The Employment Court has issued its much-anticipated appellate decision (on a limited issue) in Gate Gourmet New Zealand Ltd v Sandhu. In the context of last year’s COVID-19 lockdown, the Court considered an employer’s obligation to pay the minimum wage to employees who were not working under their employment agreements but were ready, willing and able to do so. You can find our summary of the facts here (as outlined when the case was heard in the Employment Relations Authority).
The Court noted this is the first case it has heard relating to employment rights and obligations arising out of the COVID-19 pandemic. As we commented earlier, and as the Court noted in its decision, it was surprising the case was heard by the Employment Relations Authority rather than the Court in the first instance, given the high level of public interest in having the Court’s guidance on this matter. This is likely why the Court, in hearing the appeal, also considered arguments from Business New Zealand and the New Zealand Council of Trade Unions, as intervening parties.
The decision
The majority in the Court has clarified that section 6 of the Minimum Wage Act 1983 (“Act”) does not require minimum wage to be paid to an employee in circumstances where that employee is not working, even if they are ready, willing and able to do so.
The key aspects of the decision are:
- being ready willing and able to work is not the same as working for the purposes of the Act, and here it was held the employees were not working during the relevant period, even though they would have been, were it not for the lockdown and the resulting impact on the employer’s business;
- as the employees were not working during the periods in question, they were not entitled to be paid the statutory minimum wage. They were, however, entitled to be paid the amounts the employer had agreed with the relevant Union they would be paid, while not working, including the Wage Subsidy;
- as the Act was not applicable to the payments in question, it followed that there had not been any unlawful deductions under the Act.
Given the legal importance and wide-ranging implications of this judgment, and because the Chief Judge did not agree with the majority, in this case, it is possible (even likely) that this case will be appealed to the Court of Appeal – so watch this space.
What are my obligations?
This decision should not be read as giving employers the ability to avoid paying staff at least the minimum wage for contracted hours of work when there is no work available or unilaterally vary their hours of work. The judgment is clear that the issue before the Court was confined to the application of the Act to the specific facts.
The Court made very clear, and it is important to be aware, that other factors could create an obligation to pay employees the minimum wage, and/or their normal earnings, during similar circumstances, even where work is not being performed.
These include:
- obligations recorded in employment agreements and associated documentation; and
- legislative obligations such as the payment of holiday pay under the Holidays Act 2003.
Further, this decision does not change the obligation to consult with employees and obtain agreement prior to implementing any changes to existing terms and conditions of employment, including salary and wages.
For more information
For tailored advice on your rights and obligations, please contact our Wellington employment law experts on 04 472 0020.
