Modifying employment agreements during COVID-19 response and recovery

Find out about options to deal with the impacts of COVID-19 in the workplace.

Last updated: 19 August 2020

Employers and employees need to work together to slow the spread of COVID-19, protect New Zealand and keep each other safe. This means that normal obligations to keep in regular contact and to act in good faith are more important than ever.

Regular employment law still applies to all employment relationships – regardless of the circumstances that we find ourselves in. This includes:

  • having a written employment agreement for every employee, and doing what that agreement requires
  • keeping each written employment agreement up to date, including documenting any changes that affect rates of pay or hours worked
  • meeting legislative and any relevant contractual requirements for changing employment arrangements
  • complying with all minimum standards legislation and with the Employment Relations Act 2000. 

Deal with each other in good faith

Employers and employees, and their representatives must discuss in good faith the implications of the COVID-19 response and recovery on their working arrangements.

Good faith includes the following three elements:

  • Parties must not act in a misleading or deceptive way.
  • Parties must be responsive and communicative.
  • Before making a decision, which may result in employees losing their job, the employer must give the affected employees sufficient information to be able to understand the proposal and then give them a proper opportunity to comment.

Good faith is also wider than this. It is more than just following the letter of the law. It involves treating others fairly using common sense.

Where changes to current working arrangements are proposed by an employer, there are specific good faith requirements that must be followed. Any changes made need to be consulted on and agreed to by both parties.

Any agreed change to the employment agreement should be recorded in writing. Having the agreed terms and conditions in writing is a legal requirement, whether the change is temporary or permanent.

Employers and employees may be considering changes that involve workplaces closing temporarily or reductions in hours. These changes require additional good faith or other process arrangements, including consulting with employees and their representatives, providing time to respond to proposals and considering their comments.

During the COVID-19 response period, there may have been circumstances where consultation on changes could reasonably have been shortened if the employer genuinely needed to make rapid adjustments to cope with their circumstances. Shortened processes must still occur in good faith and provide opportunity for workers to seek advice. 

As we are now in the COVID-19 recovery phase, normal consultation processes should be followed for any workplace changes proposed during the COVID-19 recovery period. This includes normal consultation timeframes and provision of information.

Good faith requirements

Guidance on workplace change

Access to financial support

Wage subsidy schemes – Work and Income

The wage subsidy schemes support employers and their staff who are financially impacted by COVID-19 to maintain an employment connection and ensure an income for affected employees. Employers can check their eligibility and apply online on the Work and Income website.

Wage subsidy schemes – Work and Income (external link)

COVID-19 Leave Support Scheme – Work and Income

The COVID-19 Leave Support Scheme is available for employers, including sole traders, to pay their employees who can't work because the employee can't come into work as per Ministry of Health guidelines, which recommends they stay at home, and they are not able to work from home because of the nature of work. Employers can check their eligibility and apply online on the Work and Income website.

COVID-19 Leave Support Scheme – Work and Income (external link)

Work and Income benefits

If employees are facing difficulties (for example, where they have had a reduction in hours of work) they may also be able to access support from Work and Income. 

Benefits and payments – Work and Income (external link)  

Employees who lose their job between 1 March and 30 October 2020 due to COVID-19 may be able to get the COVID-19 Income Relief Payment. People can check their eligibility and apply online on the Work and Income website.

COVID-19 Income Relief Payment – Work and Income (external link)

Flexible working

Example 1: Agreeing to undertake different ways of working

Working as usual may be difficult for employers and employees due to the impacts of COVID-19. Employers and employees may want flexible ways of working during this time (for example, staggering start times to avoid peak times for public transport). Parties should discuss these matters and agree to arrangements in good faith. These changes can be temporary or permanent. The length of time for this change must be stated in the employment agreement variation.

Any changes must be recorded in writing and signed by both parties, and the parties must be given reasonable time to consider the proposal.

Employees can ask also to change their work arrangements, place, hours, or days. Employers must legally consider this in good faith.

Example 2: Agreeing to a temporary reduction in hours.

Generally, if an employment agreement sets the employee's hours of work, then an employer can’t change them without the employee's agreement. This must be negotiated in good faith. If the employment agreement says that an employer can change the hours of work, the employer still has to act fairly and reasonably before they do.

In some situations (such as genuine financial, commercial or economic problems, or genuine restructuring of the business), reducing an employee’s hours may be put forward as an alternative to redundancy.

Alternatively, employers may propose changes to work times or moving to shift work arrangements to manage physical distancing requirements.

In these situations the employer must follow the usual process for workplace change, which includes giving the employee a fair opportunity to consider and respond to the proposed change.

Any agreed changes must be recorded in writing and signed by both parties, and the employee must be given reasonable time to consider the proposal.

Workplace change process

Example 3: Returning to normal hours

Some employers and employees may agree to a reduction in hours during the COVID-19 Alert Levels. This could be a temporary or permanent reduction. The length of time for this change must be stated in writing in the employment agreement variation.

However, employees should be paid at their contracted rate, for each and every hour they work regardless of the Alert Level unless otherwise negotiated in good faith, which can never be below the minimum wage.

Any agreed changes must be recorded in writing and signed by both parties, and the employee must be given reasonable time to consider the proposal.

Hours of work

Changes to job description

Example 4: Agreeing that the employee will undertake alternative work where the employee is unable to do their existing job

An employer can’t change the job description of an employee without the employee’s agreement. In some situations, where an employee is unable to do their existing job, an employer may propose that the employee does a different job. This could be a temporary change until the employee can resume their existing job.

In these situations the employer must follow the usual process for workplace change which includes giving the employee a fair opportunity to consider and respond to the proposed change.

Any agreed changes must be recorded in writing and signed by both parties, and the employee must be given reasonable time to consider the proposal.

Workplace change process

Changes to the rate of pay

Example 5: Agreeing to a lower rate of pay for each hour that the employee works

An employer can’t change an employee’s rate of pay without discussing it in good faith and the employee’s agreement. In some situations, (such as genuine financial, commercial or economic problems, or genuine restructuring of the business), reducing an employee’s rate of pay may be put forward as an alternative to redundancy. The length of time for this change must be stated in writing in the employment agreement variation.

In these situations the employer must follow the usual process for workplace change, which includes giving the employee a fair opportunity to consider and respond to the proposed change.

During all Alert Levels, businesses are legally required to pay workers for any work they do and must continue to meet all contractual obligations. This means employees – regardless of whether they are working from home, or from their workplace – must be paid at least the minimum wage, or more if the rate in their employment agreement is higher.

If an employee is working (either from home, or at a workplace), then they must be paid for each and every hour that they work at their agreed wage rate. This rate cannot be below the minimum wage rate.

Any agreed changes must be recorded in writing and signed by both parties, and the employee must be given reasonable time to consider the proposal.

Workplace change process

Receivership

If an employer has been placed into receivership the receiver will have responsibility for decisions on running the business and this includes handling the business’s employment relationships. Each situation will be different depending on the nature of the company in receivership.

Contact the receiver for specific information about your situation if your employer has been put into receivership, or seek legal advice. You may wish to contact a Community Law Centre for advice or your union.

Community Law (external link)

Depending on the circumstances the receiver may cancel your existing employment agreement, or they may offer you a new employment agreement with different conditions. Employment laws still apply, and the receiver will be required to keep in regular contact with you and act in good faith.

Insolvency

There are some relief packages for business and individuals and increased support for those who have been impacted by COVID-19.

Keeping businesses viable and New Zealanders employed is one of the main priorities during these uncertain times. New legislation has been passed which could protect your business, allowing you to continue trading and keep your staff employed.

Insolvency and trustee services (external link)

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