COVID-19: Employment issues -updated 24 March 2020

The COVID-19 situation is rapidly evolving, and employers need to be continually assessing and reassessing their response. This article is being updated regularly: the last update was 24 March 2020.

Level 3, moving to Level 4 

The country is currently at Level 3, moving to Level 4 (effectively in lockdown) from 11.59 pm on Wednesday 25 March. This means New Zealanders not working in essential businesses must stay at home and stop all interactions with others outside of their immediate household. The definition of “essential businesses” is presently causing much debate.  The list can be found here but it seems further clarification will be required in some cases.

Government support package

On 17 March 2020, the government announced a support package for employers and employees impacted by COVID-19. An employer will be able to apply for wage subsidies if the business can show a 30% or more decline in revenue for any month between January and June 2020, as compared to that month last year.  If the application is approved, the employer would be paid $585.80 per week for full time staff, and $350 for part time staff, with these payments available for up to 12 weeks, with the subsidy paid in a lump sum rather than as a weekly amount.  

Initially, the overall subsidies were limited to $150,000 per business, but this ‘cap’ was removed on 23 March 2020.

Businesses will also have to show what actions they are taking to mitigate the financial effects of COVID-19. Examples given by the government include activating a business continuity plan, speaking to the bank, or relevant industry association.

There has been a degree of confusion around the subsidy eligibility criteria that means a business must use “best endeavours” or “best efforts” to retain the named employees and pay them a minimum of 80% of their normal wages or salary for the duration of the subsidy. There has not yet been indication as to what “best efforts” require, but in the absence of guidance from the Government, we would expect the orthodox justification test would apply, that is ‘what could a fair and reasonable employer do in all of the circumstances?’

Equally, there has been no guidance to date as to how the “normal wages or salary” are to be calculated. It appears to date that the Government has not tied the method of calculation to existing statutory definitions such as average weekly earnings (AWE), or ordinary weekly pay (OWP). In the absence of clear rules, a prudent employer may consider applying the greater of the AWE to OWP calculations.

Leave Payments

Employees who are unable to work because they are sick with Covid-19 or in self-isolation directed by the Ministry of Health, or caring for someone who is sick with Covid-19 or required to self-isolate, will be eligible for a leave payment. These will be payments of $585.80 per week for full time staff and $350 per week for part time staff.  These payments will be available for a period of 8 weeks.  As of 24 March 2020 these are limited to people who arrived in the country in the last 14 days or who have had close contact with someone with Covid-19.

These payments will be additional to ‘normal’ sick leave entitlements under the Holidays Act 2003 and any additional contractual entitlements.

There has been no indication as to whether this will be extended to include those who cannot work from home because they are caring for children while schools are closed.

Advice for employers and employees

Clearly, COVID-19 is having an enormous impact on the day to day arrangements for many employment relationships.

With the elevation across New Zealand to ‘level 3’ on 23 March, and confirmation that we will move to ‘level 4’ from midnight Wednesday 26 March 2020, employers will need to continue to address the ability to work from home/remotely and other business continuity issues.

Where employees are unable to work from home, but are willing and able to work, the usual starting point is that the employee is entitled to be paid. However, one might equally argue that employees are not willing and able to work, as they are required by the Government to stay at home (assuming work from home is not an option) and therefore that they cannot necessarily expect to be paid.  The situation remains unclear.  

As ever, the key for employers is to act in good faith, communicate with their employees about the situation, and to continue to communicate as the situation develops.

Issues such as sick leave, leave without pay, annual leave, and ‘special’ leave will need to be dealt with on a case by case basis, factoring in the impact of any Government support. Employers should remember the requirement to act as a ‘fair and reasonable employer’ continues, and if at all possible, this will involve consultation (from a distance!), and the requirement to justify actions.

Any reduction in work hours, change in work location (e.g. working from home), a need to temporarily close the business, or a need to reduce the number of staff (i.e. redundancy) will, again, need to be dealt with individually, and will need either consultation or agreement depending on the situation and your employment agreement.

We will update this page when further information is to hand.

The situation is constantly changing, so employers need to keep a watch on the Ministry of Health advice, and the Government’s Covid-19 page to consider the appropriate action required in relation to their own business.

If you need any help with wage subsidies, leave entitlements, redundancies, business interruption clauses or anything else arising from Covid-19, please give our employment team a call to discuss. Noho ora mai.

This article was updated on 24 March 2020.


Disclaimer:  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.

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