COVID-19 – First Employment Law Case in the COVID-19 Era

The Employment Relations Authority has released a pivotal decision in the first employment law case in the COVID-19 era. In Raggett & Ors v Eastern Bays Hospice Trust [2020] NZERA 266, the Authority reminded employers that despite the Alert Level 4 lockdown and government restrictions, employment law continues to apply to all employment relationships, especially regarding employment agreements. Variations to the terms of employment agreements must be agreed to by employees, to avoid unilateral changes being considered unlawful and employers being liable for breach.

The Facts

Eastern Bays Hospice Trust (the Employer) closed over the COVID-19 Alert Level 4 lockdown, applied for the Wage Subsidy and subsequently made its Employees redundant. The Employer stated it would pay the Employees 80% of their usual pay for their notice period.

The issue at hand was whether in accepting the Wage Subsidy, the Employer was somehow released from its obligations to pay wages in the manner required under the employment agreements and the Wages Protection Act 1983. In applying for the Wage Subsidy, the Employer declared that they would use their best endeavours to pay employees at least 80% of their wages, which can only be imposed with employees’ agreement.

In this case the main concern raised was that the Employer had unilaterally decreased Employees’ pay without consultation and agreement from them. The Employer had effectively altered the terms of the employment agreement, and as no agreement for the variation was sought or given, the Employment Relations Authority ruled that the Employer unlawfully varied the employment agreements.

The Argument

In their defence, the Employer argued they were discharged of their obligations under the Wages Protection Act 1983 as the Employees were not “working”, New Zealand was in lockdown and the Employees could not work from home. The Authority found that the Employer’s argument was invalid, as the Employees were “ready willing and able to work” but were unable to because of the COVID-19 restrictions. Therefore, the Employees were still owed wages and the Employer was liable.

Going Forward

The main learning from this case is that to vary terms of an employment agreement (e.g. reducing hours, pay, and/or notice period) the explicit written consent of an employee is required. Without that consent, any deduction could be unlawful and the employer (as in this case) could be liable to pay wage arrears.

Employment Law Assistance

Renika Siciliano and Jerome Burgess are able to assist with employment matters relating to COVID-19, and provide guidance on crafting policies in relation to your business’ response to COVID-19, or any future pandemic event.

Renika is a Director and leads our Workplace Law Team. She can be contacted on 07 958 7429.

Jerome is an Associate in our Workplace Law Team and can be contacted on 07 958 7427.