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Can You Implement A ‘Pandemic Clause’ in Your Employee Contracts?

Published March 12, 2021 (last updated May 20, 2022) - NZ Operations Manager

While lockdowns have thankfully been relatively short and sharp in New Zealand, they have still meant that some businesses have to close down temporarily.

The financial impact of these closedowns has forced some businesses to reassess their employment contracts and other aspects of workplace relations in order to be better prepared in the future.

Recent media reports have covered a dispute regarding a so-called ‘pandemic clause’ that some employers have inserted into their employees’ contracts, with unions disputing the legality of these clauses. According to these reports, this clause compels employees to take leave during a lockdown.

This may leave employers curious as to whether these clauses are permitted. In this article, we will discuss the issue in more detail.

Before we go on, keep in mind ‘pandemic clause’ is a casual phrase, and is not formal terminology. Further, not all the facts regarding the employment agreements or the employers’ policies are known. This article is intended to give readers a general overview using freely available public information.

What’s a Pandemic Clause?

According to these news reports, clauses have been inserted into employment agreements by their employers stipulating that an employee must use their accrued leave before the employer would top up their pay, or take unpaid leave during an exceptional event.

The employees referenced in the media stories are employed at retailers that have had to close down their physical storefronts due to the recent lockdown.

Some or All of My Employees Can’t Work During Lockdown. Do I Still Need to Pay Them?

If all or some of your employees can’t work due to a lockdown (e.g. your retail store has had to close), whether you will have to pay your employees (and whether this has to be at least the minimum wage) is very much fact dependent, as illustrated by cases from the first lockdown that have reached the Employment Relations Authority and have been determined.

Generally speaking, an employer must pay employees their normal pay if they are ready, willing and able to work their scheduled hours.  Dependent on any contractual terms or policies, the employer may be able to consult with employees regarding alternatives during this time, such as their agreement to reduced hours or taking leave entitlements. 

The Government has introduced another COVID-19 Wage Subsidy to help businesses continue to pay employees. Your business may be eligible for this payment.

If your workplace can still operate during lockdown, then employees who can continue to work should be paid as normal.

If you need a better way of ensuring you’re paying your employees for the hours they’ve worked, why not try BrightHR. With BrightHR’s Roster Tool, you can create multi-week shift schedules, and with Blip by BrightHR you can track when your employees clock in and out of work. And you can do this all in the palm of your hand. Find out more about BrightHR here.

Can I Insert a Pandemic Clause into My Employee’s Contracts?

When drafting an employment agreement, an employer may wish to include a clause that in effect stands employees down if the business can’t operate or the employee’s role cannot be undertaken due to, for example, a pandemic, ‘act of God’ or ‘force majeure’ (a legal term that covers extraordinary natural events, e.g. a natural disaster).

However, the enforceability of some of these clauses is still highly debated and will greatly depend on how the clause is drafted.  Generally, ‘force majeure’ clauses will not apply where the business can still be run just at more cost or inconvenience, rather they apply where running the business is impossible.  There is a high threshold to meet the requirements of these clauses, particularly where temporary changes are possible or there is other support available to businesses.  A clause or policy regarding what will happen in the event of an emergency or disaster is, however, very useful to include to clarify obligations in these events. 

Do I Need to Provide Employees with A Contract?

Every employee must have their own written employment contract, whether it be an individual employment agreement or collective agreement.

An employment contract cannot offer less than the legal minimum rights (i.e. wages, legislative entitlements and safe working conditions) or trade off the minimum rights for other things. There are certain things that must be included in employment agreements by law, otherwise the parties can negotiate the terms of the agreement. 

Do You Need More Help Understanding Pandemic Clauses or Employment Contracts?

Employsure can help you better understand workplace relations, and provide tailored contracts for our clients upon request.

If you’re not a client, ring the number below right now and we can provide general advice in respect to employment relations and workplace health and safety.

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Call our team to receive free initial advice on any workplace relations topic.

About Employsure

Employsure is one of New Zealand’s largest workplace relations advisers to small- and medium-businesses, with over 5,000 clients. We take the complexity out of workplace legislation to help small business employers protect their business and their people.

This blog has been compiled on the basis of general information current at the time of publication. Changes in circumstances after publication may affect the completeness or accuracy of this information. To the maximum extent permitted by law, we disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, currency and reliability of the information on this website, and to seek professional advice where necessary. Nothing contained on this website is to be interpreted as a recommendation to use any product, process or formulation or any information on this website. For clarity, Employsure does not recommend any material, products or services of any third parties. 

BrightHR Can Help You Too

Bring your employee management into the digital age with BrightHR. Access documents, roster employees on to shifts, manage leave and much more with BrightHR. Find out more about clicking the link below. 

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