COVID-19: Next Level:  Employment beyond Lockdown

Next Level

We are almost 3 weeks into a Level 4 lock-down and a little over a week from Level 3 if all goes to plan. Now is the time to be thinking about what the next stage will look like for your business.

The Law

All employment laws remain in force.  This is important.  It covers all of the Employment Relations Act obligations, including the twin pillars of “good faith” and the “test for justification”, the obligations under the Holidays Act and Minimum Wage Act, and of course compliance with every employment agreement and collective agreement. 

We also need to remember the contractual principle that a party to the contract must be “ready, willing, and able” to perform the bargain.  For an employment agreement, this means that an employee must be ‘ready, willing, and able’ to work, and there is a corresponding obligation on an employer to pay for that work.

As we have explained here, a lock-down does not give an employer a unilateral right to ignore employment laws, including the agreement it has with its employee.  Although the economic impact of COVID-19 may seem a compelling reason for an employer to act now without employee agreement, that may seem far less compelling in 3, 6 or 12 months’ time when it has an employee and/or union claim against it that it cannot defend.  We also expect to see a rise in representative actions, i.e. groups of employees taking claims together against an employer. 

If you are an employer needing to take steps to protect your business or organisation, we strongly recommend that you take specialist legal advice before you do. 

Level 4

Under Level 4, most employees were not able to work and technically had no entitlement to be paid.  While this is a bit controversial in the current circumstances, this is a legal concept that we are all familiar with.  In many ways, an employee being stuck in their house because the Prime Minister says so is no different than an employee being stuck on holiday because, say, their car broke down, or their flight has been cancelled.  Not the employee’s fault but why should an employer be required to pay?

Many employers took up the Wage Subsidy and accepted additional obligations in a Declaration they gave to the Government; namely, to use best endeavours to pay a minimum of 80% for a 12 week period.  The best way to look at the Wage Subsidy is that employers have agreed to do these additional things, but it does not release an employer from any of its normal employment law obligations.  The Government did not change the law to let employers off the hook; it added obligations if an employer wanted to access the Wage Subsidy.

Many employers have managed to adapt to the current lockdown with the cooperation of their employees.  However, the abruptness and completeness of the lock-down was a relatively straightforward scenario by contrast to what Level 3 is likely to present.

Level 3

What do we know about Level 3?  Very little actually but the Prime Minister promised yesterday to tell us by the end of the week.  It is likely that public venues and mass gatherings will be limited; schools will be restricted; there are likely to be some public transport restrictions; and people are likely to be still expected to work from home, if they can.  The two days of Level 3 we have experienced so far, from the 23 March announcement, also required bars, restaurants, and cafés to close. 

However, the employment law position will fundamentally change at Level 3, and again at Level 2.  At Level 3, and particularly at Level 2, most employees are likely to be ‘ready, willing, and able’ to work.  That means that an employer’s obligation will be to provide the agreed hours of work, and the agreed wage or salary set out in the employment agreements.

The difficulty is that due to the continuing economic impacts of COVID-19 and the Level 2 and 3 restrictions, many employers may be unable to provide sufficient work.  This doesn’t let them off the hook from their obligations to pay normal wages or salary. 

But the Wage Subsidy says that I only need to use best endeavours, right?  Yes, that’s the deal you have with the Government, but the deal you have with your employees is that you will pay them in full if they are ‘ready, willing and able’ to work.  They are separate obligations and separately enforceable.  You have actually done two deals; one with the Government, and one with your employees; and you must comply with both.

Please tell me there is a way out?  Yes but it gets pretty complex, pretty fast.  It starts with another contractual principle called a variation of contract.  The difficulty is that a variation requires mutual agreement – i.e. you need to convince your employees to agree.  The other issue is certainty – the change you are agreeing to needs to be certain, and employers probably have no idea what work will be available after Level 4, just a pretty good idea that there will be less.  Finally, each variation needs to be tailored to the particular employment agreement to be enforceable.

So how about some hours of work flexibility?  Well yes, that is a good idea, but it is constrained by the availability provisions brought into force by the previous Government.  These provisions, which were ostensibly to address ‘zero hour contracts’, complicate almost every possible flexibility arrangement possible, and require some serious legal contortions to allow any work arrangements that include variable hours.

So (to coin a phrase); where the bloody hell are we?   We are at Level 4, about to go Level 3, and then possibly the glory days of Level 2.  Remember them?  

Seriously though, employers now have a short opportunity to prepare themselves for the ‘Next Level’. This requires careful thought about the immediate impact to the business, what work will be available at Level 3 and Level 2, and what an employer should do with regard to its employees.  That might include some agreed changes about how they go about their work, how much work there is, and how much they will be paid for it.

In most circumstances, a variation will be required and careful thought needs to be given to whether that variation is for a short-term or a longer-term, and what flexibility it can and should contain.  Changes to hours and corresponding pay are obvious, but what about duties, and location?

These require careful consideration of the employment agreements, and how an employer should go about varying agreements so that it has flexibility, but can also rely on and enforce the agreement.  

That process requires careful legal analysis of each employment agreement before that is commenced.   There is little point commencing a process, and thinking that you have your employees on board, if the outcome of that process is not binding on you and your employees or it does not achieve the contractual outcome that you thought it did.   It may, in some case, be unnecessary to proceed through a variation process requiring agreement if you can achieve the same result through consultation.

Employment laws continue to apply, and are a constant; even though what we see ahead of us keeps changing.  While it is important to plan and be agile, it is just as important to ensure that actions taken now do not result in the possibility of future claims at a time when the business is trying to get back on its feet.  There is no substitute for specialist employment law advice at this time.

If you have any questions about Level 3 or your employment obligations more generally, please get in touch with our Employment Team: employment@heskethhenry.co.nz or your usual contact at Hesketh Henry.


The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.

Do you need expert legal advice?
Contact the expert team at Hesketh Henry.
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Media contact - Kerry Browne
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