Covid-19. Key employment law information and FAQs

POSTED BY Duncan Coats
26 March 2020

posted in Covid-19 | Employment



The New Zealand Government has confirmed that, with effect from 23:59 on Wednesday 25 March 2020, it is implementing Alert Level 4 in response to the Covid-19 crisis. This means that it is not likely that Covid-19 is contained and so the Government is taking the most severe action under its alert system to eliminate the virus. Alert Level 4 requires (amongst other matters) that people stay at home, that all non-essential businesses shut their physical premises and that employers consider alternative ways for employees to work.

This update provides employers with workplace law guidance in relation to key issues that may concern them regarding the outbreak and Alert Level 4. We start by summarising the key support the Government has made available to employers and then provide the answers to certain frequently asked questions (FAQs) that may be troubling employers.

As the situation unfolds, it is imperative that employers stay up to date with developments (as they are rapidly changing). The Government’s dedicated Covid-19 website is an excellent starting point as is the Ministry of Health’s website. WorkSafe and MBIE have also published useful information on their websites.

Government support for employers

The Government has announced (and since refined) an economic response package to assist employers who are significantly impacted by the Covid-19 crisis. The key elements of that package are set out below.

$9.3 billion wage subsidy package

Wage subsidies are available from the Government for all employers affected by Covid-19. To be eligible for support, employers must:

    • have suffered, or be forecasted to suffer, at least a 30% decrease in revenue for any month between January 2020 and June 2020 (when the scheme ends) in comparison to the revenue generated for the same equivalent month in 2019, with such decrease being related to the Covid-19 outbreak; and
    • declare that they will use their best endeavours to continue to employ the affected employees at a minimum of 80% of their income for the duration of the subsidy period; and
    • have taken active steps to mitigate the impact of Covid-19 and sign a declaration to that effect.

If a business has been operating for less than a year, it can compare its monthly revenue to a reasonably equivalent month in order to show a 30% decline in revenue.

If approved, the employer receives the wage subsidy as a lump sum payment. The amount of support available is as follows:

    • $585.80 per week for full time employees (i.e. those working 20 hours or more per week); and
    • $350.00 per week for part-time employees (i.e. those working fewer than 20 hours per week).

The lump sum is payable for a 12 week period. There was previously a $150,000 cap on payments that could be received but this cap has since been removed by the Government.

Employers can apply for this subsidy through an online portal on the Work and Income website.

$126.5 million Covid-19 leave scheme

The Government will cover the cost of leave for those who are:

    • unable to work from home and need to self-isolate in accordance with Ministry of Health guidelines (e.g. because they have recently returned from overseas or have come into contact with someone who has Covid- 19);
    • sick with Covid-19 and unable to work; or
    • caring for dependents who are sick with Covid-19 or have to self-isolate.

The scheme is available to self-employed people in certain circumstances.

This scheme will be available for eight weeks and the amount of weekly support available is $585.80 for those who work full-time and $385 for those who work part-time (full-time/part-time status is determined on the same basis as for the wage subsidy scheme).

Covid-19 leave will apply even if an employee is on paid leave and their paid entitlements will remain unaffected. So, an employee can receive paid sick leave under the Holidays Act 2003 (Holidays Act) or, if requested by the employee, paid annual leave, at the same time as receiving Government-funded Covid-19 leave.

The Covid-19 leave scheme does not apply to those who leave New Zealand to travel overseas after 16 March 2020 and who are required to self-isolate on their return (which they would need to do even if Alert Level 4 wasn’t in place).

To receive the support available, employers must apply to the Ministry of Social Development and, if eligibility criteria are met, will receive a payment which they must then pass on to the affected employee. Payments can be backdated to 17 March 2020.

Our FAQ section is set out below.

Concluding remarks

The Covid-19 crisis has created a period of unprecedented uncertainty in New Zealand for employers and employees alike. It is a complex and rapidly evolving situation.

We hope that this update and our FAQs will assist with navigating you through some of the issues. If you would like to discuss any of the above (or the FAQs), please do not hesitate to contact us using the details below. There may well be other commercial matters you have thought about and which aren’t covered in this note – for example suspending performance of a contract or terminating a contract on the basis of a force majeure event or Covid-19 implications for director responsibilities or considering whether there are legal avenues available to you to suspend payment of rent under a commercial lease.

