In lockdown many employers are struggling without cash flow to their businesses. However, employers cannot change an employee’s terms and conditions of employment without the employee’s consent. This applies during covid lockdowns, just as much as it does at any other time. Lockdowns do not alter the fundamental employment laws.

Employers must continue to pay employees their normal pay, even if they cannot provide work during a lockdown if the employee is available for work. Two cases decided by the ERA have confirmed that employers must pay normal wages and cannot unilaterally reduce those even during a lockdown (absent a clause in the employment agreement allowing that). In those cases the wages were reduced to 80% and the wage subsidy paid to the employees. That was held to be a breach of the employment agreement to pay the agreed wage rate.

If an employee is not available for work, eg they are stuck in another country or another part of the country due to the lockdown and cannot get back to where they normally work, they are not available for work (unless they can work remotely). In that case the employer could decide to not pay them. This is subject to discussing this with the employee, to see what other arrangement might be agreed to- eg using holiday pay, and subject to paying any subsidy received for the employee from the covid relief schemes.

If an employer has no work to offer employees, they cannot unilaterally change rates of pay or dismiss workers. Pay can be changed by agreement. If the employee agrees to a lower rate that might prevent a redundancy situation. Before a dismissal for redundancy can be made the employer must fairly consult with impacted employees and give them a reasonable opportunity to get advice and respond to the proposal for restructuring/redundancy. Other options like redeployment must be considered before dismissal.

If an employee agrees to a “no work no pay” arrangement in their employment agreement, the employer might be able to use that in the event of not being able to do any business. They must first consult with the employee and consider alternatives. These type of clauses have not yet been tested in the Employment Relations Authority or Employment Court in a full level 4 lockdown situation. The only case to come before the ERA was just prior to lockdown last year and the Authority held that the clause did not apply as the employer could still provide work at level 2 (as they then were) and so could not use the lack of work clause as the reason for the dismissal.