Coronavirus Covid 19: Employment lawyer answers all your wage subsidy questions

Holland Beckett Law employment lawyer Christie Goodspeed. Photo /Supplied

What are employees' rights? What are employers' rights? What if you're made redundant? Holland Beckett Law employment lawyer Christie Goodspeed answers questions about the Government's wage subsidy scheme

What rights does an employer have?

An employer ultimately has, subject to compliance with employment law, the right to organise its business as it wishes, including (as long as procedurally and substantively justified) restructuring to reduce its workforce, or change certain roles to reduce costs and create efficiencies.

If an employer wants to change the terms and conditions of employees' employment, it cannot unilaterally do so. There are two parties to the employment relationship who must agree. It must consult and attempt to obtain agreement. If that is not possible then it may need to look to other ways of achieving efficiencies/cost savings it requires – for example through a restructure process.

The overriding premise is that this is a 'relationship' not a 'contract´ and the parties must deal with each other in good faith and be responsive and communicative. This includes, where it is proposed to make a decision that will impact an employee's ongoing employment – advising them of that proposal, providing information in relation to the same and allowing the employee to comment before decisions are made.

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What rights does an employee have?

For essential workers who are vulnerable – they would have the right not to be required to attend work and for employees working in essential services, to be offered work and paid as usual.
However, they have the right to have their health and safety protected in the work they are performing, so additional measures will likely need to be taken to protect their health e.g. rolling shifts so that less risk of exposure, protective equipment/masks etc if appropriate.
For employees whose employer has accessed the wage subsidy, to have this passed on to them and for their employer to use 'best endeavours for them to be 'topped up' to 80 per cent of the employee's normal pay.

What if someone earns less or more than $585 a week?

If an employee's actual pay is less than the subsidy, the employee will continue to receive his or her ordinary pay. The balance can be used by the employer to subsidise any other impacted employees.

For those who earn more than $585.80 a week, an employer must make 'best endeavours' to top up an employee's pay to 80 per cent of the employee's usual pay.

Could you explain the wage subsidy in layman's terms?

The subsidy is essentially a Government 'base wage' payment, which can be utilised by qualifying employers to pay towards the wages of their staff. It has been referred to as a 'universal basic income', because at worst, this is the amount that must be passed on to those employees.

The wage subsidy is designed to reduce the financial impact for employers of Covid-19 on New Zealand businesses. It is available to those qualifying employers, whose circumstances justify the grant being made. It is designed to help employers to retain their staff, without having to reduce an employee's hours of work or make employees redundant. The wage subsidy is a payment solely for the retention of staff, and the entirety of the payment must be passed on to employees.

It is intended to provide assistance and 'breathing space' while qualifying employers determine what the impact of the pandemic has been (including the lockdown) and what this will mean for their business going forward after the 12 weeks.

• Covid19.govt.nz: The Government's official Covid-19 advisory website

In your view, what parts of the wage subsidy scheme have led to confusion?

One of the most confusing aspects of the wage subsidy is the term "best endeavours" and what exactly this requires regarding the requirement to top up an employee's pay. In this context, the Government's interpretation of "best endeavours" appears to be an employer must try their best to pay their employees at least 80 per cent of their normal wages. In our view, this does not mean embarking on a course of action leading to the ruin of the employer, but exhausting all reasonable courses of action which could be taken in these challenging circumstances.

The Government places significant emphasis on this being a "high trust scheme" for employers with the purpose being to ensure that the money is used to support the wages of employees. When we have enquired on their helpline for comment, the approach seems to be hugely flexible and intended to ensure employees at a minimum receive the subsidy.

The other issue is around keeping a job open and the two different undertakings that were given pre 4pm on 27 March and post. Pre 27 March, the obligation was to make 'reasonable endeavours' to keep the role, not that the role has in all circumstances to be maintained.

Also the lack of detail, and some circumstances falling outside the above like: what if an employee is on their trial period and a wage subsidy is granted – can the employer terminate employment for failing to satisfactorily complete the trial?

If an employer opts to make their staff redundant because they can't survive under the redundancy laws, what are they obligated to pay?

In New Zealand there is no statutory provision for redundancy compensation. This may be provided under an employee's individual employment agreement, however, this is reasonably uncommon. If an employer makes an employee redundant for genuine commercial reasons, they would be obligated to pay the employee the duration of their notice period (which may be payable in lieu of working if the employee is unable to work).

What happens if an employer doesn't have the money?

If an employer cannot afford to make the top-up payment, and has made best endeavours to do so, then the employer can simply pass on the entire wage subsidy to the employee and leave the role open.

If an employer considers that their business may their business is no longer solvent (i.e. their liabilities outweigh their assets or they cannot pay their debts as they fall due), then the employer should seek specific advice as to cost savings, and interventions that may be available.

Can a business place staff on leave without pay rather than making them redundant? If so, can they access unemployment benefits?

The issue will be whether it has work to offer an employee to do, and whether the employee is a position to be able to accept such work. In these difficult times, it can be a mix of the two.

An employer should consider all circumstances to determine what options are available, for example:

Is there work available for the employee to do? If there is it should be offered. Is there a wage subsidy available to supplement the employee's income? then that should be considered rather than leaving the employee without income. Does the employee have leave they can access or are there other options rather than leaving the employee without pay.

While an employee is on 'unpaid leave' they are still technically employed. We cannot comment specifically on eligibility for Winz benefits, but anticipate that the employee being in work could impact their eligibility for a benefit.

What are employees' rights when an employer asks them to take a pay cut?

An employee is not required to agree to a reduction in hours or pay. If an employer wants to reduce an employee's pay, then it must consult with that employee in good faith and obtain their agreement. If an employee does not consent to this, they should communicate their refusal in writing. If the employer cannot achieve agreement, then the employer may undertake restructuring to achieve cost savings (subject to any undertakings with the wage subsidy).

An employer who is struggling to meet the 80 per cent top-up, can reduce the top-up if that is not possible after using best endeavours to do so.