After the earthquake comes the clean up - and employment issues

John Key’s announcement that an emergency fund will be available for earthquake stricken Canterbury’s small businesses to continue to pay their staff will be welcome relief to employers in the region who are unable to continue trading as normal. The fund will provide a $350 per week gross wage subsidy in an advance lump sum paid to the employer, which the employer can top up. Companies holding insurance cover for loss of earnings will be expected to use this before accessing the wage subsidy. Many business interruption policies will cover payroll. For example, one of NZ insurer’s business interruption policy provides cover, where material damage has occurred, for wages paid where the services of employees cannot be utilised in full or at all as a result of the damage.

The government fund is designed to encourage employers to continue to pay their staff even where the business is unable to open. Without it, employers and employees will need to carefully consider their obligations under their employment agreements (with large doses of communication, common sense and good faith). Most employment agreements will not cover “Act of God” events such as an earthquake, and there is no statutory requirement for employers to pay special leave in such situations, throwing us back on the terms of the agreement for payment of either annual leave or continued wages.

If the business is able to operate, the first issue for many employers affected by the Canterbury earthquakes will be ensuring that the place of work is safe – this is the employer’s responsibility and an employee can legitimately refuse to work where he or she considers the workplace to be unsafe. The Department of Labour has a health and safety check list for employers on its website http://dol.govt.nz/quake2010/

Other issues for employers, particularly if disruption continues, will be whether they can sustain the employment of staff, or whether redundancy or frustration of contract issues will come into play. Employers will need to consider carefully how they would conduct a redundancy process; it is likely that a normal consultation process would be able to be significantly constrained in the circumstances. The National Distribution Union praised Foodstuffs and the owners of the Kaiapoi New World supermarket that has had to close, laying off 80 staff, for the way they have handled the situation. Staff were all told together at a meeting of the closure and given 2 months’ pay plus a grocery voucher; significantly more than their contractual entitlement. Foodstuffs also pledged to find jobs for as many staff as possible who wanted to stay with the company.

As detailed by the Department of Labour, the key for both employers and employees affected by the earthquakes will be communication, flexibility and working together to get through a very stressful time for all.

Updated: October 2010