Pandemic covid-19

Must I Pay My Staff In A Pandemic?

COVID-19, the new coronavirus, is deadly. It is threatening the global economy, as countries impose restrictions on residents, and travel and commerce are disrupted.

The New Zealand Government has announced unprecedented measures to assist affected businesses. These may cushion the blow. But for many businesses, tough decisions will remain – including how you deal with your with staff in the days and weeks to come.

If your business is badly affected, what are your obligations to your staff? Can they refuse to work? Do you have to send them home? And would you still need to pay them if you do?

A SUMMARY

If you don’t have time to read this article in full, here is a quick summary.

Whether you have to pay your staff depends on whether you are asking staff not to come to work, or your staff are unwilling or unable to work.

If its unsafe for you to continue your business as normal, and you want to keep you staff away, you would normally have to pay them if they are ready to work. But you may not have to if:

  • You reach agreement with them about alternative arrangements (such as taking annual leave, leave with out pay or working from home)
  • You have a clause in your employment agreement that permits you to suspend your employee’s employment without paying them

There are other options available if neither of the above works for you – such as directing staff to take leave on 14 days notice, or making staff redundant.

If however your staff are not willing, or unable to work, then you would not normally need to pay them unless:

  • They are sick, or are caring for someone dependent on them, who is sick, and they have sick leave available
  • They have genuine grounds for refusing to work for reasons of health and safety

The Government’s recent wage subsidy announcement may also influence your thinking about whether you continue to pay staff, knowing that you may be able to claim a subsidy if you do and you suffer a downturn in revenue.

The rest of this article explores each of the above options in greater depth.

IS IT SAFE FOR STAFF TO BE AT WORK?

Your first consideration must be safety. Nothing is more important. As an employer, it is your obligation to keep your employees healthy and safe while they’re at work.

How do you know when it is no longer safe for your staff? An employer will likely act reasonably if they rely on the Ministry of Health’s guidance. So check that regularly.

If that guidance suggests you should close your doors, or keep certain staff away from the workplace because they pose a risk, heed that advice.

DO I HAVE TO PAY MY STAFF IF I SEND THEM HOME?

If you have to keep staff away from the workplace, your next thought will be “Do I have to keep paying them?”

Generally, if your staff are willing and able to work you have to pay them even if you can’t provide them with work. But there may be exceptions to this.

Agree other arrangements

The first exception is if you agree an alternative with your staff.

If you have to close your doors, some staff might be happy to take their annual leave, take leave in advance, or take leave without pay.

Others might pitch in and help with some other tasks outside of their usual duties, reduce their hours of work, or work from home if that’s possible.

You won’t know what works for your staff and what doesn’t until you discuss it with them.

Communicating with your staff is key. Help them to understand the challenges you face, and explore with them what they might be prepared to agree to.

Record any agreement in writing. This can be by way of an email or letter that captures what you have discussed.

Suspending staff under a Business Interruption clause

If your staff don’t agree to an alternative, look to what your employment agreement allows.

Some agreements contain clauses allowing you to suspend your employees from work if there is a significant interruption to your business occurs.

Here is an example clause that might give some rights to do this:

“If all or part of the Employer’s business operations are suspended because of an event beyond the Employer’s control (such as an epidemic, war, natural disaster, electricity failure, strike, or governmental action) (Interrupting Event), the Employer may request the Employee to undertake alternative duties, work from another location, or suspend all or part of the Employee’s employment. If the Employee is suspended, the parties may agree that the Employee will take accrued holidays or leave for the period of suspension, but the Employer will otherwise not be required to pay the Employee for any period where the Employee cannot work due to the Interrupting Event.”

To rely on a clause like this to suspend your staff without pay, first consult with them about what you propose to do and get their views. Listen to what they might suggest as an alternative, or any other feedback they might make, and give it some reasonable consideration.

Only once you have done that should your make your decision whether to rely on this clause and suspend their employment.

You also must act reasonably at all times. If an employee genuinely cannot carry out their usual work, for example, because the business is a restaurant required to be closed, suspension may be reasonable.

But many employees may be able to work remotely if you accommodate that. Suspending an employee without pay if you could have permitted them to work from home may not be reasonable.

Suspending staff under a Health and Safety clause

Your employment agreement may also contain a right to suspend for health and safety reasons.

Normally a suspension for that reason, where attending work is a risk to the employee or if they pose a risk to others, would be on pay.

However, you may stop paying them if the suspension carries provides that you can do so after a specified period of time. But consultation with your employee about doing so is recommended before you take that step.

