Updated: Jun 28, 2020
As an employment law advocate, I have been inundated with inquiries from New Zealand employees who have been trapped overseas as a result of the COVID-19 temporary border closures.
In this blog post, I want to make a plea to employers to stop flagrantly dismissing your overseas employees. While these are unprecedented times, if an employee raises a personal grievance for unjustified dismissal, the employer will still be required to justify your decision as being fair and reasonable in all the circumstances. Please, read this post, and then seek legal advice if required.
I firstly want to provide some context to the situation. Many of the employee's who have contacted me are migrant workers on a range of visas. They have been legally working in New Zealand for years. They have paid their taxes, they have contributed to our economy and they have built lives here.
Those most affected are on employer specific work visas, or visas which specify the employer, role and location of employment.
For these people, when their employment is terminated, their visa is no longer valid. This means that they may potentially lose their right to re-enter New Zealand, and they will be required to undergo an entirely new application process prior to re-entering New Zealand.
For many, a new application process will require an offer of employment. However, New Zealand's unemployment rate is on the rise, and this will directly affect a migrant's ability to find work in New Zealand. This is because an employer is legally required to try to fill a position using New Zealand citizens or residents before offering a position to a migrant worker.
All the while, the migrant worker will still have financial obligations to meet in New Zealand; including rent, power, internet, loans, etc.
Employment Law: Frustration
In many circumstances, employers have attempted to justify the decision to terminate an employee's employment on the basis of "frustration of contract," without undertaking any process whatsoever. In brief, frustration of contract occurs when an unforeseen event means that the parties are unable to perform the contract. By virtue, the contract is immediately terminated, or 'frustrated'.
An employment agreement can be terminated in common law by frustration, although in practice the Employment Court is reluctant to apply the doctrine of frustration, preferring to treat the termination as either a dismissal or abandonment of employment.
This was confirmed by the Court of Appeal in Karelrybflot AO v Udovenko, where it held that the doctrine of frustration does apply in the employment setting, but it should not be lightly invoked and should be kept within very narrow limits.
It is my view that, even in these unprecedented circumstances, frustration of contract will likely have little application in employment law. Why? Because without a fair and reasonable process, it does not meet the test of justification contained within section 103A of the Employment Relations Act 2000.
However, if an employer were apply a fair and reasonable process when claiming "frustration", what would this process look like? Read on for a potential solution.
Employment Law: Abandonment of Employment
The second most justification I've heard from employers is that the employment has been terminated due to abandonment of employment.
Abandonment of employment usually occurs when an employee has been absent from their employment for three or more consecutive days, without reasonable excuse. Most employment agreements will contain a clause which effectively mirrors this; but it is important to note that if your employment agreement has a vague or ill-defined clause, the common law principle of abandonment will override this.
In these circumstances, I cannot see any employer being able to justify its decision to terminate an employee on the principle of abandonment of employment. The employee has a reasonable excuse for their absence; that is, that they are unable to return to New Zealand due to no fault of their own.
Employment Law: Something Else?
As discussed, an employer won't likely be able to justify its decision on the basis of frustration of contract or abandonment of employment. However, that doesn't mean it will be impossible to terminate an employee's employment in these circumstances. These are unprecedented times, which means the Employment Relations Authority may be required to set a new precedent.
If it were, it is my view that it would likely draw from principles from “medical incapacity”; whereby, an employee is unable to return to work due to sickness or injury. I believe the factual circumstances associated with medical incapacity cases are analogous to the present instance; in both situations the employee is prevented from performing the tasks and duties associated with their role due to a “no fault” event.
In these situations, the employer must conduct a fair and reasonable process prior to terminating the employee’s employment. As part of this process, the employer is required to consider:
Whether the employer has provided the employee with a reasonable time (in the circumstances) to return.
The reason and nature of the absence.
The company’s resources to temporarily fill the affected employee’s shifts either with existing staff, or by hiring new casual or fixed-term employees.
Whether the employee would be employed long-term if the employee had been able to return to work.
The nature of the employment itself.
It is true, an employer is not expected to indefinitely hold open a position for the affected employee. However, this is only one consideration.
The most important consideration, in my opinion, is the employer's ability to temporarily fill the affected employee's shifts. If the employee is a sales representative for a huge nation-wide company, it may be more difficult to justify the termination of that employee's employment. That is, because the company will likely have the resources to use existing staff, or hire casual or temporary staff, to cover the employee's absence.
However, if the employee is the head chef of a small family owned cafe, the employer may be able to terminate the employee's employment; if it can establish that is is not viable, or not possible, to hire a fixed-term head chef.
In either event, a fair and reasonable process must firstly be conducted. As part of that process, the employer's concerns must be discussed with the employee. The employer must weigh up the above considerations, and provide the employee with an opportunity to respond.
You can read more about medical incapacity on my other blog post, here.
Conclusion: What next?
If you are an employer, I recommend you thoroughly consider your ability to temporarily fill the affected employee's shifts prior to taking any action against the employee. As part of this, you may need to seek legal advice, to ensure that your assessments of the situation are 'fair and reasonable.'
If you are a New Zealand employee, and your employment has been terminated due to your inability to return to New Zealand, you may be able to raise a personal grievance for unjustified dismissal. The purpose of raising the personal grievance could be to reinstate you to your former role; a remedy which is available in Employment Law. This would mean that, effectively, the termination of your employment would be redacted and your employment would be considered continuous. Please contact me for further advice on this.
You can read more about the above topics on the Ministry of Business, Innovation and Employment's dedicated "Employment" website: Frustration of contract, Abandonment of Employment and Medical Incapacity.