Christchurch Earthquake: advice for employers

In the days following the earthquake, many Christchurch business owners will be coming to terms with what remains of their business and have questions. The information below is designed to answer some of the more common questions that may arise. However, if any Christchurch business has a question about any employment issue arising from the earthquake they are welcome to call us before the end of this week (i.e. close of business 10 September although if the need remains we will extend this) to receive a complimentary 15 minute telephone consultation. Simply call us on 09 358 2725 or 021 320 171.

UPDATE

The government has announced that it will provide a subsidy for Canterbury small businesses to assist with the payment of wages to staff following the earthquake. To find out more or apply go to: http://www.workandincome.govt.nz/about-work-and-income/news/canterbury-earthquake/employer-subsidy.html

Payment of remuneration

In the vast majority of cases the obligation to pay an employee’s remuneration will continue,  irrespective of the ability of the business to trade.  I will deal with each type of employee separately.

  1. Salaried employees:  The employment agreement stipulates an obligation to pay a yearly sum (whether in monthly or fortnightly instalments).  This obligation endures until the agreement ends irrespective of the ability of the business to trade.
  2. Waged employees (i.e. paid by the hour):  In most cases waged employees will have regular hours of work per week (whether full time or part time or whether the times for working fluctuate weekly by roster).  This places an obligation on the business owner to pay for those normal hours even where work in not available.  Even where the employment agreement does not stipulate normal or regular hours of work per week, if a previous pattern of employment has established regular hours each week, those hours will be deemed the employee’s normal hours of work and the obligation to pay for those hours will remain.
  3. Casual employees:  Casual employment is the only type of employment where there is no obligation on the employer to provide work and therefore there is no corresponding obligation to pay casual employees unless they carry out work.
  4. Fixed term agreements: Whilst fixed term agreements are bot commonplace, they may be "frustrated" by the earthquake where the fixed term is going to expire, or is likely to expire, before the business is able to recommence trading.  In simple terms, frustration occurs where an event outside the control of either party renders the contract unable to be performed and is therefore terminated. In such a situation there will be no obligation to pay wages because the contract comes to an end immediately.  

Circumstances which may avoid the need to pay salary or wages

There may be situations where the franchisee does not have to pay wages:

  1. An employee’s ability to work:  The obligation to pay wages or salary assumes an employee is able or wants to work.  There will be many employees will need time off work to attend to personal matters in light of the earthquake.  In this instance, business owners should come to an agreement with employees concerning the use of holiday pay, or where applicable, sick pay.  Some employees may require time off work to cope with the trauma of the earthquake and it will be appropriate to allow sick pay for this purpose.
  2. Closedown period:  The Holidays Act does permit businesses to have closedown periods which give the employer the right to discontinue the work of employees.  However, there is a 14 day notice period requirement before a closedown period can operate so this would only be of assistance to businesses that anticipated being closed for a long duration. However, if a store anticipated major structural repairs which are likely to go on for some time this may be an option to avoid terminating its employment agreements.
  3. Agreement to discontinue work:  There is nothing stopping a business owner and an employee agreeing to discontinue work without pay for a period of time or for the employee to use any accrued entitlement to holiday pay.  Business owners should communicate with employees as to when their store is likely to re-open and endeavour to reach an agreement on pay where possible.  
  4. Redundancy and frustration:  If the earthquake is likely to spell the end of the business then the employer should let its employees know as soon as possible.  Termination will take place either by way of redundancy or frustration.  If it looks like the business will not be able to resume trading as a result of the earthquake the best advice is for the employer to start communication with its employees immediately in order to let them know that the employment relationship either has come to end through frustration or will be coming to an end by way of redundancy. Whilst the law does impose an obligation to consult in the event of redundancy, in this situation consultation is likely to serve no purpose.
  5. Force Majeure: some commercial contracts have clauses which allow for the obligations under the contract to be suspended when the ability to perform the obligations is hindered by an Act of God, such as an earthquake. Such clauses are called force majeure clauses but they are extemely uncommon in employment agreements. However, if your employment agreements does have such a clause or a similar clause which says you don't have to pay, then you can rely on it.  

Business interruption insurance

Many businesses will have business interruption insurance which will cover business interruption as a result of earthquakes.  Such insurance would usually cover staff wages but the business owner should check the terms of the policy and/or consult with their insurance broker as insurance policies can vary with respect to their terms of coverage.

Most policies will cover loss of profit during business interruption, so that will cover losses caused by having to pay staff wages while the business interruption continues.

If a business owner has business interruption insurance which may apply in these circumstances the recommendation is for them to speak to their broker to get confirmation that wages will be 
reimbursed during the period of interruption.

Government subsidy

The Government has now announced a subsidy to help business owners pay wages to staff following the earthquake. For more information go to: http://www.workandincome.govt.nz/about-work-and-income/news/canterbury-earthquake/employer-subsidy.html


Health and safety issues

An employer has an obligation to ensure a safe working environment and many workplaces will be unsafe as a result of the earthquake.  Therefore, business owners should be careful when asking employees to assist with clean up to ensure:

  1. You don't place your employees at risk of harm;
  2. If necessary you provide or ensure that they wear protective clothing (e.g. heavy footwear,hard hats etc);
  3. You instruct your employees to ensure that they bring to your attention anything that they believe to be a hazard;
  4. You only require your employees to carry out tasks which they are capable of performing in a safe manner;
  5. You remind your employees that they do not have to undertake any task which they consider unsafe.
Our thoughts are with you.

Regards,

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