COVID-19 and minimum wage obligations – the latest from the Employment Court

Gate Gourmet New Zealand Ltd v Sandhu [2020] NZEmpC 237 deals with employment rights and obligations arising during the COVID-19 lockdown. The key issue was whether an Employer was obligated to pay employees the minimum wage if they were not working due to partial business closure, but were “ready, willing and able” to do so.

Facts

Gate Gourmet New Zealand Limited (Gate) is an airline catering company which closed part of its business during the nationwide lockdown in March and April 2020. For some employees, the partial closure meant that there was no work available and they were required to stay at home for the lockdown. Gate paid these employees 80% of their normal wage. However, for those who ordinarily received the minimum hourly wage, this payment equated to less than what they would have been entitled to receive by law for working under the Minimum Wage Act 1983 (MWA).

Five employees, through their union, filed in the Employment Relations Authority. The Authority found that if the employees were “ready, willing and able” to carry out their function in an essential industry, Gate was required to pay them at least the minimum wage. The Authority ordered Gate to reimburse the employees for the difference between what they had been paid and the minimum wage.

Gate challenged the Authority’s determination in the Employment Court.

Employment Court decision

The primary issue for determination was whether the employees were entitled to be paid minimum wage for the period in question.

Section 6 of the MWA provides that all employees “shall be entitled to receive from [their] employer payment for [their] work at not less than the minimum wage”.

The Court considered what constituted “work”, and the majority found:

• The purpose of the MWA was to ensure employees received a base rate for work completed. It did not provide a guaranteed minimum income;
• Employees who stayed at home were not “working” for the purposes of section 6, and therefore the MWA did not apply in this case. Being “ready and willing to work” was not the same as working under the MWA;
• Accordingly, the payments that the employees received of 80% of their ordinary pay (and less than the minimum wage for a 40 hour week) was lawful;
• Although the MWA did not apply, Gate still had other employment obligations including arising from their employment agreements. The employees’ employment agreements provided for full-time employment for a minimum 40 hour-week – this meant that the Company was obligated to pay the employees for those 40 hours, even when work was not actually performed (through no fault of the employees).

Interestingly the Chief Judge dissented, concluding that the minimum hourly wage applied, given that the employees could not work for reasons of the pandemic and not due to their default, illness or accident, so no deduction from the minimum wage could be made. She said lawfully an agreement couldn’t be made to reduce the employees’ wages to 80% of the minimum wage, however it was open to the employees to agree to a reduction of their hours of work to give the equivalent result. She said that to allow the majority’s interpretation to apply, meant that it took away money from the most vulnerable group of employees where Parliament had intended to provide them with an income floor, being the minimum wage.

Take home findings for employees and employers

The lockdown and wage subsidy were not intended to override the legal rights of employees and the obligations on employers to uphold those. Consideration should always be given the to the legal framework of minimum obligations, as well as the rights and entitlements under each employee’s employment agreement.

Given the risk of future Covid restrictions/lockdowns, employers are reviewing their employment agreement terms and policies to ensure they are relevant and suitable going forward. This can be a two pronged approach with employment terms – dealing with existing employees (e.g. consulting regarding proposed changes), and ensuring future employment agreements are appropriately set up going forward.

Matters to consider when reviewing employment agreements include provisions around minimum hours of work, suspension (including in pandemics) and working from home. Policy provisions that may require review include those regarding flexible work, working from home/remote working and sick leave. Special consideration should be given to those employees receiving minimum wage and the consequences of possible future lockdowns.

The above is general information. If you have specific questions or require advice, please contact one of our Employment Law team:

Christie McGregor
Partner
E: Christie.McGregor@hobec.co.nz
DDI: 07 928 7099
M: 021 0841 4220

Abigail Pearce
Solicitor
E: Abigail.pearce@hobec.co.nz
DDI: 07 571 3830