New Case Law on Wage Payments and COVID-19 Subsidy
Cases, COVID-19 / 22 July 2020
Two recent Employment Relations Authority decisions concerning the government COVID-19 wage subsidy (in Raggett & Ors v Eastern Bay of Plenty Hospice Trust t/a Dove Trust  NZERA 266 and Sandhu v Gate Gourmet New Zealand Limited  NZERA 259 confirm that:
- acceptance of the wage subsidy does not change an employer’s obligation to pay employees their full salary or wages;
- an employer cannot make deductions to an employee’s salary or wages without their prior consent; and
- at least the minimum wage must be paid for all work performed.
In Dove, the employer issued memorandums to employees advising of their redundancy owing to the impact of COVID-19. Employees were given an eight week notice period and informed they would be paid 80 per cent of their salary or wages for the first four weeks, and the government subsidy rate of $585.80 for the second four.
Affected employees took the matter to the Authority to query if Dove was in breach of the Wages Protection Act 1983 (Act) and their employment agreements for deductions from their remuneration without consent.
The Authority concluded Dove’s actions were in breach of the Act and the employment agreements and therefore unlawful. The shortfall between what the employees were actually paid and what they should have been paid was due to them.
In Gate, COVID-19 saw Gate’s business drop sharply, leaving a shortage of work to offer their employees, and therefore advised many of them to refrain from coming in.
Gate decided that only those at work would be paid the full 40 hours per week, while those not required to work would only be paid at 80 per cent of their usual wages, with the option to supplement this by using annual leave. There was disagreement between the parties as to whether this reduction was agreed or not. The employment agreements in question provided each employee with at least 40 hours work per week at minimum wage.
Affected employees challenged this on two grounds: firstly, that reducing wages required employee consent and, regardless, such an arrangement is unlawful as it means they are paid less than minimum wage.
The Authority sided with the employees. A reduction in their wages to 80 per cent was in breach of the Minimum Wage Act 1993, regardless of whether the reduction was mutually agreed. Consequently, they were entitled to be paid what they should have earned for 40 hour weeks during this period.
Message for Employers
These cases highlight the ongoing employment issues arising out of COVID-19 and various responses employed swiftly to address downturns in work. We are seeing a raft of claims against employers along these lines, and recommend seeking strategic advice regarding any necessary defence.
Disclaimer: We remind you that while this article provides commentary on employment law and health and safety topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek legal advice from your lawyer for any questions specific to your workplace.