03.03.2021

The impact of lockdown on the Minimum Wage Act: the Employment Court judgment in Gate Gourmet

In Sandhu v Gate Gourmet New Zealand Ltd, Gate Gourmet challenged the Employment Relations Authority’s determination that the protections under the Minimum Wage Act 1983 (MWA) applied to its employees, despite the employees, at the relevant times, performing no work during the 2020 level 4 lockdown.

The Authority proceedings

Gate Gourmet provides in-flight catering services to the aviation sector in New Zealand.  While it could remain open as an “essential service” during level 4 lockdown, the nature of its business meant it had very little work available.  It proposed a partial shutdown of its operations and gave its employees different options for pay, one of which was that the employees would be paid 80% of normal pay, conditional on the wage subsidy application being approved.  Gate Gourmet asserted that the union had agreed to 80% on behalf of each employee who was a member.  The Authority did not determine that issue or its effect.

Under the employment agreements, some of Gate Gourmet’s employees were contracted to work 40 guaranteed hours per week, and were paid the minimum wage.  The effect of the option was that they would be paid less than the minimum wage.  The employees’ union brought claims on behalf of its members. 

The union alleged that Gate Gourmet could not pay less than the minimum wage and had breached the MWA in doing so.  Gate Gourmet argued that the employees were not entitled to the minimum wage because they did not work. 

The Authority disagreed with Gate Gourmet and found that the minimum wage applied when employees worked and when employees were ready, willing and able to perform the work.  It found that that the employees were ready, willing and able to work and that Gate Gourmet had agreed to continue employment on the current terms and conditions.  The Authority considered that the employees were not working because of the COVID-19 restrictions, rather than Gate Gourmet’s decision.  All the same, the parties could not agree to any arrangement which had the effect of reducing wages to below the minimum wage.  It concluded that Gate Gourmet had breached the MWA.

The Employment Court judgment

Gate Gourmet challenged the determination on a narrow issue, namely whether the MWA applied when employees did not actually work.  It appears to have accepted that the employees were ready, willing and able to work.

The matter was heard by a full bench (3 Judges) of the Employment Court.  Business New Zealand and the Council of Trade Unions were granted permission to participate, given the importance of the issue to a large number of employers and employees.

Gate Gourmet, supported by Business New Zealand, argued that the MWA does not apply unless an employee is actually working. As the employees were not working, Gate Gourmet did not breach the MWA.

The employees and the Council of Trade Unions argued that an employee is entitled to receive payment for work at not less than the minimum rate of wages where work was guaranteed, but not provided, by the employer.

The majority of the Court found that the core concept of the MWA is that the minimum wage is guaranteed in exchange for work by the employee.  As the employees were not working, the MWA did not apply.  No statutory minimum wage entitlements arose. 

The Chief Judge disagreed with the majority of the Court.  Her Honour found that the employees, being contracted to work 40 hours per week, were “working” for the purposes of the MWA.  In her view, the majority ignored the common law rule that, where there are agreed hours of work cancelled by the employer, wages remain “payable” provided that the employee was ready and willing to work those hours.  The fact that they could not fulfill their contractual hours was due to Gate Gourmet’s decision not to provide them with work.  This meant that Gate Gourmet was not permitted to make any deduction from the employees’ pay.  The Chief Judge held that it was unlawful to pay employees only 80% of the minimum wage during level 4 lockdown.

It is important to note that the majority only found that payment was not due to the employees under the MWA.  The Court noted that other obligations to pay, outside the MWA, may still apply when an employee is not working.  They noted that the terms of an employment agreement are likely to require payment where an employer unilaterally decides an employee is not required to work, which is similar to the point made by the Chief Judge above.   However, the majority considered that enquiry was not relevant to the MWA issue, given the limited focus of the challenge.

This judgment (subject to any appeal) resolves one narrow aspect of employer conduct during the lockdown periods – whether the minimum wage was payable when an employee did not work.  It does not determine whether the employees were entitled to be paid under their employment agreement when Gate Gourmet failed or refused to provide work or other actions that were reportedly taken by employers, such as unilaterally reducing employees’ wages based on the wage subsidy but without any agreement with employees.

If you have any questions about the impact of lockdown on the minimum wage please get in touch with our Employment team, or your usual contact at Hesketh Henry.

 

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.

Do you need expert legal advice?
Contact the expert team at Hesketh Henry.
Kerry
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

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