Where employees have been advised to self-isolate in accordance with public health guidance and cannot work from home, employers face the thorny question of how to handle the cost of their absence.
As a starting point, employers may be able apply to the Ministry of Social Development (MSD) for financial support to help cover the employee’s wages. For example, an employee may qualify for the Leave Support Scheme (LSS) if they:
- have COVID-19; and/or
- are a household contact [1] of a person who has COVID-19; and/or
- are the parent or caregiver of a dependant who has been advised to self-isolate; and/or
- are in the category of people most at risk of severe illness from COVID-19; and/or
- have household members in the category of people who are most at risk of severe illness from COVID-19.
The LSS provides financial support to help cover the employee’s wages while they are self-isolating and cannot work from home. Under the LSS, employers can receive weekly payments of either $600/week for full-time employees who were working 20 hours or more a week; or $359/week for part-time employees who were working less than 20 hours/week. These payments must be passed onto the employee in full unless the amounts are higher than their normal contractual wages.
In our view, the LSS can be applied towards payment of an employee’s sick leave, if they are isolating due to symptoms of COVID-19 and/or have tested positive for COVID-19.
It gets tricky when an employee is not sick with COVID-19 but is self-isolating as a close contact. Employers applying for the LSS must declare that they will use ‘best endeavours’ to top wages up to 80%. The self-isolation rules are rapidly evolving but businesses are understandably concerned about paying 80% of wages for frequently repeated absences over the course of several months. There is no simple fix to this dilemma and businesses will need to consider options such as topping up for up to 10 days per employee, then assessing ability to continue doing so, with risk.
Alternatively, an employee may qualify for a one-off payment of $359 under the Short-Term Absence Payment (STAP) scheme if they do not qualify for the leave support scheme and are:
- staying home while waiting for their COVID-19 test result or a dependent’s test result, in accordance with public health guidance;
- identified as a household contact; or
- asked to get tested by a health official.
If the employer does not apply for Government subsidies, we consider that there are two potential options:
- An employee sick with COVID-19 can take sick leave. When that sick leave expires, they have the choice of unpaid leave or using annual leave; or
- An employee who is not sick but is a close contact is not ‘ready, willing and able’ to attend work, and therefore is not entitled to wages.
It is important to note that option 2 above is untested. The Employment Relations Authority ruled that the employees were ‘ready and willing’ to work in the first lockdown back in 2020,[2] but that view was never tested in the Employment Court and the current situation is arguably distinct. We do note that the obligation of good faith requires employers to work with employees positively and constructively, meaning it is highly unlikely that any employer would be justified in outright refusing to pay their employee’s wages without first exploring other options, such as the employee using annual leave or taking unpaid leave.
If the employee and the employer cannot reach an agreement on leave, the employer can direct the employee to take annual leave after providing 14 days’ notice.
Employers should exercise caution before deciding not to apply for Government subsidies because if the employee is eligible to receive the subsidies, this decision could lead to personal grievances for unjustified disadvantage being raised against the employer.
Lastly, it is important to note that basic employment law obligations still apply. Therefore, before making any decision that may affect an employee’s term and conditions of employment, such as payment of wages, employers should first consult with the affected employee(s). Employers should also consult employees before making an application to receive Government subsidies and obtain their consent to the application being made on their behalf, as well as the disclosure of their personal information to MSD.
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[1] New Zealand moved into Phase 3 of its Omicron response at 11:59pm on 24 February 2022, which has changed the self-isolation criteria. In Phase 3 this means that close contacts are no longer required to isolate and should only take a Covid-19 test if they have symptoms. Further “household contacts” are persons who live with someone who has tested positive for Covid-19, and therefore must self-isolate until their Covid-19 positive household member has completed their 10 days of isolation.
[2] Raggett & Ors v Eastern Bay of Plenty Hospice Trust t/a Dove Trust [2020] NZERA 266
