I can't tell you how many times I've been asked; "Can my employer force me to take annual leave during the COVID-19 nationwide lockdown?"
I've been avidly following the commentary surrounding employment law and the COVID-19 pandemic. It hasn't been a hard task; the legal community simply haven't been talking about it. Yes, they were regurgitating the government updates, but they weren't providing substantive commentary.
I have since posted my views on the COVID-19 Wage Subsidy and the requirement to pay wages. Shortly after, I posted on LInkedIn, stating that everyone was desperate for information, and that it was our time to step up. I requested that other employment law professionals provided their commentary on the matter. The next day, I began to see more articles appear. To those who have provided commentary, I thank you.
Today, I am again requesting that we step-up and provide quality commentary about the requirement to take annual leave during the COVID-19.
I have seen many simply quote section 19 of the Holidays Act 2003:
An employer may require an employee to take annual holidays if the employer and employee are unable to reach agreement under section 18(3) as to when the employee will take his or her annual holidays. If [this subsection] applies, an employer must give the employee not less than 14 days' notice of the requirement to take the annual holidays.
This isn't enough, and does not provide useful guidance. Please don't take this the wrong way, but we did not study this profession simply to read legislation. As members of the legal community, our role is to interpret and apply the legislation.
These are unprecedented times, and the Holidays Act 2003 was not designed in a time of a global pandemic. Let's get back to LAWS101: Statutory Interpretation.
Section 19: An Ordinary Reading
Let's firstly consider the wording of section 19 of the Holidays Act.
Yes, an employer may require an employee to take annual leave by giving 14 days notice; but only after they have been "unable to reach agreement."
Firstly, it is my view that this imposes an obligation on an employer to engage in a consultation process with an employee about the use of annual leave. Failure to attempt to "agree" on the taking of annual leave, may result in the incorrect application of section 19(2) of the Holidays Act 2003.
Also, according to section 16: "After the end of each completed 12 months of continuous employment, an employee is entitled to not less than 4 weeks' paid annual holidays."
Therefore, annual leave is only accrued after an employee has been employed for 12 months' continuous service. Without our guidance, many employers will be incorrectly applying this section; believing that annual leave is accrued from paycheck-to-paycheck.
If we are going to be quoting section 19; let's at least be providing the right advice.
The Purpose of the Act
Section 19 of the Holidays Act 2003 states: "An employer may require an employee to take annual holiday."
"May;" it's a small word, but an effective one. If parliament intended for this section to be implemented without consultation, and without considering other factors, they could have worded this differently.
Let's not forget the purpose of the Holidays Act 2003. The purpose is to allow employees to take their annual leave for the purposes of "rest and recreation", and to allow employers to "manage their businesses". As we know; typically, this section has been used when an employee's annual leave accrual becomes too burdensome for the employer to effectively manage their business.
The purpose of this section was not to force employees to use annual leave to top up their wages; effectively allowing an employer to default on their obligation to pay wages.
The Wage Subsidy Scheme
It is important to consider all other factors, too. Perhaps your advice will change if the employer is receiving the Wages Subsidy Scheme. Minister Grant Robertson has been informing employers that if the employer has received the Wage Subsidy, it cannot force an employee to take annual leave in replacement of the Wage Subsidy.
The declaration of the Wage Subsidy also states that an employer must use its best endeavours to pay at least 80% of its employees wages. If this is not possible, then it is required to pass on the full amount of the subsidy.
Something for you to consider; if an employer is able to top up the employee's wages to 80% (using wages or annual leave), does that mean it is "possible" for the employer to pay those wages? They have the funds available; we aren't talking what's most sustainable for the business, we are talking about what is "possible."
If an employer is an essential service, and have not received the Wage Subsidy; they may be safe in applying section 19 of the Holidays Act 2003, but only if done correctly.
But, if the employer is a non-essential service, and has received the Wage Subsidy (as most non-essential services would have), an employer should not be quick to rely on section 19 of the Holidays Act 2003.
It all depends on the circumstances, right?
Let's get talking. I'd like to know your view. Are you aware of any case law that we can adapt or apply? Can you provide any additional insight?
Just as we advise our clients; this is a time to work together. Let's provide New Zealand with the best advice we can.