As the economic realities of the Covid-19 pandemic really start to bite, we are getting more questions on whether employers can make staff redundant, particularly if the employer has been in receipt of the wage subsidy scheme.
Can I stand an employee down?
Whether you can stand staff down depends on what might be in your agreement. Advice can only be tailored to individual circumstances and, indeed, might be different across different employees within the same organisation. You may be able to require staff to take annual leave, even during lockdown and even if in receipt of the wage subsidy. Seek advice from us as to how to navigate that particular minefield.
What if my employee will not agree to reduced hours or payment?
Generally, an employer is entitled to restructure its business to make it more efficient or to reduce expenses. Wages are usually the largest expense for a business, so when tightening belts staff costs are often the first port of call (nice mixed metaphors there!). Check that you have reduced expenses in all other areas possible before looking at wages.
Changes to remuneration, hours or days of work cannot be altered without agreement, unless there is a contractual provision that allows you to do so (after consultation). Good faith obligations (not to mislead or deceive and to use a fair process) continue.
If a staff member does not agree to a variation to the agreement the employer may consider redundancies.
Can I lay staff off? What if I received the wage subsidy?
Prior to 4:00 p.m. on 27 March 2020, any employer who was in receipt of the wage subsidy scheme was required to take “active steps” to minimise the impact on business and to use “best endeavours” to pay 80% or more for 12 weeks, and pay at least the full amount of the subsidy to the employee (unless the ordinary wages were less than the subsidy).
The pre 4:00 p.m. on 27 March 2020 declaration was much looser than the declaration post-4:00 p.m., 27 March 2020 which requires you to declare “You will retain the employees named in your application as your employees for the period you receive the subsidy in respect of those employees.” This is effectively an undertaking or moratorium on redundancies.
As such, it is important to know that when you applied for your wage subsidy, before considering whether you want to make staff redundant.
If you have not undertaken to retain employees for the period of the wage subsidy you may consider redundancies after appropriate consultation. If you have agreed to retain staff, you can also start consultation about redundancies within the wage subsidy period. Those redundancies then could take effect after the wage subsidy period is over.
Level 3 restrictions may affect staff members’ ability to be consulted but often AVL can be used to ensure the employee gets a fair hearing.
Louise Foley is standing by to answer any questions you may have. Call her on 021 245 1048 or email lfoley@lepine.co.nz
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