Legal expert Catherine Stewart answers all your wage subsidy, vaccine and essential work questions

Lockdown will provoke a strong sense of déjà vu for both employers and employees. We’ve all been to this dance before, so the playlist of tracks will feel more familiar this time.

This is good because it means we’ve been able to avoid the panic and chaos of the first lockdown, but there is quite a bit of confusion about the lines between the rights of employees and the obligations of employers.

This complexity is exacerbated by the unknowns relating to how long the lockdown might last and how quickly the vaccine can be rolled out to as many people as possible.

Amid this uncertainty, employers and employees face a tricky task in navigating their workplace relations in an era that has little regard for your expectations.

To help make sense of some of the legal grey areas, lawyer Catherine Stewart joined the Herald over Zoom to answer some of the most pressing questions readers have sent to the newsdesk.

Herald: What are the rules with the latest edition of the wage subsidy? What must employers show this time?

Stewart: The current wage subsidy is a very similar scheme to the one that was put into place last year, during the alert level 4 lockdown.

There needs to be a New Zealand business, which has suffered a decline in revenue or predicts such a decline in revenue. The decline in revenue needs to be attributed to the increase in alert level, and they need to have taken active steps to have mitigated their loss. So those things are all the same.

There are some differences in the detail. One thing is, for example, the level of the payments has increased slightly, taking into account inflation. The threshold for the decline has also increased.Last year, during alert level 4, the threshold was a 30 per cent decrease in revenue – this year it’s at 40 per cent.

Herald: There have been a few changes to the Government’s wording for the latest wage subsidy. What are these changes and what do they mean for employers and employees?

Stewart: The difference in the declarations for the wage subsidy between the last level 4 lockdown and this level 4 lockdown is that this time employers are required to declare that they acknowledge that the receipt of the wage subsidy does not minimum standards in a wider sense than just the Employment Relations Act.

Last year the employer was required to declare that the receipt of the subsidy does not override “existing obligations under the Employment Relations Act 2000”.

This year the employer is required to declare that the receipt of the subsidy does not override “existing obligations under employment law, including (but not limited to) the Employment Relations Act 2000, the Minimum Wage Act 1983, the Holidays Act 2003 and the Health and Safety at Work Act 2015”.

In other words, this year the declaration is wider and explicitly mentions minimum standards.

Something that was clear in both last year’s and this year’s declaration is the requirement that the employer will not make any changes to obligations under any employment agreement, including rates of pay, hours of work, and leave entitlements without the written agreement of the relevant employee.

Herald: What are the obligations for employers who accept the wage subsidy?

Stewart: First of all, the need to use the wage subsidy to pay wages. They can’t use it to pay their rent or to clear their debts or whatever else. It must be put towards staff wages.

They need to retain staff for the duration of the wage subsidy period. They can’t make them redundant or terminate their employment during the period of the wage subsidy. And they also need to use their best endeavours to pay the employees at least 80 per cent of their salary or wages. Those would be the key obligations, otherwise normal employment, law obligations continue to work.

Beyond this, the normal employment law obligations apply.

Herald: I suspect my boss of not passing the wage subsidy to staff. Can I report him?

Stewart: There is a reporting mechanism to the Minister of Social Development if you have grounds to think that you’re not receiving the wage subsidy in your wages. There is a full complaints process set out with the Ministry of Social Development.

Herald: One thing that has been quite controversial is the timing of redundancy around receipt of the wage subsidy. So, can an employer start making people redundant while accepting the wage subsidy? When can the process be started?

Stewart: They can’t implement the redundancies during the period of the wage subsidy because, as mentioned earlier, one of the key obligations is to retain staff during the period of the wage subsidy. However, they can still start a redundancy process. And then when they’re not receiving the wage subsidy, they can implement redundancies.

Of course, they need to follow existing laws around redundancies as well. So they need to make sure that they’re doing everything right in terms of having a robust process and being fair and reasonable and having a good substantive justification.

But once the wage subsidy has expired, they can, in accordance with normal law, implement redundancies.

Herald: Another contentious issue that has emerged involves essential work amid a local outbreak of the Delta variant. If people are too afraid to work is this sufficient grounds to stay home or are they obligated to work?

Stewart: If it’s an essential worker who is in a business, which is open during alert level 4, then they have an obligation under the terms of their employment agreement to perform their services. They are obliged to go to work.

But on the flip side, the employer is obliged to provide a safe working environment for that employee. So you have two obligations: one on the employer and one on the employee.

If the employee doesn’t feel safe, for whatever reason, then the question is why don’t they feel safe and do they feel unsafe on reasonable grounds?

In an extreme situation where there is a lack of safety, then a worker could refuse to go to work – invoke the Health and Safety at Work Act, under which you can refuse to attend work if there are health and safety grounds. Or they could even implement a strike under the Employment Relations Act on health and safety grounds.

There are mechanisms in the legislation for them to turn around and say to their employer that it’s unsafe to work and, on health and safety grounds, “I’m not going to attend”.

That said, it’s a really high threshold to achieve. They would be quite extreme cases that would entitle employees to refuse to work. Often these issues are resolved with measures that are put in place to make employees feel safer.

On the other hand, if there aren’t any reasonable grounds for the employee to say they feel unsafe, then the employer could actually make a lawful and reasonable instruction to direct that employee to attend the workplace and could ultimately invoke disciplinary action if they didn’t. Again, this is an extreme example.

