Employment Court – Personal grievance – Unjustified disadvantage – COVID-19 – Wage reduction – Procedural fairness
A key issue in the case was whether the employer unjustifiably disadvantaged the employee by reducing his wages by 20 per cent in response to reduced turnover caused by the outbreak of COVID-19.
The employee in this case worked Front of House at a restaurant owned by the employer. The employer challenged the Authority determination that it had unjustifiably disadvantaged the employee in several ways, most notably by reducing the employee’s pay by 20 per cent. The employer insisted that these wage reductions were necessary to avoid redundancies caused by COVID-19 and the subsequent lockdowns. It also said that employees agreed to these reductions during a staff meeting. However, the Court determined the evidence did not support this (see para 13).
The Court held that the wage reduction amounted to a personal grievance for unjustified dismissal. The Authority had found that while the employer had strong substantive justification for the wage reduction, its failure to consult the employee meant it did not meet the procedural requirements of s 103A (external link) of the Act (see para 36). In the Court, the employer challenged this point on the basis that the circumstances of COVID-19 should relax the procedural requirements of s 103A (external link) (see para 37). The Court agreed that context is important for determining the requirements of procedural fairness, and that the context of early COVID-19 was highly pressuring and challenging (see para 38). However, the Court said the impact on the employee was also relevant. The impact of substantially reducing the employee’s pay raised the standard required of a fair and reasonable employer (see para 42). Given this, the Court found that simply advising the employee by letter that their wage would be reduced fell short of the minimum procedural requirements. The employer should have consulted the employee on such a significant decision, regardless of the context of COVID-19.
The Court upheld the Authority’s finding (see para 46). The Court dismissed the employer’s challenge and awarded costs to the employee.
Wilson-Grange Investments v Guerra (2023) NZEmpC 39 [PDF, 226KB]