesses accessing the scheme must still undertake best endeavours to pay employees 80% (casual staff included) of their pre-COVID income. Where that is not possible – in particular where a business has no activity whatsoever due to the shutdown and workers are not working any hours – they must pass on at least the whole value of the wage subsidy to each affected worker.
This means that businesses not able to operate during the next 12 weeks do not need to lay off staff. If you are going to commence a restructuring that looks at roles becoming redundant check in first with Work and Income about your situation and any financial assistance available to your business and staff so that when you consult you can answer all questions from your staff around this. Phone 0800 40 80 40 https://workandincome.govt.nz/
Regardless best practice is to daily or weekly communicate how the business is tracking and if you need to propose any small changes to ways of working first do this by reaching agreement in writing it can be on a temporary basis before moving into a formal process.
If the closedown ends prior to that 12 week period and work becomes available you will need to offer work to your staff that they would normally be required to do but haven’t because of the lockdown because they are still employed. It will be hard to justify a redundancy when you could apply for the wage subsidy and pass on the subsidy for 12 weeks and wait and see how the situation unfolds.
You have to show you used your best endeavours to continue to pay those who you have applied for the subsidy 80% of their normal wages. You could consider and discuss unpaid leave to temporarily suspend the contract but not end it and pass on the subsidy for the period. Then commence a restructuring process.
Essentially redundancy should be viewed as the last resort so you are less likely to get into trouble if you are communicating clearly and being seen to be taking steps and discussing and documenting agreements to avoid this situation wherever possible before you do this.
Scenario three: Your employee[s] can’t work during the lockdown and your business is on the brink of closure and you can provide evidence of this.
To avoid consultation and to just give notice of redundancy would generally be a situation where there are no alternatives to temporarily stay open after having talked to your accountant, lawyer and explored government subsidies including what is offered to business.
You will be required to give notice as per the employment agreement and pay all holiday pay owing.
Again, you could put staff on unpaid leave and apply for the subsidy and just pass this on to them but talk to Income Support first. This is a more of a wait and see approach until there is more clarity around how long the lockdown is for and what is happening for your business. This is because the subsidy is there to prevent closure and justifying a redundancy may be problematic if you haven’t done this before this shutdown and it could have been avoided.
In all cases
It is important to communicate and stay close to your employees during and after this lockdown.
More than ever whatever situation you are facing, you need to have a close connection with your staff. If you can by zoom or phone, start or continue to check in to understand workloads, challenges, opportunities, and impacts. Discuss contingency plans, and how work is being prioritised. What needs to be business as usual and what do you all need to work on now to survive this. Mental health should be monitored as part of your health and safety obligations. How are they feeling? What’s going on in their lives. Let them know what if any support is available to them financially from the government and psychologically. Do you have EAP? if not refer them to the free government support. Talk through with them the impacts on the business weekly. What steps you are taking now and what challenges you are facing. If you end up having to restructure it shouldn’t be a surprise. The proposal should reflect the story they understand and you have been communicating.
During discussions, open up to your employees to ask for any suggestions around alternative ways of working as this may open up the ability to make interim changes to hours or roles by agreement.
Appendix A – Good Faith section 4 Employment Relations Act 2000
Parties to employment relationship to deal with each other in good faith
(1) The parties to an employment relationship specified in subsection (2)—(a) must deal with each other in good faith; and
(b)without limiting paragraph (a), must not, whether directly or indirectly, do anything—
(i) to mislead or deceive each other; or
(ii)that is likely to mislead or deceive each other.
(1A)The duty of good faith in subsection (1)—
(a)is wider in scope than the implied mutual obligations of trust and confidence; and
(b)requires the parties to an employment relationship to be active and constructive in establishing and maintaining a productive employment relationship in which the parties are, among other things, responsive and communicative; and
(c)without limiting paragraph (b), requires an employer who is proposing to make a decision that will, or is likely to, have an adverse effect on the continuation of employment of 1 or more of his or her employees to provide to the employees affected—
(i)access to information, relevant to the continuation of the employees’ employment, about the decision; and
(ii)an opportunity to comment on the information to their employer before the decision is made.
(1B) However, subsection (1A)(c) does not require an employer to provide access to confidential information—
(a)that is about an identifiable individual other than the affected employee if providing access to that information would involve the unwarranted disclosure of the affairs of that other individual:
(b)that is subject to a statutory requirement to maintain confidentiality:
(c)where it is necessary, for any other good reason, to maintain the confidentiality of the information (for example, to avoid unreasonable prejudice to the employer’s commercial position).
(1C)To avoid doubt,—(a)subsection (1B) does not affect an employer’s obligations under—
(b)an employer must not refuse to provide access to information under subsection (1A)(c) merely because the information is contained in a document that includes confidential information.
(1D)For the purposes of subsections (1B) and (1C), confidential information means information that is provided in circumstances where there is a mutual understanding (whether express or implied) of secrecy.
(2)The employment relationships are those between—
(a)an employer and an employee employed by the employer:
(b)a union and an employer:
(c)a union and a member of the union:
(d)a union and another union that are parties bargaining for the same collective agreement:
(e)a union and another union that are parties to the same collective agreement:
(f)a union and a member of another union where both unions are bargaining for the same collective agreement:
(g)a union and a member of another union where both unions are parties to the same collective agreement:
(h)an employer and another employer where both employers are bargaining for the same collective agreement.
(3) Subsection (1) does not prevent a party to an employment relationship communicating to another person a statement of fact or of opinion reasonably held about an employer’s business or a union’s affairs.
(4) The duty of good faith in subsection (1) applies to the following matters:
(a)bargaining for a collective agreement or for a variation of a collective agreement, including matters relating to the initiation of the bargaining:
(b)any matter arising under or in relation to a collective agreement while the agreement is in force:
(ba) bargaining for an individual employment agreement or for a variation of an individual employment agreement:
(bb) any matter arising under or in relation to an individual employment agreement while the agreement is in force:
(c) consultation (whether or not under a collective agreement) between an employer and its employees, including any union representing the employees, about the employees’ collective employment interests, including the effect on employees of changes to the employer’s business:
(d)a proposal by an employer that might impact on the employer’s employees, including a proposal to contract out work otherwise done by the employees or to sell or transfer all or part of the employer’s business:
(e) making employees redundant:
(f) access to a workplace by a representative of a union:
(g) communications or contacts between a union and an employer relating to any secret ballots held for the purposes of bargaining for a collective agreement.
(5) The matters specified in subsection (4) are examples and do not limit subsection (1).
(6) It is a breach of subsection (1) for an employer to advise, or to do anything with the intention of inducing, an employee—
(a)not to be involved in bargaining for a collective agreement; or
(b)not to be covered by a collective agreement.