Common employer mistakes from lockdown.

By Paul Brown (originally published September 2020)

It's clear some employers either panicked or did not bother getting good advice about reducing staff costs during the lockdown, and there Is now a backlog of cases in the Employment Relations Authority dealing with Covid-19 related issues.

Here, Paul Brown details some of the more common mistakes he encountered since the first return to Alert Level 1 (and to avoid in the event of future similar scenarios).

Varying terms of employment for employees by changing hours or rates of pay without consultation and agreement: You may recall the initial advice was that employers should pay 100% of wages if this was possible or, if not, use their best endeavours to pay 80% of wages. A key message missing in that, is that an employer cannot unilaterally change the terms and conditions of employment, especially around wages.

Any change to wages must be by signed consent, which somehow a lot of employers managed to over-look. In any situation, pay cannot be reduced below the minimum wage of $18.90 per hour. Employers who fail to do this are at risk of personal grievance claim for unjustified actions causing disadvantage and an action for wages recovery and/or penalties.

Failure to comply with the wage subsidy declaration by either not paying employees included in the application and/or making employees redundant during the subsidy period:

The employer declaration made after 4pm on 27 March stated they would pay the employees included in the application at least the full amount of the wage subsidy. It also stated the employer would retain the employee for the wage subsidy period.

On a good day, employers who breach these obligations face prosecution by MSD for recovery of any amount the employer is not entitled to. On a bad day, they could face prosecution under the Crimes Act 1961 for fraud, and the like.

“Employees wrongfully denied money to which they are rightfully entitled can pursue a personal grievance claim for unjustified actions causing disadvantage.”

Unlawfully requiring employees to use leave during the subsidy period:

Some employers were quite creative about how to jump the gap from 80% to 100% of wages. One tactic was to ask employees to use their own holiday pay to top up their own wages or salary to 100%. I’m surprised anybody would agree to this but clearly some have. Any employer who has done this could face prosecution by MSD, and will need to repay the holiday entitlement to the employee. Again, employees can pursue a personal grievance for unjustified actions causing disadvantage.

Making employees redundant without complying with obligations of good faith regarding consultation and procedural fairness:

Employers who used Covid-19 as the basis for redundancies are still required to engage in genuine consultation with the employee.

This requires procedural fairness, which includes adequate consultation, including explanations,

meetings, genuine consideration of feedback and discussion of any selection criteria. The terms of the employment agreement must be complied with, including notice. As you would expect, any employee can challenge their redundancy by claiming it was an unjustified disadvantage and/or unjustified dismissal. 

Using Covid-19 as an excuse to get rid of 'expensive' or 'unwanted' staff:

Reducing the number of employees by redundancy requires an objectively measurable selection criteria. This does not mean your friends stay and everybody else can be considered for redundancy. The selection criteria has to be objectively measurable, i.e. based on verifiable data and facts. For example, ‘relevant qualifications / work experience / training / experience (and the like) for the role' may be measured from 0 (you're gone) to 5 (you're staying).

The criteria should be communicated to the employees and their representatives for feedback. Any other relevant information should also be supplied, such as which employees are in the selection pool and who will be on the select-ion panel.

The selection criteria should avoid anything discriminatory such as attendance record, sick leave records, visa status or availability to work during lockdown. This has become an issue since the lockdown as some employees had legitimate reasons they were unable to work such as personal vulnerability to Covid-19, or caring for someone in their bubble, or the absence of childcare. Any reasons like these must not to be used against the employee in the selection criteria.

Conclusion

If any of the above apply to you as an employer, you have two options. One is for you to raise the issue with your employee and explain that, despite your best intentions, you may not have complied with all your obligations as an employer, and resolve the issue - including paying any money owed.

The other option is to say nothing and hope the employee never finds out what has happened (what I call the "Dumb and Dumber" approach). The downside to this approach is that you face a personal grievance, payment of any money owed, the imposition of penalties, and prosecution by MSD. Probably not a good day in the office, if that was to happen.

As always with employment law, prevention is always cheaper than cure, so get some good advice if you are worried.