CORONAVIRUS / COVID-19 – Can an employer require employees to take annual leave?

25 Mar 2020
Author: Andrea Twaddle
 

Yes, there are circumstances in which an employer can legally require employees to take annual holidays during the Government lockdown. Unhelpful accusations of "unscrupulous" employers have created confusion about this issue for employers and employees, so here's the actual law on the issue.

What are an employee’s rights to annual leave?

Under the Holidays Act 2003, after the end of each 12 months of continuous employment, employees are entitled to 4 weeks’ paid annual holidays (“annual leave”).[1] The purpose of annual leave is of course, for rest and recreation.

If an employer receives a leave request, as with any dealing with an employee, an employer must be fair and reasonable in all the circumstances in deciding whether to agree to the request, or not. An employer must not unreasonably withhold consent to an employee’s request to take annual leave.[2]

The starting point, is that an employer and an employee should reach agreement on how an employee’s entitlement to annual leave is to be met.[3] If they are unable to reach agreement, an employer must give an employer no less than 14 days’ notice of the requirement to take the annual leave.[4]

What can an employer do during the lockdown?

Presently, the Government has placed the country into a state of emergency. It has required all those who do not work in essential services to ‘stay home’. For many businesses, that are unable to operate remotely, or, where cashflow is seriously compromised by the impact of the Government’s ‘lockdown’, the inevitable consequence is consideration of the ongoing viability of their business, and whether they are able to retain staff.

One option being considered by employers, where there isn’t cashflow, is to ask employees whether there is agreement to waive the 14 days’ notice before an employer can require an employee to take annual leave.[5] In doing so, this reduces the employer's total liability for leave. As with any other proposal, an employer should consult with employees on such a request; providing all relevant information, seeking their feedback and genuinely considering that input before making a decision. If no agreement is reached, an employer may require the leave to be taken. For some employers in the current environment, it is one way of trying to retain staff with some income, when they may otherwise be contemplating redundancies.

Remember, that if an employee is on annual leave, they should not be working. Annual leave cannot be used to 'top up' an employee's pay, when they are actually working.




What impact does the wage subsidy have on the use of annual leave during the lockdown?

If an employer has applied for the Government’s Wage Subsidy, this must be passed onto the employer for wages. The purpose of the subsidy is to keep staff employed during this period of business disruption, and generally provides assistance for employers to:

  • provide income to employees while retaining their employment; and
  • take any necessary steps to secure the ongoing viability of their business. 

Remember that there is no ‘opting out’ of the expectation that employees are paid for leave accurately, based on the calculations set out in the Holidays Act, and Wages Protection Act.. 

Summary

There are many ways employers are trying to provide income to employees in a scenario where they are facing a significant downturn in the business revenue, and as alternatives to restructuring and redundancies. 

Employers should not implement any steps without good faith consultation with employees. However, an employer is entitled, provided the provisions of the Holidays Act are met, to require an employee to take annual leave, as one option.

The specialist employment law team at DTI Lawyers are working with businesses across a multitude of sectors to provide advice about managing the impact of COVID-19. If you have questions, would like further information or specific advice, please contact us on 07 282 0174.

The information contained in this article is accurate as of the date of publication, but please note in this rapidly moving environment, you should review the DTI Lawyers website, or contact our team, to ensure it remains up to date.



 

[1] Holidays Act, s16.

[2] Holidays Act, s18(4).

[3] Holidays Act, s18(3).

[4] Holidays Act, s19. It is also important to note that an employee only becomes entitled to annual leave every 12 months. While an employee accrues annual leave during the 12 months, the entitlement vests on the employee's annual leave anniversary date. Employees can be directed to take accrued annual leave to which they have an entitlement, i.e. it has become vested, not ongoing accrual.

[5] An employer cannot force an employee to take leave in advance, but some employers in the current environment have offered employees leave in advance, in order to provide some payment to them, anticipating that employment will resume their usual work following easing of the Government’s Alert levels. An employee is entitled to agree, or decline the proposal.

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CORONAVIRUS / COVID-19 – Can an employer require employees to take annual leave?
About the Author
Andrea Twaddle
Andrea is an experienced specialist employment lawyer and Director at DTI Lawyers. She advises on contentious and non-contentious employment law issues, including privacy, and health and safety matters. Andrea is AWI-CH qualified, and undertakes complex workplace investigations. She is a former Council Member at the WBOP District Branch of the Law Society, and Coordinator of the WBOP Employment Law Committee. Andrea is a regular commentator on employment law issues and is frequently sought as a presenter at client and industry seminars, as well as for the provision of advice to other lawyers, professional advisors and leadership teams. You can contact Andrea at andrea@dtilawyers.co.nz