Herald: The ethical implications of mandatory vaccines at the workplace have already served up a few interesting debates. So could an employer force staff to have a vaccine to work?

Stewart: Generally speaking an employer cannot force an employee to have a vaccination. There are long-established rights that people have to refuse medical intervention with their bodies without their consent.

However if an employee is a worker covered by the Covid-19 Public Health Response (Vaccinations) Order 2021, then in order for them to undertake the work covered by that order they must be vaccinated. The type of work covered is in relation to managed quarantine facilities, managed isolation facilities, airports, aircraft and ports.

Furthermore, there is nothing to stop an employer from bargaining for a mandatory vaccinations clause in its employment agreements when employing staff. Such a clause can be bargained for along with all the other clauses of the agreement.

Another possibility is for employers to implement policies requiring mandatory vaccinations. They would need to do so according to a fair process involving consultation with staff. It is not yet tested whether New Zealand courts would enforce such a policy, and any case is likely to be fact-specific. However, there has been a recent Australian case that found a mandatory flu vaccination policy for a childcare centre was lawful and reasonable, and that upheld the dismissal of a worker who refused to be vaccinated. This is an interesting area, so be sure to watch this space.

Herald: Since we’ve been here before, what are some of the examples you’ve seen of employers behaving badly when it comes to the wage subsidy?

Stewart:In the earlier stages of the pandemic, employers were grappling with the situation and with what the wage subsidy meant, and they tended to misinterpret things like the 80 per cent rule; they would automatically reduce employees’ pay; they wouldn’t follow proper processes when it came to redundancies.
Many employers were in some instances panicking, some with good reason, and they were perhaps unintentionally flouting the existing laws. These were really the situations that we observed where employers were just getting it wrong in these very unusual unprecedented times.

Herald: There have been some examples of big companies shrinking during the first bout of Covid, then growing again, and now they’ve potentially had to start letting people go again. Is there anything protecting employees from this seesaw of uncertainty?

Stewart: Well, the wage subsidy is really good protection because the employers can’t make employees redundant during the period they receive it. That’s really the key protection to keep jobs safe.

Over and above this, there are a lot of entitlements at law that they have in existing law. They can raise personal grievances. They have entitlements to minimum standards. They have entitlements to minimum wages. They have entitlements to leave. So there’s a whole suite of legislation that gives employees entitlements that they can use if they need to.

There is hopefully also the added protection that comes with the general feeling that we’ve been through this before. Employers might be thinking, depending on their situations, that they don’t want to lose their talent.

If they do that then they could lose momentum in the business, particularly if they have to recruit new staff as they recover.

Having said that, we don’t yet know how long this lockdown is going to last and just how much impact it’s going to have on businesses.

Herald: Many employers previously asked their staff to take pay cuts. What are the rules regarding this?

Stewart: Generally speaking, no, an employer can’t ask an employee to take a pay cut. The rate of pay is a fundamental term of a contract, and should not be altered without the agreement of the employee.

There is, however, a school of thought – which is largely untested in New Zealand employment law – around whether employees are really willing and able to work during a Government-mandated lockdown and whether pay is required in those circumstances.

That is another area of law that is still untested, but, generally speaking, the employer must obtain the agreement of the employee before they can implement a pay cut.

Herald: Furloughs have become very common in the UK and the US. What do these mean and do they apply in New Zealand?

Stewart: Furloughs are basically a temporary absence of leave from the employment agreement. A furlough is basically a situation where the employer provides no work and provides no pay, and the employee does no hours. It’s used in circumstances outside the control of both parties.

While they are common in the US and the UK, they are largely untested or uncommon in the New Zealand employment law sphere. It would definitely require agreement between the employer and the employee to implement a furlough-type arrangement.

We do, however, have clauses that are similar and often put into employment agreements. I have to say, they’ve been put in a lot more often since the March 2020 lockdown.

They are clauses such as a business interruption clause, lawful suspension clause or a force majeure clause. They all have a similar kind of effect, which is basically to suspend the employment agreement while this extraordinary event is happening. They excuse the employer from the obligation of having to provide work, they excuse the employee from the need to do any work, and it’s a no-pay arrangement.

Employers would be well-advised to check if their employment agreements have clauses to that effect because they may well provide a similar kind of arrangement to a furlough arrangement and give some in extraordinary circumstances.

Herald: On the topic of a leave of absence, many employees have accrued weeks and weeks of annual leave over the last 18 months. Can your employer force you to take leave?

Stewart: Under the Holidays Act, an employer can require you to take leave if they give you 14 days’ notice. We haven’t yet had 14 days of lockdown, so up to now employers wouldn’t have had the capacity to say “we require you to take leave”.

That said, this is one of the areas where agreement is the best way forward. Rather than the employer forcing someone to take leave, it sometimes just requires a conversation in good faith. You might find some employees are happy to take some leave.

Herald: To round off the discussion, what do you think employers and employees should be wary of if the lockdown drags on?

Stewart: Employers and employees need to keep talking to each other. When we’re all at home, working in our bubbles, it’s easy to become quite isolated. It’s important to remember that the employment relationship needs good communication for it to be effective on both sides.

Keeping the conversation going and keeping in touch with each other on a regular basis and addressing issues as they come up and resolving them is really important.

We should always bear in mind that the employment relationship is governed by a statutory obligation for both parties to act in good faith – and good faith requires the parties to be communicative with each other.Keeping the conversation going about how things are working is really important when we’re all isolated in our bubbles.

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