This blog continues with our series of blogs on the legal consequences of the Christchurch Earthquake by our qualified New Zealand Lawyers.
1. My business is unable to keep operating (or was unable to operate for a time) after the earthquake due to damage or a police cordon, how long do I have to keep paying my employees?
First check the terms of your Employment Agreement. Many will not deal with this situation but some may. For example, some agreements state that the employer may stop paying employees when the business is shut down for reasons beyond the employer’s control (‘Act of God’ or ‘Force Majure’).
If the Agreement is silent on this issue, the following considerations apply:
(a) In general, if an employee is willing and able to work, an employer is obliged to pay them.
(b) Subject to the terms of the employment agreement (for example the agreement may deal with alternative work locations and/or duties), you may be able to:
i: require employees to shift to another site or work from home;
ii. agree with employees that they use their annual leave until work can resume (the Holidays Act 2003 requires an employer and employee to try to agree on when annual holidays are to be taken. Failing agreement, an employer can direct an employee to take annual holidays on 14 days’ notice).
iii. agree with employees that their wages will reduce;
iv. agree with employees that they will take unpaid leave;
v. agree with employees that they carry out different work.
(c) If it appears that your business is unlikely to operate again or not for some time, you may have to consider making employees redundant (we will be placing a blog on this in the next few days) or (in the case of the business not being able to operate again) you may be able to argue that the employment contract has been frustrated and is at an end.
The principles of frustration have been held to apply in an employment context, although generally in the case of such things as a major or prolonged illness of the employee, or the employee’s imprisonment or detention for a lengthy term. The doctrine is not limited to these situations however. Nonetheless frustration is unlikely to be established if alternative employment arrangements could reasonably be made, albeit not immediately. Whether the employment relationship has radically changed as a result of the earthquake is a matter of fact and degree. You should obtain legal advice before relying on an argument of frustration, as the threshold required to meet frustration of contract is extremely high.
2. My business kept operating after the earthquake but some of my employees didn’t come to work, am I obliged to pay them?
This will depend on why they have not returned to work.
(a) Sickness – If the employee hasn’t come into work because they were sick or injured, or needs to care for a spouse or dependent who is sick or injured, the employee is entitled to sick leave.
(b) Caring for children/property – If the employee hasn’t come into work because they are looking after children who can’t attend school or daycare (because they are shutdown) or because they are dealing with damaged property, you will need to reach agreement with your employee as to whether they will take annual leave, special leave or leave without pay, as well as how long these arrangements will continue for.
(c) Feeling unsafe – If an employee hasn’t come into work because they feel unsafe, you will need to look at:
i. if they have reasonable grounds to believe that the work they are required to perform is likely to cause them serious harm (we recommend that you obtain expert advice on whether your workplace is safe after the earthquake and/or what can be done to make it safe, e.g. ensuring that buildings are structurally sound, that machinery can be restarted safely and that potable drinking water and sanitation is provided);
ii. have they discussed those concerns with you; and
iii. can alternative work arrangements be made, e.g. performing other duties or working from home.
If their concerns aren’t justified or they refuse to do other work which falls within the scope of their employment agreement, you are not obliged to pay them and may need to consider taking disciplinary action if the situation continues (see below – “No Reasonable Ground”).
(d) No reasonable ground – If an employee doesn’t return to work at the agreed time without reasonable justification, it may be necessary to look at disciplinary action or possible termination of employment due to abandonment. However, whether this course of action is legally justifiable or not, will depend on a consideration of all the circumstances, given the unique impact of the earthquake on employees and their families. Before taking any action, you should first obtain legal advice.
This article is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please contact a qualified legal professional.
