By Vaughan Granier
The question of whether workers who were unable to work during the COVID-19 lockdown were still entitled to be paid a minimum wage has reached a new turning point.
On 21 December 2020, the Employment Court released a landmark decision in Gate Gourmet New Zealand Ltd v Sandhu [2020] NZEmpC 237, ruling that the Minimum Wage Act 1983 (MWA) did not apply to certain wage changes made in lockdown.
This decision overturned a previous ruling made by the Employment Relations Authority (the Authority) for the same case in June last year. In case you missed it, I wrote about the Authority’s ruling here.
Since we live in a world where COVID-19 continues to have an unsettling impact on our economy, the new decision is helpful to employers seeking clarity around pay obligations under lockdown or reduced work circumstances.
So, what exactly was the reason behind the Court overturning the Authority’s decision? Below, I summarise the facts underpinning this judgement and how it may affect the way you adjust your employees’ pay during a lockdown.
Background
Gourmet (Gate), an essential business that provides catering services to passenger aircraft experienced a downturn in work during the COVID-19 lockdown. Gate used the wage subsidy to retain their people and pay non-working employees on 80 per cent pay.
During the period in question, the minimum wage rate changed from $17.70 to $18.90. Many employees who worked for Gate on minimum wage were consequently earning less than the minimum rate when placed on 80 per cent pay.
Despite that fact that employees had agreed to this arrangement at the time, a Union representing part of the employee body in Sandhu and Ors v Gate Gourmet New Zealand Ltd [2020] NZERA 259 argued that this was a breach of the MWA.
The Employment Relations Authority said employees were entitled to a full minimum wage
Initially, the Union’s argument made sense. As a general rule, if an employee is willing and able to work, but an employer refuses them the opportunity to work, they’re still entitled to be paid and the MWA should apply.
The Authority followed this logic and held that the MWA required the employer to pay at least the minimum wage to employees who were unable to work during the lockdown. Gate was ordered to backpay the unpaid wages to its affected staff.
Gate challenges the Authority’s ruling and wins
On appeal, the Court has reversed the decision made by the Authority. Their guidance notes that the MWA does not require a guaranteed minimum wage in every circumstance. Where an employee does not actually do any work, the Court has held that the MWA does not apply to their remuneration.
The minimum wage is in exchange for work
The rationale behind this verdict is based on the Court’s interpretation of section 6 of the Minimum Wage Act which applies to a wage received in exchange for work performed, stating:
“…every worker who belongs to a class of workers in respect of whom a minimum rate of wages has been prescribed under this Act, shall be entitled to receive from his employer payment for his work at not less than that minimum rate.”
On this basis, the Court found that when payment is not “for his work” then the MWA does not apply.
Employers should still seek advice around remuneration changes in future lockdowns
Despite the positive outcome for the employer here, it’s important to note that this is a specific judgement in a particular circumstance. There are other situations where this ruling may not apply, and employees would still be entitled to be paid their full (contractual) wages. For example, if an employer unilaterally prevents employees from working.
The complexities surrounding minimum wage entitlements during lockdown will receive further thought again this year when the Court examines the appeal of a similar case involving Dove Hospice. I’ll be watching the matter closely and keeping you up to date with the latest guidance here on our blog. Watch this space!
For more information on the Minimum Wage Act and its requirements, contact our friendly HR Assured team.
Vaughan Granier is the National Workplace Relations Manager for HR Assured NZ. He has over 24 years’ experience in international human resources, health and safety, and workplace relations management. With over 10 years working in New Zealand and Australian companies, he provides in-depth support to leadership teams across all areas of HR, Health and Safety, and employee management.