OTHER OPTIONS THAT DON’T REQUIRE AGREEMENT

If your staff don’t agree to remain away from work, and you don’t have any helpful clauses in your employment agreement to assist you, you may need to consider other options.

Direct them to take annual leave

If staff have accrued annual leave, you can direct them to take that leave by giving them 14 days’ notice.

You first need to have attempted to agree with them about when they take their leave, which highlights the importance of discussing options with staff as a first step.

This approach has some limitations: you can only direct staff to take leave that they have accrued (you can’t make them take annual leave in advance of accruing further leave), and you must give them at least 14 days notice.

But for some employers this may be a tool worth keeping up their sleeves.

Ending employment by reason of redundancy

Unfortunately, you may have to consider redundancies if your business cannot sustain its wage costs.

The business might reach this point if it cannot trade for a certain period and there isn’t any reasonable likelihood of trading again soon.

Any redundancies must be for genuine business reasons. If there is a pandemic and your business has been badly affected you may think it’s readily apparent that genuine business reasons exist.

That may be so, but keep an objective eye on your proposal to restructure. You also need to make sure you follow a fair process.

Has the pandemic ended the employment agreement?

In the event of a pandemic you might also consider that your employment contracts with your employees have end if they cannot be performed for reasons out of both parties’ control.

This is what lawyers call “frustration of contract”.

However, case law suggests that if you have another option available to you – like ending the employment by reason of redundancy – then it cannot be said that the agreement has ended by way of frustration.

So be wary of thinking that you can ignore your employment agreements because of the pandemic.

WHAT IF YOUR EMPLOYEE CAN’T, OR REFUSES, TO WORK?

Let’s say the shoe is on the other foot and it’s your employee that cannot, or will not, come to work. What happens then? Do you have to pay them?

If you can continue providing work to your employees then normally an employee has to show up for work to be paid. If they don’t, then no pay.

Paying sick leave

If your employee falls sick they can use their sick leave entitlements if they have any, or you could agree for them to take annual leave or leave in advance.

Remember, your employee only may not take sick leave if they are sick or injured themselves. They can also take sick leave if their partner or spouse, or someone who depends on them for care is sick or injured.

But once they run out of sick leave, or are no longer sick, or caring for someone who is sick, your obligation to pay them sick leave ends.

What if my employee is quarantined?

What if your employee isn’t actually sick but are quarantined or “self-isolating” for a period of time?

Again, the default rules apply: if they can’t work, you don’t need to pay them; and if they aren’t sick (or caring for someone who is) then they don’t qualify for sick leave either.

Many employers will wish to pay staff caught in such a situation, out of compassion. You might try to agree that your employee works from home, or that they use their annual leave or are paid annual leave in advance, as above.

If your employees cannot work from home, or do not have any accrued annual leave, the Government’s COVID-19 leave payment may be something your staff can claim, or alternatively you may consider continuing to pay them special leave and claim the wage subsidy.

What if my employee refuses to come to work?

If an employee refuses to turn up to the workplace for fear that they may contract the virus, whether you have to pay them may depend on whether they have good reason for their refusal.

Employees are entitled to refuse to carry out unsafe work under the Health and Safety at Work Act 2015. Arguably, they should not be penalized if they are willing to work but you cannot provide them with a safe workplace.

But you would not need to pay someone who refuses to work if you can demonstrate it is reasonably safe for them to do so. Again, relying on the Ministry of Health guidelines would likely be a fair course to take.

WHAT IF MY EMPLOYEE IS AWOL AND SILENT?

What if someone doesn’t come to work for several days and you have not heard from them?

If you have an abandonment clause in your employment agreement you might treat their employment as having ended if you haven’t heard from them for theperiod specified in that clause.

However, you shouldn’t be too hasty to rely on an abandonment clause to end someone’s employment in the context of a pandemic.

You need to make genuine attempts to contact your employee before you rely on an abandonment clause and you would likely need to not “jump the gun” where a pandemic may affect someone’s ability to respond.

THE GOVERNMENT’S COVID-19 PANDEMIC SUPPORT PACKAGE

Qualifying businesses, who make best efforts to retain employees and pay them a minimum of 80% of their normal income, may be entitled to a wage subsidy of $585.80 per week for each full time employee (20 hrs or more) or $350.00 per week for each part time employee (less than 20 hrs).

If an employee is required to self-islolate for a period of time and cannot work from home, they are also entitled to Government support.

CONCLUSION

We all hope that the COVID0-19 pandemic is swiftly resolved. But if it’s not, you’ll need to consider carefully how you deal with your staff. Maintaining clear and open communication with your staff to reach agreement will always be your first and best option.