Whether, after accepting the Covid-19 Wage Subsidy, an employer can reduce an employee’s salary without their permission.
This decision is based on the interpretation of ‘wages’ in the Wages Protection Act (the Act) and its application to individual employment agreements.
The Employer, Dove Hospice, claimed the government’s wage subsidy scheme to allow them to pay their employees at least 80% of their normal wage. A number of staff were unable to work over lock-down and the employer, without consultation, paid them at this reduced rate over the period.
Usually, this would be a clear cut-issue. The starting point here is that terms of employment cannot be unilaterally varied, which means if the employer is to reduce wages set out in an employment contract, they must have the express permission of the employee: a good point to always keep in mind!!
The issue is complicated somewhat by the circumstances in which it occurred – that is the employer accepting the government’s wage subsidy scheme and then only paying the employees 80% of their wages in accordance with minimum requirements of the subsidy. But importantly, in this case, the employees did not agree to have their wages reduced to 80%. They were told they were to be paid 80% of their contracted wages over level 4 lock-down and this would be reviewed in late April. So, Dove made a unilateral change to their employment agreements in breach of the Employment Relations Act.
In an attempt to get around this, Dove argued what they were paying were not wages as defined in the Act over the Covid period which allowed them to alter the wage in the agreements to 80%. The Act sets out that a wage is something paid to an employee ‘for the performance of services or work’ – something Dove claimed did not happen over Covid as the roles the workers were employed in were not able to be carried out at home. If they were to accept Dove’s argument, then any non-performance of work would allow an employer to get out of their contractual engagement to pay wages.
The Authority did not agree with this line of argument, instead saying that wages are paid for a contract of service which employees are willing to carry out. They found the employees were willing and able to carry the work out. It was not their fault Covid made them unable to work and nothing in their individual employment agreements specifically authorised their employer to deduct wages for circumstances such as Covid.
Therefore, Dove breached their obligations under the Wage Protection Act by reducing, without permission, their employees’ wages to 80% of their normal rate. In the context of the Covid-19 Wage Subsidy Scheme, an employer must therefore have sought permission of the employee before reducing their wage to the minimum 80% of the rate in the contract.
Read another case APEX recently took on behalf of CMDHB Part-time phlebotomists. This case looked at how sick leave entitlement is calculated for these part-time employees.