Minimum Wage during Lockdown
Updated: Jan 19, 2021
During COVID-19 Level 4 Lockdown in 2020 many businesses had no option but to close up shop and send their employees home.
You will recall the Government provided a wage subsidy for employers to encourage them to retain employees over the Lockdown period. The Government had also suggested that employers, following due process, could pay their employees at 80% of their normal pay where employees had not been rostered to work.
Like many other employers, Gate Gourmet NZ Ltd, followed this suggestion, however their decision was challenged in the Employment Relations Authority (ERA). The challenge was that Gate's employees who were not working, were being paid 80% of the minimum wage and therefore Gate Gourmet was in breach of the Minimum Wages Act 1983, regardless of any agreement with employees to only pay 80% of the minimum wage. The ERA held that as the decision to work or not work was made by the employer and not the employees, by paying 80% of the minimum wage Gate Gourmet had breached the Minimum Wages Act.
Gate Gourmet appealed this decision to the Employment Court. The Court found that the purpose of the Minimum Wages Act is to ensure employees receive a base wage for their work to enable workers to meet living expenses for themselves and their families. However, the Court also found that the Minimum Wages Act does not provide for a guaranteed minimum wage. It only provides for a minimum wage for work performed by an employee.
The Court relied on a decision in the Ideal Services Ltd v Dickson  ERNZ 116 Employment Court case which identified factors to be considered when determining what constituted work. The Court found that Gate Gourmet's employees were not working during the Lockdown periods where they were not rostered on. Accordingly:
there were no constraints placed on the employees' activities by Gate Gourmet;
the employees had no responsibilities to Gate Gourmet; and
there was no benefit to Gate Gourmet.
The Court found that when the employees stayed at home, they were not working for the purposes of the Minimum Wages Act, therefore the Minimum Wages Act did not apply and no statutory minimum wage entitlements arose.
If you are in a similar position, i.e. you did not require or roster your employees to work during the Lockdown, then there was no entitlement to a minimum wage. However, you must at least apply whatever wage reduction you did agree with your employees. This decision does not alter your obligation as an employer to comply with the Minimum Wages Act, nor does it allow you to contract out of that Act or unilaterally reduce employees wages.
Photo: Michael Longmire on Unsplash.com