At Lowndes Jordan our team is working remotely and it’s very much business as usual in respect of our client service delivery. We look forward to hearing from you with any queries you have.In the meantime, we wish only one thing for you all: stay safe.

Frequently asked questions

1. Alert Level 4 distinguishes between "essential services" and "non essential services". What is an "essential service"?

An essential service is, in broad terms, a service that supports people and provides the necessities of life. This means food, medicine, healthcare, energy, fuel, waste-removal, internet and financial services will continue to be available. An entity that provides support to an essential service provider is also deemed to be providing an essential service. A full list of essential services is available here (note that this webpage will be updated from time to time). You can email if you have questions regarding whether or not your business is an essential service.

2. Why is the distinction between essential and non-essential services important?

Under Alert Level 4, only businesses/entities that provide essential services can remain physically open. All non- essential businesses must close. If you are a non-essential business and your staff can work from home, you can continue to operate your business.

3. I do not operate an "essential service". Do I have to pay my staff during the Level 4 lockdown?

If your employees can carry out their work from home, then they will be entitled to be paid their normal pay.

If your employees cannot work from home, then they probably do not have to be paid. This is because they are not “able” to work from home (and an employee needs to be “ready, willing and able” to work in order to receive wages/salary). Despite this, you might consider the following alternative solutions in order to maintain good workplace relations with your employees (these options are not mutually exclusive):

    • agree that you will grant them special fully-paid leave for all, or some, of the lockdown (though not every employer will be in a financial position to do this);
    • agree in writing with employees that they can use their annual leave entitlements to cover some/all of the lockdown period;
    • agree with employees in writing that their employment terms and conditions will be varied on a temporary basis during the lockdown period (e.g. agree a temporary reduction in wages/salary); and/or
    • apply for the Government wage subsidy such that business can use those funds to pay employees' wages. The subsidy is a last-resort step. Note that employers must use their "best endeavours" (read, "best efforts") to continue to employ affected employees at a minimum of 80% of their income for the duration of the subsidy period - so if you are seeking to agree a wage cut with the employees and receive the Government subsidy, then the starting point is that such a wage cut should not take employees' normal income below 80% of the normal pay.

In any approach to this situation, you should consult with employees before deciding what to do. Not only because this assists with meeting your good faith obligations but also because it will assist with alleviating stress and hassle for all involved in this unprecedented period.

4. Can I require my employee to take their annual leave during the Level 4 lockdown?

Under the Holidays Act, an employer and employee are required to try to agree on when annual leave is taken. If they cannot agree, an employer can direct an employee to take annual holidays by giving 14 days’ notice. As the Level 4 lockdown will last 4 weeks, there is enough time for you to consider and implement this option (assuming you can’t agree with employees when they should take their annual leave).

5. I do not operate an essential service and I need to consider a proposal to make redundancies. Is this possible?

You will no doubt have already considered cost-saving initiatives as a means to avoid making compulsory redundancies.

If redundancies have to be considered in order to save further costs, you will need to consult with affected employees regarding that proposal. This will include providing them with relevant information about the commercial rationale for the proposal (eg work has diminished or is expected to do so or the business has to downsize or cut costs). You should seek affected employees’ views on the proposal before making any decisions regarding their employment.

6. I would like to proceed with a proposal to make redundancies, can I still do that if I have received the Government's wage subsidy?

Potentially, yes. However, this is complicated by the fact that as part of the wage subsidy application, employers are required to confirm that they will use their best endeavours to retain affected employees for the duration of the subsidy period (i.e. until June 2020).

Clearly, the more evidence an employer has of showing the steps it has taken to try and retain staff after receiving the Government’s wage subsidy, the better placed an employer will be to demonstrate that it has used its best endeavours to retain employees. This might include initiatives such as obtaining employees’ written consent to reduce their salary on a temporary basis (but make sure that such a salary reduction does not mean that you fall foul of the requirement to use best endeavours to continue to employ the affected employees at a minimum of 80% of their income for the duration of the subsidy period – see FAQ 3). It may also include broader cost-cutting measures implemented by a business.

The length of time that has elapsed between receiving the wage subsidy and making redundancies will also be relevant. An employer will be at greater risk if redundancies are made a week after receiving the subsidy in comparison to making redundancies several weeks after receiving the subsidy.

7. I employ an individual in a non-essential business and they are working remotely from home. Do I have to meet certain of their expenses so that they can perform their duties at home?

