EMPLOYMENT NEWS, MARCH 2011

Christchurch Earthquake

Almost everyone in New Zealand has family, friends, or associates affected by the devastating earthquake in Christchurch, and our thoughts are with everyone who has been affected.

Once the immediate emergency has passed, many people will be turning their minds to their work in Christchurch and questions like is there still a job for me to go to? What if I can’t make it to my place of work? Will my employer still be able to pay me, even though the business is closed? will need to be answered.

Health and Safety

The disaster raises many employment law issues. First and foremost must be health and safety. Very simply, if a workplace is not safe to work in, employees cannot be required to work there, and must not do so. It is imperative that everyone follow the instructions and advice of Civil Defence staff, Police, and City officials.

An employee can also refuse to work on health and safety grounds if he or she has reasonable grounds to believe that there is an imminent risk of serious harm.
Many businesses, especially in the CBD, will be closed for quite some time, and in some cases may not reopen. So what happens to the employment relationship?

Force majeure

The first port of call is, as always, the employment agreement. Following September’s earthquake, we suspect that force majeure clauses will be slightly more common. Such clauses may state that the employer can stop paying the employee where the business has been shut down due to an ‘Act of God’.

What if employees are willing and able to work, but the business is closed?

Subject to the employment agreement, the usual rule of thumb is that where an employee is ready and willing to work, the employer is obliged to provide the work and pay the employee. However, generally speaking, and unless the employment is frustrated, if the employer is unable to provide work for the employee, the obligation to pay wages remains. The government Earthquake Support Subsidy (explained in greater detail below) may assist employers to meet their wage/salary obligations, at least in the short term.

We would recommend that employers discuss with employees whether it is possible for them to take annual holidays, leave without pay, or a mixture of both, or to agree to a reduced pay rate for a period of time. Employers can also require employees to take annual leave, by giving 14 days notice.

If the employer’s business is not going to be able to resume, employers could consider redundancies, or potentially rely on the doctrine of frustration to end the employment relationship. With regard to redundancies, we would recommend that employers do follow (as far as possible) the ‘usual’ process of consulting with employees about a proposal to make their positions redundant, although consultation may take a slightly different form than that which would be carried out in normal circumstances. Contractual entitlements to redundancy compensation will still apply.

With regard to frustration (which in short, is when it is impossible for the agreement to continue)this may apply where a workplace has been completely destroyed, will not reopen, and there is no other work for the employee within the business, or potentially where the source of work has been destroyed – e.g. if the sole client’s business was destroyed. Frustration essentially means that the employment agreement is cancelled, and will require the employer to notify the employee that this is the case.

In the recent past, the Courts have been reluctant to accept frustration as a valid termination of employment relationships, unless there is no other alternative. We recommend that employers facing these issues take advice.

What if the business is open or there is work for employees, but they are not turning up?

If work is still available for employees, but they are bereaved, sick, injured, or caring for dependants who are sick or injured, they will most likely be entitled to take sick or bereavement leave. Most employers will take a generous approach to entitlements in this case, and are probably unlikely to require proof. Other employees may be unable to come to work due to accommodation problems, transport issues, or the need to care for children while schools and child care facilities are closed. It is important that employers and employees keep in touch with each other, and communicate in good faith about what leave may be taken, and how that will be remunerated.

We know that a number of Christchurch residents are displaced, or have simply left the city, to stay with friends and family, or in holiday homes outside of the region. If an employee does not turn up for work, and cannot be contacted, it may be that they have legally abandoned their employment. Employers should definitely not jump to this conclusion however, and it is important to make every attempt to contact the employee, and discuss the reasons for their absence before moving to terminate for abandonment. An employer faced with a situation where an employee does not turn up to work or cannot be contacted, needs to consider the very sad possibility that they have been killed or are listed as missing. Even in the best of times, the Courts place a strong onus on the employer to prove that an employee has in fact intended to abandon their employment. During a state of national emergency, such as we are now facing, it seems likely that Courts would not show a great deal of sympathy toward employers who acted hastily or prematurely in declaring employees to have abandoned their employment.

Government support

The Government has announced an emergency employment support package as a first step toward supporting those financially impacted by the earthquake. There are two types of support: Earthquake Support Subsidy, and Earthquake Job Loss Cover.

Earthquake Support Subsidy is a payment for employers to assist them to pay their employees while they deal with the impact of the earthquake. The subsidy is also available to the self employed or business owners who draw a wage. The payment assists employers when they are unable to operate either due to damage, a cordon, or an essential service is not available, or where they can operate but are experiencing significant loss of trade. This subsidy is for employees who still have a job, while the employer works out what they are going to do.

The payment will be made directly to the employer who will then pay the employee. The wage subsidy:

•  Will be paid for up to six weeks from 22 February 2011 with a review after three weeks;

•  Will be paid at a rate of $500 per week per fulltime employee (over 20 hours per week) or a rate of $300 per week per employee for part time employees (defined as anyone working 20 hours a week or less); and

•  Is not subject to GST but is subject to PAYE.

Earthquake Job Loss Cover is for those who have lost their job as a result of the earthquake. If an employee is unable to contact the employer, and is not working or being paid, then the employee may apply for the Earthquake Job Loss Cover payments, which are made directly to the employee.

The payment is:

•  $400 net per week for full time employees (over 20 hours per week) or $240 net per week for part time employees (anyone working 20 hours or less per week);

•  paid weekly; and

•  for up to six weeks from 22 February 2011.

To qualify, an employee must:

•  have been employed on 22 February 2011;

•  have worked for an employer who was based in the Christchurch City Council area; and

•  no longer have an employer (i.e. the employer has decided not to operate)

An employee cannot get the Earthquake Job Loss Cover payment if the employer is getting the Earthquake Support Subsidy for that employee.

In our view:

The key for employers and employees navigating through this crisis is communication in good faith. Keeping in touch with each other, and providing regular updates on such matters as access to the workplace, safety status of the workplace, availability of, and for, work, and employees’ state of health will hopefully help the working relationship to continue in some form.
Communication itself may present a challenge – even if we assume that both employer and employee have working phones, it may be that contact details are lost, or, as we have mentioned above, that employees have moved or been displaced from the area. Employees may not have internet connections available, or even power, in some cases. As with so many things in Christchurch at the moment, some lateral thinking may be required to figure out effective communication channels.

We strongly urge that employers use caution in making any ‘big decisions’ with regard to employment. In particular, assuming that employees have abandoned their employment, or making the decision to otherwise terminate employment, should only be made after proper consideration, and taking advice.

It is likely that both parties will need to compromise on their strict legal entitlements, and flexibility on both sides is going to be extremely important. Where the business will not be able to reopen, again, communication will be key.