Employment Court vindicates lockdown payments


With the recent reappearance of Covid-19 in our community, the spectre of lockdowns is never far from everyone’s minds.

The first lockdown affected our lives in many ways, personal and professional.

It certainly proved challenging for employers as they tried to navigate the complexities of their obligations to employees in completely unprecedented circumstances and often as their businesses were about to fall off a cliff.

It was inevitable that some errors would be made, even by the most well-meaning employers.

But a recent ruling on one of the Employment Court cases arising from that time has vindicated the employer.

More importantly, it gives some assurance to employers who may yet have to chart their way through more lockdowns.

The case involved a company called Gate Gourmet, an in-flight catering company which significantly reduced its operations during lockdown because of the dramatic decrease in flights.

Gate Gourmet claimed the wage subsidy.

Its employees for whom there was no work stayed at home and accepted an option of receiving 80% of their pay (unless they chose to top their wage up using annual leave). So far, so good, or so it seemed.

However, as some readers will recall, the minimum wage increased during the lockdown, on April 1, 2020.

So from that date onwards, it transpired that some Gate Gourmet employees who were not required to work and so were being paid at 80% of their usual, pre-lockdown wage, ended up being paid less than the (new) minimum wage rate.

The employees lodged a claim with the Employment Relations Authority, which found that Gate Gourmet had acted unlawfully, in breach of the Minimum Wage Act 1983.

However, the authority’s ruling has recently been overturned in a split decision by the Employment Court.

This no doubt controversial decision hinged on the definition of work. Essentially, the court deemed that the Minimum Wage Act relates to hours actually worked, and since the employees who were on lockdown and unable to perform any work for their employer were technically not working, the Minimum Wage Act did not apply.

The decision has obvious ramifications for future lockdowns or analogous situations, in which reduced wages for low-wage workers unable to work may put the workers beneath the minimum wage.

For that reason, employers should keep watching this space, as the decision may well be appealed to a higher court.

But nonetheless it is heartening news for employers who may be deprived of any ability to do business yet who still endeavour to keep jobs for their employees as best they can.

In the meantime we await the outcome of another lockdown-related employment case, Dove, which covers employers’ obligations around consulting with employees on wage reduction and redundancy entitlement.

So while we all watch for the latest news on Covid-19 cases, employers should also keep abreast of Covid-related developments that affect their employment practices.

 – The Otago Southland Employers Association and the Otago Chamber of Commerce are holding Employment Relations Roadshows around the region from February 1-4.

 – Virginia Nicholls is the chief executive of the Otago Southland Employers’ Association.



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