Can employers force their employees to use annual leave during Covid-19 restrictions?

The Covid-19 pandemic has affected many businesses across New Zealand, and many have not been able to operate at their usual capacity.  In response, some employers have required their employees to use their annual leave.  Is that allowed?

Employers can require an employee to take annual leave by providing the employee with 14 days’ notice that they require them to go on annual leave.  This can be done if the employer has a close-down period (only once per year, commonly over Christmas) or if the employer and employee cannot agree when the employee will take leave.

There has not yet been any cases decided that deals specifically with requiring employees to take annual leave due to closedowns or reduced workflow as a result of COVID-19 restrictions.  However, the Holiday Act states that the purpose of annual leave is for “rest and recreation”.  As such, it is possible that requiring an employee to take leave for reasons other than a close-down, or for the purpose of rest and recreation is illegal. 

Employees may of course still ask their employer to take leave, in which case the employer can agree. 

The employee may also ask their employer to cash-up, up to one week’s annual leave, (for instance to top up wages where the employee is being paid less due to COVID-19).  The employer does not have to agree to the cash-up request.

It is important to note that if an employee is not paid their annual leave correctly, the employer may be forced to reinstate the annual leave, while the employee also keeps what they were already paid for the incorrect annual leave. 

To avoid this potentially costly mistake, employers should take care to get things right.

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