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Case Study: Minimum wage impacts on workers in lockdown

By Nikki Farrell

Case Study: Minimum wage impacts on workers in lockdown

At times it feels like a distant memory, but for some people, the battle over lost wages from Covid-19 lockdowns has continued long after the country felt it was getting back to normal…the first time.

One such case came about during New Zealand’s first lockdown in March 2020. “Sandhu v Gate Gourmet New Zealand Ltd [2021] NZCA 591”.

Gate Gourmet New Zealand Ltd (Gate Gourmet) provides in-flight catering services to passenger aircraft both domestically and internationally. Mr Sandhu and other employees were employed by Gate Gourmet for a minimum 40-hour week, and they earned the minimum wage.

On 23 March 2020 New Zealand went into alert level 4 lockdown resulting in Gate Gourmet partially shutting down its operations. This shutdown saw Gate Gourmet tell Mr Sandhu and some employees they were not required to work.

Gate Gourmet agreed that if it received the government wage subsidy (which it did) then it would pay employees who were not required to work 80% of their normal pay. The employees therefore received 80% of the minimum wage.

Legal Challenges

The employees successfully brought a claim in the Employment Relations Authority claiming that Gate Gourmet was breaching section 6 of the Minimum Wage Act 1983 (MWA) as they were being paid below the minimum weekly wage. The Authority Agreed.

Gate Gourmet appealed to the Employment Court. That Court overturned the Authority decision and found in favour of Gate Gourmet.

Court of Appeal

The employees challenged the Employment Court decision. The question for the Court of Appeal being:

Whether, in the absence of sickness, default, or accident, the minimum wage is payable for all of a worker's agreed contracted hours of work or whether it is lawful to make deductions from wages for lost time not worked at the employer's direction.”

The Court of Appeal found in favour of the employees.

The Court found that the logical reading of section 6 of the Minimum Wage Act (MWA) was that it “requires payment of the minimum wage for the whole of the time that the employee has agreed to work” (see paragraph [46] of the decision). There are situations for lost time (such as by default or the worker, or the worker being ill or having suffered an accident – s 7(2) MWA) where payment of wages may be withheld but those situations were not present here. Section 6 is a basic protection for employees and the MWA prevents workers on minimum wage from being exploited.

The judges found (at paragraph [54]) that:

“It is not lawful to make deductions from wages for lost time not worked at the employer’s discretion. The minimum wage is payable for the hours of work that a worker had agreed to perform, but does not perform because of such direction.”

The orders made in the Employment Court were set aside and the decision made by the Employment Relations Authority was restored, meaning that the employees should have been paid the minimum wage during the shutdown.

The decision highlights the importance of protecting workers who receive the minimum wage. It sets a precedent for payment of wages where the workers were unable to attend work due to a direction of the employer.

The outcome may have been different if the employees were unable to attend work due to other reasons, such as a government direction.

 

If this article has raised questions for you, we can help! You can contact Nikki Farrell for a chat on Nikki.farrell@gibsonsheat.com or at 04 916 6458.

Disclaimer: The information contained here is of a general nature and should be used as a guide only. Any reference to law is to New Zealand law and legislation. We recommend before acting on it, you consult your accountant or tax adviser