An Employer’s Guide to the Covid-19 Coronavirus

28 March, 2020 | Carolyn Ranson

(Updated since the Government changes on Friday 27 March 2020)

Over the last few weeks the coronavirus known as COVID-19 has plunged the whole world, including New Zealand, into unknown territory. The measures that have been put in place in New Zealand are unprecedented. For employers and business owners, this uncertainty has extra implications on revenues and business viability.

All business owners will be considering the effects of the measures in response to covid-19 on their own business, and this will include whether their business can continue to employ staff.

The particular issues the employer faces will be a function of whether or not they are an essential service, and if they are – whether they expect their business will increase or contract.  In addition, if they are not an essential service, are staff able to work from home? This will largely depend on the industry they are in.  There will be a number of different scenarios.

While the prospect of redundancies might loom overhead, there may be other alternatives that could be considered in the short term at least.

These alternatives may include canvassing with staff whether they would be prepared (as an alternative to a redundancy process) to:

1. work reduced hours,
2. take one or more days a week as annual leave; or
3. take leave without pay.

In addition, the government has also stepped in to offer assistance in the form of a wage subsidy (for qualifying businesses) to help you keep staff employed while you consider options. You can find out more about the COVID-19 Wage Subsidy here. 

The reality is that based on their specific situation, employers will be reviewing all, only one or a combination of options.

Process

It critical to understand that all employment obligations under employment legislation, case law and the individual employment agreement with your employee continue to apply.

All of the above options require employee consent or a considered proposal to be put to the employee in the form of a restructure. The key is careful consideration of your business situation and your options before putting together the proposal. Then it will be important to follow the proper process in getting feedback on and then implementing the proposal, if that is what you ultimately decide to do.

As well as disestablishing a role, any substantial change to an employee’s role, salary, hours or working conditions will be a matter that will require either consent or a restructure process.  If you choose a restructure process then this must not be predetermined.

A restructure can seem daunting, especially in these uncertain times, but an employer can successfully implement decisions that affect employees, as long as its obligations under employment law are met.

The covid-19 crisis does not mean that an employer can avoid its obligations of good faith and fair and proper process.  Timely and practical legal advice can assist to reduce the risk of receiving a personal grievance claim.

So what does an employer need to think about before embarking on a restructuring process?

 

1. There must be a full review of business needs in the proposed area of change. Some questions to consider in the covid-19 crisis are:

• • whether the business is an essential one?,
  • If it is, can staff work from home?,
  • If it is not, can staff work from home?,
  • Will my business cease entirely, increase or decrease slightly/moderately etc?
  • Will staffing needs change or stay the same or increase?
  • Does the business qualify for the Government wage subsidy?
  • Can the business draw on cash reserves or increase borrowings?
  • Can the business take other steps to reduce costs to the business and mitigate covid-19 losses?
  • What financial forecasting has the business carried out and what does it indicate?

2. If some (or all) positions are identified as being subject to potential change (including being the recipient of the government wage subsidy) then the employees holding the positions affected must be consulted, in good faith and without any prior determination.
3. These employees must be given a chance to submit feedback to the proposed changes.
4. The feedback given must be properly considered, again in good faith, before any decision is made.
5. If you intend to apply for a government wage subsidy or leave payment then the employee involved must give written permission.

The obligations of good faith and pre-determination have been the subject of many personal grievance claims brought before the Employment Relations Authority and the Employment Court.  The difficulty is that the threshold for meeting these requirements will depend on the facts in each case.  Covid-19 presents a very unusual set of facts not seen before in New Zealand or around the world.

The key to successful and stress free managing of your staffing during the covid-19 crisis is getting timely advice, tailored to your business, from an employment lawyer experienced in redundancy and restructuring, as early as possible in the process.  This way, you can ensure that your good faith obligations, as an employer, are met and that the financial benefit of a restructure, including utilising the government subsidy, is not outweighed by a costly personal grievance claim.

Contact PA to the employment team Suzanne Sumner, to become a client and set up a time for a phone or video conference meeting – phone 09 837 6840 or email suzanne.sumner@smithpartners.co.nz