Workplace closures and other interrupting events
In the context of COVID-19, this article considers workplace closures, force majeure and frustration as it applies to employment arrangements.
Workplace closures
Where a workplace is required to close (for example, where it is not an essential business able to operate during alert level 4 lockdown), but an employee remains ready, willing and able to work (i.e. is not sick nor required to care for any sick dependents), the employer is in general obliged to provide the employee with work and must pay them accordingly.
Conversely, where an employee is compulsorily quarantined (due to recent overseas travel or contact with a known COVID-19 case), then it is arguable that the employee is not ready, willing and able to work, and the employer may not be required to pay the employee (unless the employee is able to work remotely).
Force majeure
Depending on its wording, a force majeure clause (or other type of business interruption clause) may excuse a party from carrying out its obligations under an employment agreement (for example, of an employer being required to provide employment). Few employment agreements contain force majeure clauses, and in each case the clause will need to be reviewed to ascertain whether COVID-19 is covered in the situations listed and whether a party’s non-performance falls within the scope of the clause.
A force majeure clause in an employment agreement may be more applicable to a fixed-term type of employment agreement, say employment for a specified event, rather than for a standard permanent employment agreement.
Frustration
New Zealand employment law allows for frustration of employment agreements – this may occur when an unforeseeable event makes it impossible for the parties to perform the obligations in the employment agreement. The effect of frustration on an employment agreement is that the employment is terminated – however, with COVID-19 it may be more appropriate to govern any termination of employment under existing redundancy provisions.
The New Zealand courts are reluctant to impose frustration on employment agreements, given the unequal effect this will have on affected employees. The COVID-19 situation likely will not give rise to frustration of many standard employment agreements, merely due to the workplace being closed – the work may be able to be carried out in adapted circumstances or a redundancy process may be more appropriate.
An employment agreement will not be frustrated where it contains express provisions to govern the situation (such as a force majeure provision mentioned above or other applicable leave provisions).
Get in contact
If you would like advice about the effect of COVID-19 on your workplace (as employer or employee), or you would like our assistance with another legal matter you are facing, please contact your usual point of contact at Kemps Weir or contact us here.
Disclaimer: This publication should not be construed or acted on as legal advice. It is brief and general in nature. Specific advice should be sought.