New Zealand update: Gate Gourmet – Were Employees At Home During Lockdown ‘Working’?

The Employment Court has found that employees who remained at home during New Zealand’s Level 4 lockdown were not ‘working’ for the purposes of s 6 of the Minimum Wage Act 1983 (MWA).

Background

Gate Gourmet New Zealand Ltd (Gate) provides in-flight catering to passenger aircraft. Gate was deemed an essential service and was permitted to stay open during the Level 4 lockdown in March/April 2020.

Upon the lockdown commencing on 26 March, Gate confirmed to its employees and the Aviation Workers United Inc Union (AWU) that if an employee was not rostered on or asked to come to work, Gate had no work for that employee and they should stay home. A subsequent closedown notice was emailed to employees on 27 March to confirm it would continue operating as an essential service but had to close down part of its business.

Gate presented three options to employees. Option two enabled employees to receive at least 80% of their normal pay. Option three enabled employees to receive at least 80% of their normal pay, and the employee could use their annual holiday entitlement to supplement their income so that they would receive 100 per cent of their normal pay. Both options were conditional on Gate receiving the wage subsidy. The AWU, on behalf of its members (including the defendants), agreed to options two and three, subject to Gate complying with all applicable legislation.

The minimum wage increased on 1 April 2020. Gate agreed to apply the new minimum wage rate of $18.90 to the defendants whether they were working or not. However, Gate maintained that it was only required to pay employees who remained at home not working at the agreed rate of 80 per cent of their normal pay based on the increased minimum wage rate. Working employees would receive their contracted rate for each hour of actual work.

The employees, through the AWU, filed a statement of problem with the Employment Relations Authority (the Authority), alleging that Gate had taken unilateral action in changing employees’ terms and conditions of employment without proper consultation and that Gate had acted unlawfully in paying them below the minimum wage of $756 per week (based on a 40 hour week). The Authority found that if the employees were ready, willing, and able to carry out their function in an essential industry, Gate was required to pay them at least the minimum wage, notwithstanding any agreement to the contrary. On a non-de novo basis, Gate challenged the correctness of the Authority’s determination that the entitlements under the MWA applied to the defendants whether or not they were actually working for Gate.

Employment Court Decision

The importance of the issue warranted a Full Court of the Employment Court, and leave was granted to Business New Zealand and the New Zealand Council of Trade Unions to make submissions at the hearing.

The majority judgment of Judge Holden and Judge Beck stated that the MWA does not provide for a guaranteed minimum income, rather a minimum rate of payment in exchange for work performed by an employee. They framed the issue as being whether the defendants were entitled to the minimum wage under s 6 of the MWA, which, in turn, depended on whether they were ‘working’ for the purposes of that section. In consideration of whether an activity is work, the Employment Court considered the factors set out in the Court of Appeal’s decision in the ‘Sleepovers’ case.

The Employment Court stated that Gate exercised no constraints on the defendants’ activities, who also had no responsibilities to Gate or provided any benefit to Gate during the relevant period. Accordingly, when the defendants were at home, they were not ‘working’ for the purposes of s 6 of the MWA and, therefore, were not required to be paid the minimum wage.

The Court considered the potential effect of s 7(2) of the MWA, which prevents pay deductions in respect of time lost by any worker, except for time lost by reason of the worker’s default, illness, or accident. The Court concluded that if no wages are payable because the employee is not working under s 6, then there are no wages from which a deduction can be made.

In her dissenting judgment, Chief Judge Inglis stated that the relevant question is not whether the employee was actually working when a claimed unlawful deduction is made but rather whether their terms and conditions provided them with a right to perform work. The Chief Judge considered that s 7(2) reflected the common law rule that an employee is entitled to wages in circumstances where they are ready and willing to perform work and would have found that there was a breach of the MWA. Whilst the defendants could have agreed to temporarily reduce their hours of work, they could not agree to a reduction in their wages to80 per cent, which constituted an unlawful deduction under the MWA.

Comment

The approach of Judge Holden and Judge Beck framed the issue as being whether the defendants were, in fact, working as opposed to whether the defendants were ready and willing to perform work (the Chief Judge’s approach). The Chief Judge’s indication that no breach of the MWA would have arisen if the employees had reached an agreement with Gate to reduce their hours of work (rather than wages) would have been a strange agreement to reach, given both parties were aware of the unavailability of work during the relevant period, and that they would not be expected to “work”. The employees have been granted leave to appeal this decision to the Court of Appeal. If Chief Judge Inglis’ approach is preferred, it could have significant consequences for huge numbers of employees.

New Zealand media and more comment than this case, perhaps, indicating general public confusion as to employment status issues. The2019/2020 Government discussion paper on better protections for contractors indicates that the result in this case could be subject to change, with potential legislative changes on the horizon. The UK approach may then be more relevant if protections for ‘dependent’ contractors are introduced, or even the third ‘worker’ status is adopted in New Zealand.

Quigg Partners, New Zealand, a Transatlantic Law International Affiliated Firm.

For further information or for any assistance please contact newzealand@transatlanticlaw.com

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