Employer has no right to reduce wages during Lockdown Level Four

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Court of Appeal overturns Employment Court ruling

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Wellington, December 24, 2021

The Court of Appeal has overturned the Employment Court’s ruling that employees who did not work during Covid-19 Alert Level 4 lockdown were not entitled to be paid minimum wage under the Minimum Wage Act.

Ultimately, the Court of Appeal sided with the employees, finding that they were entitled to be paid minimum wage for the hours of work they had agreed to, regardless of whether or not the work was performed. 

About the Case

The case concerned an in-flight catering service, which employed 130 workers.

As an essential service, the company remained open throughout Covid-19 lockdowns.

However, due to a lack of demand for in-flight catering brought on by limited air travel, the company had little work to offer its employees.

In late March 2020, the company proposed that its employees be paid 80% of their normal wage due to the reduced work, which lowered some wages below the national minimum.

In response, five employees brought their case before the Employment Relations Authority.

Previous decisions

At the first instance, the Employment Relations Authority (ERA) found that the employees were “ready, willing and able to work” and that the company, not the workers, decided whether or not they would work. Given this, it found that the company breached the legislation in paying below the minimum wage.

The company challenged the Authority’s finding before the Employment Court. There, the majority held that, although the employees were willing and able, they did not actually perform work and, therefore, were not entitled to be paid the minimum wage.

The Court of Appeal decision

On appeal, the employees argued that, under the legislation, the payment of total wages could only be withheld where the employee did not perform the work due to their own default or illness. The employees asserted that “a failure by the employer to provide work did not excuse the employer from payment as a matter of common law.”

The court agreed, commenting that the legislation is directed at “preventing the exploitation of workers” and recognises the “diminished bargaining power of those in low-paid employment. “It is not lawful to make deductions from wages for lost time not worked at the employer’s direction,” the court said.

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With this, the Court of Appeal set aside the Employment Court’s decision and found in favour of the employees.

Key Takeaways

Generally, all employees aged 16 years or older must be paid at least minimum wage for every hour of work.

Under the Minimum Wage Act, employers must pay an employee the minimum wage unless the employee did not perform work due to their own default or illness

If an employee is ready and able to work but the employer cancels their shift without notice, the employer typically cannot deduct from wages

Employers should consider obtaining legal advice before making changes to an employee’s wages due to the Covid-19 shutdowns.

Source: Employment New Zealand


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