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Brief Counsel

The employment relationship in the aftermath of the quake

03 March 2011

As Christchurch moves from the rescue and recovery phase, many businesses and employees will need to know what is going to happen in their workplace.  This guide has been prepared to assist employers in the wake of the 22 February earthquake.  It is necessarily brief and general, and is not a substitute for specific legal advice about your situation.

Key messages

Put staff safety and welfare first.

Take time before making any decisions, particularly if they affect staff safety or long term employment.

Communicate with staff, especially before making any key decisions.

Be compassionate, understanding, flexible and pragmatic. 

Government support package provides ‘breathing space’

The Earthquake Support Subsidy is available for up to six weeks from 22 February 2011 and is paid as a lump sum directly to the employer (and to the self-employed and sole traders).  To qualify, a business must be:

  • New Zealand owned
  • based in the Christchurch City Council area and either
  • unable to open due to damage to the workplace, a cordon or lack of an essential service or
  • suffering a significant loss of trade.

Public sector organisations are not eligible.  Neither are employers who can continue to operate and/or meet their wage and salary obligations.

Payments are $500 gross a week for full-time employees and $300 gross a week for part-timers (20 or fewer hours a week).  The payment is not subject to GST but is subject to PAYE, holiday pay, ACC levies and all the normal employment-related expenses.

You will need to provide your business IRD number, business bank account number, and staff names and IRD numbers.  If you don’t know your IRD number, contact IRD on 0800 227 774 between 9am and 8pm.  Payment will be made as soon as IRD confirms your details.

Employers who have Business Interruption insurance but are experiencing a delay in payment may access the subsidy but will have to repay it when their insurance is paid out. 

If you would otherwise have qualified for the subsidy but have decided not to re-open your business, you should advise your employees to apply for the Government’s Earthquake Job Loss initiative.   Payments under the Job Loss scheme will be made direct to the recipient’s  bank account at a rate of $400 net per week for full time employees and $240 net per week for part time employees.

Applications for both the subsidy and the cover can be made at www.workandincome.govt.nz, by phone on 0800 779 997 or in person at a Work and Income centre or mobile van.

Don’t rush back - prioritise safety

As an employer, you are required to do all you can to provide a safe workplace.  

If your business can operate, you must assess risks to employees, contractors, visitors and people around the workplace before you allow workers back.  Put safety first.  Where there are hazards, they have to be eliminated, minimised or isolated.  Keep assessing whether it is safe to work.

Emphasise to staff that they have an obligation to keep themselves safe, and that they need to be extra vigilant and aware of any hazards over this time.  Be clear that they shouldn’t do anything to risk the safety of themselves or others, even out of a desire to help.

Things to think about

  • Are buildings structurally stable? 
  • Is basic sanitation (running water/toilets) available?
  • Are there any unusual risks (is machinery unstable?  Have there been any spills or contamination?  Are there live electrical cables or gas leaks?)
  • Do you need specialist assessments or assistance, or additional safety equipment to deal with these risks?
  • Are emergency exits/stairways still useable?
  • Do you have a plan to deal with aftershocks?
  • Are staff safe and able to work? (Most will be suffering trauma and loss to one degree or another).
  • Be aware of and comply with any instructions or advice from local authorities.

Stay in touch - keep your employees informed

Communicate proactively.  As your situation becomes clearer, let staff and any unions know:

  • what is (and isn’t) expected of them
  • how your business has been affected, and what losses will be covered by business continuance insurance
  • what support, if any, you can offer
  • what support the business (or other staff) may need, and
  • who employees can contact if they need help/support (can you provide counselling or any other assistance?).

What do your agreements say?

You should check your employment agreements and any relevant policies.  Most employment contracts won’t cover this type of situation, but some will. 

Do I have to keep paying employees?

If you can, yes.  By law employers need to pay employees who are ready and willing to work, even if no work is available.  However, there are some exceptions and qualifications to this rule:
  • some employment agreements might give employers the power to suspend employees without pay (most agreements won’t).  We suggest employers take advice before using this type of power
  • some employment agreements allow employers to reduce hours of work, or only require payment for work actually completed (subject to minimum wage legislation), and
  • there is no obligation to provide casual employees with work or pay beyond any existing roster or pre-arranged work.  (Be careful though, often many employees who are regarded as “casuals” aren’t actually casuals by law).

That said, the overriding need here is to be understanding, compassionate and flexible.  Wherever possible, solutions should be discussed and agreed, not imposed.  

Do I have to keep paying my employees if they can’t or won’t come to work?

We encourage you to talk to employees and try to come to an agreement.  Can the employee work from home?  Can he or she make up time at a later point?  If the employee wants significant time off, can you agree on a mixture of unpaid and paid special leave?  Can the employee take annual leave?

Normal entitlements apply.  Employees are entitled to take sick leave if they, their partner or a dependent is sick or injured.  Employees receive a minimum of 5 days sick leave each year, and can accrue sick leave from year to year up to a maximum of 20 days. 

Employees are also entitled to up to 3 days bereavement leave when a relative dies.

I can’t pay forever - are there temporary options to give me breathing space?

Agreed unpaid leave

Employers and employees can agree on unpaid leave.  These agreements should be recorded in writing (an email exchange or handwritten note, preferably signed, is fine).

The Department of Labour website sets out the effect of unpaid leave longer than a week on holiday accruals.

Temporary work with other employers

Can you arrange temporary work for some of your staff with other firms while you get your business operational?  In some cases (such as essential services) other companies may have an immediate need for well trained employees.

The simplest way to achieve this will usually be to give your staff unpaid leave so that the other employer can engage them directly.

Annual leave

If the work closure is to be lengthy, employers can direct employees (without their agreement) to take annual leave. However:

  • the employer must first try and reach agreement
  • staff must be given 14 days notice of any direction
  • employers can only direct staff to take leave to which they are “entitled” (as distinct from leave which has been accrued),1  and
  • employers must make sure staff have enough leave so they can take two weeks leave in one block at some point during the year (usually this is at Christmas). 

Agreed reductions in remuneration or hours of work

Both parties can agree to temporarily reduce hours of work (or pay, where work is not available).  In normal circumstances this wouldn’t happen, but if there is no or reduced work, it might be the best way for employers to maintain their workforce.

Here are some things to think about. 

  • Any reduction in wages or minimum hours requires genuine and clear agreement from the employee. 
  • The agreement should be recorded in writing.  A letter (which both parties sign) is normally fine. 
  • Both parties should take advice (to save money, employers might want to write up a draft letter themselves, which they can take to their usual adviser). 
  • If employees are engaged on a collective agreement, the letter will normally be signed by the union, and subject to the variation procedures in the agreement.
  • When drafting the letter, look at the employment agreement.  What are you actually agreeing to change?  Do you need to change anything else?
  • That letter of agreement should:
      • be clear
      • state how long the change will apply for, and what happens at the end (presumably you will revert to the hours/pay that existed immediately before the letter), and
      • state that the employee has been given a reasonable time to take legal advice about the change (generally two or three days, but it may need to be longer in these circumstances).

For further information, please contact the lawyers featured.

In preparing this advice we have drawn on the Department of Labour website, which we recommend to you as a source of further information (particularly around health and safety).

Footnotes

1. What is “entitled” leave?  Staff only become “entitled” to leave (4 weeks) after 12 months service.  For example, someone who has worked for a year and a half without taking any holidays will have four weeks of “entitled” leave and two weeks of accrued leave. 

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