Trading through COVID-19 Alert Level 3, 2 and beyond – what employers need to know

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Businesses are facing unprecedented challenges that require them to rapidly adapt their ways of working, or indeed, their whole business model. Most employers are already preparing their “new normal” but they also need to consider how they will sustain these changes for an indefinite period of time.

This article sets out some useful employment law information for those considering significant changes to their business, including restructuring  and redundancies, as well as answers to frequently asked questions.

Record how you work and keep communication flowing

Employers are required to adapt their businesses so they can deliver “physical distancing”, which may include making decisions about alternative ways of working such as working from home, on shifts, staggering meal breaks and flexible leave. These changes have a flow-on effect for how staff are managed and supervised over a prolonged period. Recording how and when people are working, and maintaining good communication is key to nipping any issues in the bud further down the track.

If you can, employers should prepare ways for your employees to record their time worked, where they worked and their physical interactions with people during the course of their work e.g. suppliers, customers etc. Employers also need to keep in regular contact with employees, sharing information and seeking feedback from staff, both as a group, and one-on-one, particularly if staff continue to work remotely for a prolonged period.

What happens when the Wage Subsidy Scheme runs out?

By now most businesses have taken advantage of the Government’s COVID-19 Wage Subsidy Scheme (the subsidy) and will be contemplating whether or not they can afford to keep staff once the 12 weeks have ended. Restructuring and redundancies are a real possibility for many. However, it’s important employers take legal advice before deciding what to do next, even if downsizing seems inevitable. The subsidy has requirements (which came into effect at 4pm on 27 March) safeguarding employees against having their employment terminated by way of redundancy during the wage subsidy period. Employers who are hasty with redundancies risk having to pay the Subsidy money back or worse. The timing of any restructuring process will need to be carefully considered.

Businesses who did not take advantage of the subsidy are free to make genuine commercial decisions which are in the best interests of their business, without risking having to pay back the subsidy for the employee(s) concerned.

How quickly can I change the shape of my business?

Employers must still consult with staff over any changes which impact the employee’s role e.g. reducing hours or pay. However, in the current pandemic environment, there may be circumstances where consultation can be truncated if the employer genuinely needs to make rapid adjustments to cope with their circumstances. Truncated processes must still occur in good faith, and provide opportunity for workers to seek advice.

From a practical standpoint employers, union delegates and HR consultants should begin considering whether they can keep their staff now, if they haven’t already. From a financial point of view, the subsidy does not cover the contingent liability of accruing annual leave and KiwiSaver contributions. Any changes to the business need to allow time to follow the proper process, reducing the risk that those employees later bring a personal grievance.

As a rule of thumb, employers should consult with affected employees as early as possible to seek their feedback on any changes. This can be in the form of a letter inviting staff to meet to discuss the proposal or provide written feedback. Employers can require their employees to take annual leave if they provide sufficient notice. Employers may have force majeure or business interruption clauses offering solutions to the current challenges. It is important to seek legal advice prior to invoking such a clause as there is a high threshold and careful scrutiny is required to decide whether the current pandemic situation applies.

Preventing business failure: what other ways can I cut costs?

  • Consider whether you have any:
    • fixed-term agreements ending
    • non-vital services, overheads and subscriptions which can be placed on hold.
  • Apply for government packages in addition to the subsidy such as cashflow and tax measures, business finance guarantee schemes and non-interest loans.
  • Review your building lease agreement (if applicable) and whether it has its own force majeure clause.

If you have specific questions relating to your business or employment arrangements, please feel free to contact our employment team.

Frequently Asked Questions

Is the wage subsidy taxable?

No, employees on the subsidy do not attract GST but they do attract other contingent employer liabilities such as KiwiSaver and PAYE. Reparations such as fines and Child Support should also continue in the usual manner.

What is meant by “best endeavours”?

“Best endeavours” is an objective test which requires a party to act against their own commercial interests and incurs some expense (and even loss) but does not need to go as far as “beyond the bounds of reason” or risk commercial ruin.

Do I have to pay my landlord for my commercial lease?

Alert Level 3 still requires strict control measures that will require some businesses to continue to close their doors. This means that the usual “no access in emergency” clauses in certain leases may still apply so far as a “fair proportion” of rent is concerned. Landlords and tenants should continue to try to resolve what they consider is a fair proportion. If you have questions about your lease, our team can help you find out what your rights are.

Do I have to continue paying an employee who can’t or isn’t willing to work?

It’s debatable but as a guideline, an employee should be “ready, willing and able” to work in order to be paid. Deciding whether an employee fits these criteria can be very dependent on the circumstances though, so it pays to seek advice if you’re not sure.

Can I pay my employees just the $585 per week?

You must use best endeavours to pay 80% of their usual pay. If you really can’t, you must at least pass on the full subsidy, if the employee agrees to this.

What is the right process for agreeing to a reduction in hours?

Communicate the proposal for a reduction in remuneration/days/hours of work in an email, letter or video if required, and provide appropriate reasons and background information. You should allow enough time for staff to obtain advice and let it sink in, provide a timeframe for the response and allow enough time to respond to issues raised. 

Can I compel staff to take annual holidays?

Yes, even if you have applied for the subsidy, you can still “lawfully” require an employee to take leave, even if they don’t agree, so long as you provide at least 14 days’ notice. However there is a process to follow and your good faith obligations still apply.

Where can I find more information?

These sites contain useful information for employers:

How can we help?

WRMK Lawyers has Northland’s largest team of employment law specialists. If you need some help or guidance in this difficult time, please give one of us a call or contact your usual WRMK lawyer for advice.

WRMK Lawyers takes all reasonable care to make sure that the information in this article is up-to-date and accurate at today’s date. It is necessarily general information and not intended as legal advice to be relied upon.


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