Posted by Tony Sung on September 25 2020 in News

Employers need to be clear on their rights and responsibilities regarding pay during Covid-19, it is especially important with the resurgence of Covid and reimposition of some travel restrictions.

Until recently, the law has been unclear on whether employers can partially pay its workers, especially in the context of essential industry, relying on the slogan ‘no work, no pay’ and also on ‘partial performance, partial remuneration’. This issue has been given some clarification by the Employment Relations Authority in the recent decision in Sandhu v Gate Gourmet New Zealand Ltd [2020] NZERA 259.

The employer was a business providing inflight catering services to passenger aircraft. It was an ‘essential service’ for the purposes of the lockdown that commenced on 26 March 2020. Following the imposition of the Level 4 lockdown, the employer advised employees that as a result of having very little work to offer employees, as a result of the pandemic, it would need to partially shut down operations. The employer offered to pay non-working employees at 80 per cent of their normal pay. The employees lodged a claim at the Employment Relations Authority saying their pay could not be reduced without breaching the Minimum Wage Act 1983.

The Employment Relations Authority firstly pointed out that it was not open for either the employer or the employees to contract out of the Minimum Wage Act 1983. Further, the Employment Relations Authority pointed out that the decision whether to work or not was not a decision made at the election of the employees. Its view was that, considering that the employer’s business was an essential industry, the employees’ lack of work was not due to the lockdown but rather due to the direction of the employer. Accordingly, the Employment Relations Authority concluded that, in paying the employees 80% of their wage, the employer breached the Minimum Wage Act 1983.

The Sandhu decision demonstrates that it is much more difficult for an employer in essential industry to justify partial remuneration on the ground that it could not offer full time work for all of its employees due to the restrictions of Covid. If the lockdown means it is no longer possible for an employer to offer full time work for all its employees, the employer needs to take steps to restructure its business and explore alternative options.

If you would like more information regarding the above, or have any questions, please contact us.

Kalev Crossland | Partner
t +64 9 300 8755 | Kalev.Crossland@shieffangland.co.nz

Tony Sung | Solicitor
t +64 9 376 0655 | Tony.Sung@shieffangland.co.nz

Dew James | Solicitor
t +64 9 376 0655 | Dew.James@shieffangland.co.nz

This paper gives a general overview of the topics covered and is not intended to be relied upon as legal advice.