LEGAL LINES – The impact of coronavirus on employment

6 MinutesBy NZ Trucking magazineJune 22, 2020

26 March 2020 will be a day of historical significance for New Zealand because it was the first day of lockdown after the nation‘s alert level was raised to 4. It has been a time of great disruption that has brought grief, financial difficulties and enormous changes to our lives on a daily basis. For most of New Zealand there is no such thing as ‘business as usual‘, and while the measures we are taking will undoubtedly save lives, they will also result in a period of economic downturn. Some businesses have been forced to close and employees are being encouraged to work from home. For those in essential services they will continue to operate but under tight restrictions for the foreseeable future. The relationship between employers and employees is recognised in law as a special relationship, with more obligations than apply to an ordinary contractual relationship. Employers have few unilateral options in this context, so there will need to be genuine consultation and robust discussions between the parties to overcome the challenges that lie ahead.

Does employment law continue to apply?
Employers and employees have the same duties toward one another that they had prior to the lockdown, including the obligation to deal with each other in good faith. Most employers will be under significant financial pressure, given that there was very little time in which to adjust to operating in lockdown. To assist, the government is offering a wage subsidy scheme that provides a fixed payment per worker for 12 weeks. This is paid to an employer as a lump sum and it is to be passed on to employees as wages. Employers are required to make their best efforts to keep the subsidised workers employed for the period of the subsidy and to pay them 80% of their pre-Covid-19 income. Beyond this, employers should be having open discussions with employees, in good faith, about the financial situation looking forward over the next 12 months. While the lockdown itself is only for a finite period, the expected recession will have at least medium-term effects for the New Zealand economy. Employers facing serious difficulties need to talk to their employees about what measures are going to be required to keep the business afloat and avoid job losses.

What kinds of alternatives are available?
The options which employers may need to discuss with their employees could include reduced hours, reduced pay, taking annual leave, taking unpaid leave, taking special leave, or a combination of these. Both parties will need to be realistic about the alternatives and creative about finding solutions to the challenges presented. Any changes to employment terms must be agreed and recorded as variations to existing employment agreements, whether on an individual or a collective basis. It will be important for employers to convey their decisions to affected staff sensitively while stress levels are high, especially when using remote communications. Where an employee‘s position is surplus to the commercial needs of the business, their employment may be terminated on the grounds of redundancy. The process for making employees redundant is relatively prescriptive and any employees made redundant must be paid out in accordance with statutory minima and their contracts. Whilst some contracts may include force majeure or business interruption clauses and the common law doctrine of frustration of contract may also apply, they should not be considered easy escape clauses for employers. The thresholds for these legal options are set high, so seek specific legal advice on whether and how they might apply in different circumstances.

Tailoring ongoing employment relationships
Employers continue to have a legal duty to eliminate or minimise hazards to provide a safe workplace for employees and other people present on worksites. Employees of essential businesses have extra health and safety needs arising from Covid-19, such as provision of additional cleaning, protective equipment, and measures to ensure there is adequate social distancing. For employees who are working remotely, thought needs to be given by employers to how best to help them adapt to working from home, such as rearranging their workspace to make it more fit for purpose. An employee‘s mental health and wellbeing must also be considered, so regular contact to monitor this may enable employers to provide support when necessary. Many workers will have dependents in their bubble, which will be an additional responsibility they must juggle, so their employment arrangement must be flexible enough to accommodate this. Hopefully the decisions made by our government will keep bringing us closer to a return to a more normal time, and there have been heart-warming stories of people coming together to help others. While we continue to live through a time of great upheaval and uncertainty, may this sentiment of kindness continue and give us the opportunity to slow down, pause, and take pride in how we have responded to this challenge.