A decision by the Employment Relations Authority shows the importance of businesses getting legal advice before making big decisions under pressure and uncertainty during a pandemic. Photo / NZME
A decision by the Employment Relations Authority shows the importance of businesses getting legal advice before making big decisions under pressure and uncertainty during a pandemic. Photo / NZME
EMPLOYMENT LAW
Comment
It is an opportune time to look at learnings from the way some employers acted in March 2020 to ensure that when employers engage with their staff as a result of the current Covid-19 lockdown we don't repeat history.
As a result of the Covid-19 pandemic, employers were forcedto make rash decisions under immense pressure and uncertainty. Despite this, the Employment Relations Authority (the Authority) has recently made clear that such circumstances do not lead to a dispensation of employee rights and employer obligations.
One such case in which this was demonstrated is De Sousa v Bayside Fine Food Ltd which the Authority determined earlier this year. Here, Bayside Fine Food Ltd (trading as Snells Beach Café) was found to have unjustifiably dismissed eight of its employees a week before New Zealand moved to alert level 4 lockdown.
In early March 2020, Snells Beach Café proposed to their employees that a "business interruption" clause be added to their employment agreements to cover the employer for unforeseen invents, including pandemics, that were beyond its control. The clause proposed that in such events the employer would consult with employees and decide whether the employment relationship could reasonably continue.
Soon after the clause was added to the agreements, all employees were called to a "compulsory staff meeting" where they were handed dismissal letters on the basis of a business interruption (Covid-19).
Eight of the employees raised personal grievances for unjustified dismissal.
While the Authority recognised the immense pressure the café owners were under in the uncertain and unprecedented times of Covid-19, they ultimately held that all eight employees were unjustifiably dismissed.
The key reasons were:
The "business interruption" clause was essentially a frustration clause, meaning that it provided for the end of the contract when an unforeseen event occurred making performance (or continued employment) impossible. The test for frustration is high and very rarely met, the employer needed to demonstrate they truly could not trade on.
Continued business was not impossible, gatherings up to 100 were still permitted so the café could still operate.
In the event that business was affected, the Government had already announced an economic support package for businesses which the café could have relied on.
The employer did not consult or negotiate with their employees. This meant the employer did not have the benefit of the reasonable suggestions on how to trade on from its employees and did not comply with the terms of its own business interruption clause which it sought to rely on.
On this finding, the Authority ordered Snells Beach Café to pay a total of over $136,000 to its employees.
With Covid-19 lockdowns once again in the forefront of employers' minds, there are some key takeaways that should be learned from expensive lessons such as this:
• Employees' rights and employers' obligations are enduring, not even a pandemic will dispense with them. This is especially so in respect of core obligations such as the duty of good faith and the requirement to act fairly and reasonably. The Authority and Employment Court will not take kindly to breaches.
• Consultation with and giving notice to employees about proposed changes is necessary in all situations and the advice or feedback from your employees should be genuinely considered – it may even save your business.
• When contemplating making changes to your employees' terms of employment due to the pandemic you must make a sober assessment, meaning free from outside emotions, pressures and stress, of the necessity of your actions. This a difficult task and one employers find difficult due to being so invested in their circumstances.
We are experts at giving objective and pragmatic advice on business decisions and the legality of changes to employment.
• David Grindle is director in charge of the Employment Law team at WRMK Lawyers. He has practised in this area of the law for 17 years.
