COVID 19 doesn’t permit unilateral variations to Employment Agreements – Employment Lawyer – Business Lawyer – Dukesons Business Law

July 2020

This Blog isn't legal advice – if you need legal advice on any employment law issue, please contact me. I'm business lawyer (commercial lawyer) in Auckland who provides advice on a wide range of business law including employment law issues.

A recent ERA case (Raggett and others v Eastern Bays Hospice Trust) that relates to a factual matrix that occurred during a COVID 19 lockdown period simply illustrates the law that employer’s can’t usually vary employment agreements unilaterally.

The Employer received the Government Wage Subsidy (GWS) during the level 4 lockdown. (The GWS would seem to have been under the first set of rules that applied.) The GSW declaration stated “You agree you will, using best endeavours, retain the employees named in your application in employment on at least 80 percent of their regular income for the period of the subsidy.”

The Employer was a retailer. Stores were closed and employees weren’t required to work. The Employer sent a memo to employees stating that normal salary and wages would be paid until the end of the week and then payment would be at 80% until the end of the lockdown when the situation would be reviewed.

The Employer began consulting with employees about 3 weeks into the lockdown about a proposed restructure. Employees were then advised that their positions were disestablished and they would receive 8 weeks’ notice of termination (double their entitlement). They were told that the notice period would be paid out on the following basis:

  • First 4 weeks - 80% of salary or wages.
  • Second 4 weeks - the GWS rate of $585.80.

The employees lodged a claim in the ERA and as a matter of urgency, the ERA dealt with the calculation of pay in relation to the notice period. (The claim in relation to whether the redundancy was fair and reasonable has still to be determined.)

The ERA confirmed that a basic principle is that the terms of employment can’t be unilaterally varied. The employees hadn’t agreed to being paid anything other than their normal wages and salary. Just because the Employer extended the contractual notice period, it couldn’t unilaterally change the rate of pay during the extended period. The Employer should’ve consulted with the employees about a proposal to extend the notice period and to pay that extended notice period at a different rate.

The Employer argued that it had no obligation under the Wage Protection Act 1983 to pay contractual salary or wages because the employees weren’t working. The ERA held that the workers were ‘ready willing and able to work’ but for the intervening event of the COVID-19 restrictions. (That’s an important issue, that could be relevant in a range of circumstances. One ERA determination doesn’t necessarily cement the law.)

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