The Wage Protection Act 1983 and Covid-19
Covid-19 has had a massive impact on people’s lives. Whilst businesses scrambled to understand the impact to their businesses, it was assumed that the Covid-19 lockdown would allow a level of flexibility for employers in dealing with employee related issues, particularly in regards to the payment of wages. This understanding has proved to be flawed. This was evident in the matter of Raggett and others v Eastern Bays Hospice Trust t/a Dove Hospice (“Dove”) [2020 NZERA 2663103852] in the Employment Relations Authority.
The dispute concerned decisions made by Dove in response to the Covid-19 lockdown which involved reduction to workers wages or salaries and dismissal for redundancy.
On 23 March 2020, Covid-19 level 4 restrictions were implemented. Dove applied for and received the Government Wage Subsidy (“GWS”). In applying for the GWS, Dove confirmed that it would retain the employees named in the application in employment on at least 80% of their regular income for the period of the subsidy.
On 24 March 2020, Dove closed its retail stores consequent to the level 4 Covid-19 lockdown. The employees did not perform work for Dove from that date.
Dove sent a memorandum to all staff which advised that from 30 March 2020, staff would be paid 80% of salary and wages until 22 April 2020 (the anticipated end of Covid-19 level 4 lockdown). Of importance, the memorandum did not state that the 20% reduction in pay was agreed with staff.
On 8 May 2020, the workers lodged with the Authority challenging the justifiability of the dismissals and the short pay.
The workers stated that they did not agree to be paid anything short of their normal wages and salaries. The workers alleged that Dove had unlawfully made deductions from their normal wages in breach of the obligations under the Wages Protection Act 1983 (“WP Act”).
Dove counter-argued that there was no breach of the WP Act because due to the Covid-19 restrictions, the workers were not ready, willing and able to work and therefore there can be no question of any breach of the WP Act or the relevant employment agreements. The main question arising from this determination was in accepting the government Covid-19 wage subsidy, is Dove released from the obligation to pay wages or salary under the parties employment agreements and / or Wage Protection Act 1983?
The workers were all employed on individual employment agreements.
Section 2 of the WP Act defines wages as salary or wages agreed to be paid to a worker for performance of service or work. Section 4 provides where wages become payable, the entire amount must be paid to the worker without deduction. Section 5 states that deductions may be made from wages payable to a worker for a lawful purpose with written consent.
Dove counter-argued that section 2 of the WP Act says that wages means “salary or wages …. to be paid to a worker ”for the performance of services of work”. Dove says it was released from these obligations under the WP Act to pay the normal wage or salary when it became payable because the workers had not performed service or work under their employment agreements. This argument failed.
The application of the WP Act operates within the context of an employment agreement. The employment agreements did not provide for the suspension of wages or salary for non-performance in the circumstances faced by Dove in late March 2020. The workers were at all material times ready and willing to work. But for the intervening event of the Covid-19 restrictions and / or Dove’s decision to not require them to attend work during the notice period, the workers were able to fulfil their obligations under the employment agreements.
Dove was found to ultimately have breached obligations owed to the workers under the relevant employment agreements and the WP Act.
It appears from this judgement that in a world of upheaval, the decisions by employers in dealing with wages of workers needs to be carefully considered as the WP Act still retains primacy in protecting wages payable to employees.