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Court Ruling - Wage Subsidy & Minimum Wage

An aviation catering company (Gate Gourmet New Zealand Limited) who claimed more than $1.5million in wage subsidies, has lost at the Court of Appeal. The ruling, which was to do with how Gate Gourmet (as the employer) applied the rules around the minimum wage. The Court of Appeal ruling could have a ripple effect on claims regarding pay during lockdown periods in New Zealand.

Gate Gourmet provides inflight catering services to passenger aircrafts. When New Zealand went into lockdown in March 2020, Gate Gourmet, was classed as an essential service. Due to the lockdown, the company considered there was limited work available. Gate Gourmet advised its employees that, providing the company received the wage subsidy, they would pay their employees 80% of their normal pay (the employees were employed full time and paid the minimum wage). Employees were told to stay home unless rostered on.

The majority of the Employment Court found that employees who stayed home were “not working” and therefore the Minimum Wage Act 1983 and the rules around being paid not less than the minimum wage did not apply. Chief Justice Inglis of the Employment Court had a strong dissenting view.

The Court of Appeal has now overturned the Employment Court’s decision and found that it is not lawful to make deductions from wages for lost time which was not worked due to the direction of the employer. Minimum wage law apply and the employees who were directed not to work and to stay home should have been paid not less than the minimum wage for all contracted hours.

Advice to employers is this: seek legal advice before making any decision around reducing hours or pay for your team. And tread very carefully around employees who are on the minimum wage as employees who are on the minimum wage cannot agree sto a reduction in their wages – to do so would be an unlawful breach of the Minimum Wage Act 1983.

 

 Bronwen Circle 

For further Employment Law advice, get in touch with Bronwen and the employment team.
bronwen@davenportslaw.co.nz | 09 883 4420

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