Employers continue to be “shocked” they can not unilaterally reduce workers’ pay during the level 4 lockdown, says an employment law expert.

An Auckland electrical contractor sent an email on Thursday saying that staff not working on construction sites would receive 80 per cent of their normal wage for this week’s pay, consisting of $600 from the Government’s wage subsidy and a top-up from the company.

With an expected extension of level 4 in Auckland, Aseco​ commercial manager Bruce Atchinson​ said in the email that next week's pay for those workers would be 60 per cent of a normal standard week’s wage, including the wage subsidy and a top-up, and the following week it would fall to 40 per cent.

Workers were told they had the option of topping up to a different level by using their holiday pay.

Atchinson told Stuff, when asked if there had been any formal agreement to the alternative arrangement, that “I put it out there for them to come back to me in agreement.

“Last week we paid staff 100 per cent. Moving forward, we’re going to pay them 80 per cent, which we’re obliged to by obviously taking up the Government’s wage subsidy.”

Atchinson said employers had to make an “honest attempt” to pay 80 per cent of the normal wage, and disagreed that employees needed to agree to the changes.

“You’ve got to give them two weeks’ notice, which is what I’ve done.

“You can phone any other businesses in Auckland and ask them the same questions, and I think you’ll get the same answers.

“Essentially I’ve told all of our staff you’ve got options - you’ve got an option to either take it up or not take it up.

“No business can survive paying everybody 100 per cent and sitting at home, and we’re not invoicing or anything, so there won’t be a business here in future for them to have any employment if that happens.”

Employment law expert Max Whitehead, managing director of Whitehead Group, said employment law was still in place at level 4, and it was not legal to unilaterally change the amount workers were paid.

“The employment contract is sacrosanct.”

Employers should get legal advice before making any reductions in an employee’s pay, he said.

An employer was not entitled to pay an employee any less than the rate specified in the employment agreement, unless there was expressed agreement between the employee and employer. He advised that should be in writing, and signed by the employee.

An employee’s employment agreement may have specific, carefully worded clauses just for lockdowns, which could enable a pay reduction, he said.

During the last level 4 lockdown in 2020, a lot of employers assumed they had the right to lower pay by 20 per cent after the Government said employers receiving the wage subsidy had to make their best efforts to pay staff at least 80 per cent of their normal pay, Whitehead said.

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“Employers are shocked to know they can’t unilaterally reduce pay. Workers are terrified and want to keep their jobs, so they don’t kick up a fuss.

“There was gross confusion after the last lockdown, it will be the same this one.”

A lot of employers were small businesses that did not have employment advisers on tap, he said.

The consequences were likely to be significant for employers who unilaterally changed an employee’s pay. The Employment Authority could impose a penalty of up to $20,000 on the employer, some or all of which could be paid to the worker, he said.

A worker could also be back paid the amount of money deducted from their wages or salary.

Cullen Law senior associate Chris Scarrott​ said terms of employment such as pay could not be changed by an employer without agreement between the parties, as employment law remained in place despite the lockdown.

That was an express term of the wage subsidy declaration as well, Scarrott said.

“Unfortunately these unilateral changes do seem to be something we are still seeing a bit of this lockdown, although I suspect most employers are getting it right.”

The cases that came out of last year’s lockdown supported the view that an employee who could not work because of the lockdown remained entitled to their usual pay, unless agreed otherwise.

If an employer reduced an employee’s pay without agreement, the employee might be able to complain to the Labour Inspector, or raise a personal grievance, and it might end up in the Employment Relations Authority, he said.

“However, in most cases these steps can be avoided by talking to the employer and perhaps drawing to their attention the terms of the wage subsidy declaration. Discussion should almost always be the first port of call with employment issues.

“In many cases employees will be agreeable to temporary pay reductions while they are locked down and cannot work. They will likely realise the risk to the business if they cannot reduce costs, so employers should not fear the discussions.

“Reaching agreement reduces risk and will usually result in the same outcome, while preserving goodwill in the employment relationship,” Scarrott said.