You should review your employee’s contract and see what that provides for in terms of expenses.

Generally speaking, you should meet the cost of additional expenses reasonably and properly incurred to allow an employee to work from home. For example, if the employee’s mobile phone plan or broadband plan needs to be upgraded (because of the requirement to work remotely), then you can consider paying the difference between what their previous plan was and the relevant increased costs.

Communication will be key – you should make sure employees don’t incur expenses without your approval (or that they don’t incur expenses over a certain dollar amount without your written approval) and otherwise comply with any applicable expenses policy.

8. I operate an essential business. How does Alert Level 4 impact my business?

Your business is allowed to continue to provide its services under Alert Level 4. You should remain vigilant to prevent the spread of Covid-19. This will include implementing different working arrangements such as shift-based working, staggered meal breaks, flexible leave arrangements and physical distancing between staff of at least two metres.

9. I operate an essential service and my employee is sick with Covid-19, what happens next?

You should not allow the employee to come into the workplace and you should follow up-to-date Ministry of Health guidance. If the employee cannot work from home, the employee may be entitled to sick leave (assuming they have accrued an entitlement).

You can also agree with the employee that they will receive special (i.e. paid) leave for the duration of the illness (assuming you are in a financial position to offer that). If you do this you should set the relevant parameters (eg do employees need to exhaust statutory sick leave entitlement before special leave applies? How long will special leave last? etc.). If the employee has no sick paid leave or special leave entitlements, they can request to take their time off as annual leave instead (assuming they have accrued annual leave entitlement).

The employer can also apply for the Government-funded Covid-19 leave payment (see above).

An employer should also be aware of its obligations under the Health and Safety at Work Act 2015 (HSWA). You must direct the employee not to come into work. Such an instruction would also be a lawful and reasonable management instruction in the current circumstances (and so employees breaching that instruction could be subjected to disciplinary action).

If the employee can work from home (i.e. they are well enough to do so), then the employee can carry out remote working instead in isolation for as long as required under Ministry of Health guidelines. During that time the employee will receive their normal pay.

The employee should only be allowed to return to work once they have satisfied relevant Ministry of Health guidance in place at the time.

10. I suspect an employee at my essential business might have Covid-19, what happens next?

You should by now have clear policies in place requiring employees to inform you if they are at risk of spreading Covid-19. So, the first step is to discuss the matter with the employee to obtain the facts. Given the current circumstances, you ought to do this remotely or away from the workplace such that the risk of Covid-19 spread is reduced.

Employers will also be guided by the Ministry of Health’s requirements.

If there is a reasonable belief or concern that the employee has Covid-19, the employee should not be allowed to attend work. Instead the employee should follow Ministry of Health guidance, which is likely to involve self-isolation. Once the employer has sufficient comfort that the concern is not Covid- 19 related (eg the employee has returned a negative Covid-19 test and otherwise has complied with Ministry of Health guidance) the employee can return to the workplace.

During this time the employee would be entitled to full pay (because the employer imposed on the employee a requirement not to attend the workplace). Of course, if the employee was found to have Covid-19 then sick pay can be paid (if any is accrued).

The employer could make an application for Covid-19 leave support from the Government if the employee was sick with Covid-19 or was otherwise required to self-isolate (see above).

11. I have an employee in my essential business who is worried about coming into work because of the crisis. What do I do?

Firstly, consider referring the employee to an employee assistance programme provider if you have one. They will be able to assist with the employee’s anxiety. The Government also has resources available – employees can call or text 1737 to talk with a trained counsellor.

Moving on to your employment law obligations, an employee can refuse to carry out work if they have reasonable grounds to believe that the work that they are required to perform is likely to cause them serious harm. This could include a situation where an employee has a reasonable fear of being infected with Covid-19 in the workplace. So, listening to the employee’s concerns and dealing with them if possible (e.g. by explaining the steps you are taking to minimise the risk) should help the situation.

Discussing the matter might also allow for other arrangements to be put in place on a temporary basis, such as working from home, working different hours or taking other suitable measures. An employee might even prefer to take unpaid leave from work during the Level 4 lockdown.

If an employee refuses to attend work, the employer would not be required to pay the employee unless the employer is at fault (eg because its health and safety processes to avoid the spread of Covid-19 are inadequate).

POSTED BY Duncan Coats
26 March 2020

posted in Covid-19Employment



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