Business impact around remuneration and leave amidst COVID-19

Updated: May 5



Many businesses have already been seeking advice, implementing policies and taking other measures to deal with the employment implications of the rapidly developing situation surrounding the pandemic.

Following the NZ Government’s announcement on Saturday of wide-reaching travel restrictions, we have worked with our Employment Law Specialists LangstonHudsonButcher who have put together the following to make sure that you remain updated on issues that are likely to affect your workplace and employees. While we can provide you with this general guidance, it is important to remember that every workplace and employment relationship will have its own specific set of issues, and we strongly recommend that you take advice for your particular circumstances.

As you will know, the travel restrictions mean that from 23:59 on Sunday 15 February 2020, any person entering New Zealand from any country, excluding the Pacific Islands, will be required to self-isolate for 14 days from arrival. This restriction will be reviewed on Monday 30 March 2020. All New Zealanders have been encouraged to avoid all non-essential travel and to avoid hugs, handshakes and hongi.

The Govt also announced on Tuesday their package of measures which includes initiatives intended to support employers (and employees) and we summarise these below.


WAGE SUBSIDIES:

Employers who have suffered, or expect to suffer, at least a 30% decline in revenue compared to last year for any month between January to June 2020, are able to claim $585.80 per week per full time employee, and $350 per week per part time employee, for a period of 12 weeks, up to a maximum of $150,000 total.

In order to claim that amount employers must give two undertakings: First, that they will use their best endeavours to continue to employ the affected employees at a minimum of 80% of their income for the subsidy period, and second, they will take active steps to mitigate the loss to their business.

Employers can file a claim with Work and Income here.

More information is available here.


COVID-19 LEAVE PAYMENT:

Employers who have employees who have contracted COVID-19, or are required to self-isolate in line with Ministry of Health Guidelines and have registered with Healthline, or are caring for someone who is sick or in self-isolation, are able to claim $585.80 per week per full time employee and $350 per week per part time employee. Payments can be backdated to 17 March 2020 and are available for eight weeks (until 12 May 2020). Employers are then required to pass on the sums claimed to the affected employees. Leave payments are not available where the employee is able to work from home, or their self-isolation is due to travelling overseas from 16 March 2020.

Employers can file a claim with Work and Income here.

More information is available here.


KEY POINTS ARISING ARE AS FOLLOWS:

  1. Before considering redundancies based on reduced revenue, employers should consider whether a subsidy is available under the wage subsidy scheme, and, if so, whether it is sufficient to avoid a redundancy situation;

  2. Employers should not interpret the wage subsidy as entitling them to pay employees at less than their full pay (such as the suggested minimum 80%) – employee agreement to any reduction in their contractual pay rate will still be required;

  3. In our view, employers will be expected to be familiar with the leave subsidy, apply for it on behalf of employees where coverage applies, and pay it to them. Ignorance is unlikely to be treated as a valid excuse;

  4. What happens after the leave subsidy scheme expires, and whether an employer is required to continue to pay an employee their full pay during self-isolation is, in our view, unclear.


There are many news sources explaining what self-isolation entails and basic rules around workplace health and safety, good hygiene and practices, and sick leave entitlements. The following is a summary of the more complex issues you may need to consider, arising directly from the new restrictions:

1.EMERGENCY LEAVE AND SELF-ISOLATION POLICIES:

Consider issuing an emergency policy that deals with requests for leave during this period, setting out what needs to be disclosed when an application is made (e.g. details of any planned overseas travel, work from home set ups and willingness/ability to take unpaid leave during any period where an employee may not be able to return to work) and making it clear that leave involving overseas travel in the next month is unlikely to be approved. Consider also stating clearly how you will deal with pay during periods of self-isolation (which may differ from employee to employee, depending on accrued entitlements, see 3. below).

2.ALREADY APPROVED ANNUAL LEAVE:

If you have employees with approved leave to take over the next 16 days (and potentially beyond), you are within your rights to ask your employee if they intend to travel overseas during that period of leave. If so, and they are not going to a Pacific Island, you should be discussing with them a) whether they are able to postpone their travel and, if not, b) whether you can deal with the 14 day self-isolation period following their return. Ideally, you will reach agreement about how this will be dealt with, in terms of the absence, the possibility of work from home arrangements, and payment during the absence but, if not, you may need to consider withdrawing the approval for leave. We recommend taking advice before notifying any withdrawal of approved leave.

3.PAYMENT FOR EMPLOYEES SELF-ISOLATING:

If any employee is sick and they have a sick leave entitlement, this should be used until it is exhausted, at which time annual leave entitlements can be used by agreement. An employee who is away from work due to sickness, who has no leave entitlements, does not need to be paid, but employers could consider sick or annual leave in advance in that event, if the employee agrees.

Probably the most uncertain issue is whether employers are required to pay employees who are not sick but required to be away from work due to self-isolation requirements and their role cannot be performed remotely (e.g. from home), or their employer does not have an applicable force majeure clause in their employment agreement. In those cases, the employee could be said to be unable to perform their role safely, and therefore not ready, willing and able to work, such that their employer is not required to pay them. Conversely, it could be said that the employee is able to perform their role, but the Government and their employer will not let them, in which case their employer must pay. This issue has not yet been tested, and the partial solution to it might yet lie in whether the Government will enact legislation to provide them with paid self-isolation leave, although it is unclear who will ultimately pay for this leave. Otherwise, and in the meantime, employers could provide paid leave for this, either by agreement, or by using annual leave entitlements or in advance.

If self-isolation follows a period of overseas travel during approved annual leave, and you have agreed in advance that an employee may have to take leave without pay as a condition of that leave (whether in a policy or by specific agreement), then you are likely to be able to rely on that and not pay the employee during the self-isolation period.

4.POTENTIAL SCHOOL/CHILDCARE CENTRE/RETIREMENT VILLAGE AND REST HOME CLOSURES:

Sick leave will cover employee absence due to caring for a dependent who is sick. However, where a facility that usually cares for children and/or the elderly closes, employees may have to take time off work to care for them. Again, ideally, an employer and employee will be able to agree how such absence will be dealt with in terms of work from home, use of paid leave entitlements or leave in advance. However, if none of those options are practicable and the parties cannot reach agreement, an employer does not have any obligation to pay an employee who is at home caring for dependants who are not sick.

5.DISCIPLINARY ACTION FOR FAILURE TO FOLLOW A DIRECTION OR LEAVE POLICY:

As with all disciplinary issues, every situation is different and employers should exercise caution before taking action. We strongly recommend specific advice is taken if employees ignore or fail to follow directions or policies, or do not disclose material information about their leave.

Again, we reiterate that there is no substitute for getting specific advice about your own workplace and employee issues. You are likely to have questions that are not covered in the above about your particular situation and we cannot cover every situation in one email. However, we hope this provides some general guidance as to what you can and should be thinking about as we head into the working week with these new restrictions in place.

We hope this guidance assists in understanding the employment implications of the announcements, but this is no substitute for getting specific advice about your own workplace and employee issues.


If you need any further assistance or guidance, feel free to get in touch.

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