New Zealand is in lockdown for a minimum of four weeks. Businesses are forced to close. Thousands of employees are at risk of their positions being made redundant. In this environment, it is critical to restate the key tenets of employment law in New Zealand.

 

  • The Employment Relations Act 2000 governs the relationship between employers and employees.
  • The Act covers both collective and individual employment agreements.
  • To be protected, employees must meet the definition of ‘employee’ in section 6 of the Act.
  • Employees and employers owe each other the duty of good faith which requires both parties to be active and constructive in maintaining a productive employment relationship.
  • Where an adverse decision is made against an employee, an employee must be provided with access to information and an opportunity to comment on that information.
  • Any decision made by the employer must meet the test of justification, i.e. it must be a decision that a fair and reasonable employer could have made in all the circumstances.
  • Any decision regarding leave must meet the requirements of the Holidays Act 2003.
  • Employees are entitled to receive at least the minimum wage contained in the Minimum Wage Act 1983 (currently $17.70/hour for adults).

 

These key principles remain unaltered despite government measures introduced in response to the Covid19 pandemic. The principles form the bedrock of modern New Zealand employment law.

The Covid19 response has two or three key parts to it:

  1. There is a four-tiered system of alerts. Currently, New Zealand is at Level 4 – Eliminate. At this level, the goal is to eliminate the virus from New Zealand. This means that:
    a. All people are instructed by the government to stay at home.
    b. Schools and early childhood education centres must be closed.
    c. All other businesses must be closed except for essential services.
    d. Domestic and international travel is severely limited.

    New Zealand is at Level 4 for a minimum of four weeks and potentially for a longer period.

  2. To mitigate against the hardship of these measures, the government has introduced a Covid19 Wage Subsidy (CWS). The purpose of the CWS is to keep employers connected with their workers.

Under the CWS, employers, contractors, people who are self-employed and sole traders can receive the subside provided that certain criteria are met. A key criterion is that a business must have experienced a 30% decline in actual or expected revenue as a result of the government response to Covid 19.

The amount of the subsidy is $585.80 for full time employees and $350.00 for part-time employees (i.e. employees who work less than 20 hours per week. The subsidy is paid as a lump sum to qualifying employers/ entities and covers 12 weeks pay per employee.

The subsidy is exempt from GST payments. However, all the usual PAYE, Acc, Kiwisaver and student loan deductions must be made.

Under the scheme, employers are required to pay employees a minimum of 80% of their normal wages. If that is not possible, then employers must pay the amount of the subsidy. However, if an employee’s wages are less than the subsidy, then the employer must continue to pay the employee his or her normal wages.

 

COMMENT

This has significant implications for any redundancy decisions. The fact that New Zealand is at Alert Level 4 is a relevant circumstance which must be taken into account. So too is the existence of the wage subsidy scheme. Indeed, it may be very difficult for an employer to justify a redundancy if no application for wage subsidies has been made by an employer.

In addition, employers should be encouraged not to panic and to take time over making any redundancy decisions because a lawful redundancy will require that employees are provided with access to all relevant information and an opportunity to comment on that information. An employer must consider all employee responses before making any decisions.

Covid19 has not altered the fundamental principles of New Zealand employment law. All affected employers and employees should seek proper legal advice before making significant decisions regarding employment law issues.