If your business cannot operate do you have to pay staff?

The weather has impacted various regions recently and official advice has included reference to people working from home where possible. For some businesses, this isn’t always a feasible option, so if an employee isn’t able to work from home, the next question is who pays their wages/salary and what are your obligations as an employer.

Defaulting on work obligations – employer or employee?

If an employee is unable to work from home, or other options cannot be mutually agreed, then the question of ‘who pays’ comes down to who is defaulting on their obligations to work, or to provide work under the terms of an employment agreement. For example, if a child’s daycare centre or school is closed due to a MOE directive, but staff are ready, able, and willing to work, then the employer is defaulting and should pay staff their normal pay. However, if an employer has work available, and their premises are undamaged, but an employee is unable to get to work due to the roads being closed, or damage to their vehicle, they are therefore not ready, or able to work, so the employee is defaulting, and the employer is not obligated to pay them their normal pay.

Before assumptions are made about the time away from work, and whether it would be paid or unpaid, you need to look at the employment agreement, workplace policies, and the specific situation you find yourself in. Some employment agreements may specifically cover this type of situation and the extent of any contractual obligations that might apply. If there’s nothing in the employment agreement, then it is up to both the employer and employee to talk about it in good faith and agree what the time away from work will be classed as.

Sick Leave for Dependants

If the employee's partner or dependant family member isn’t injured or sick but requires care, (i.e. because the child's school is closed), the employee can’t take sick leave because their dependant is not sick or injured. If it’s not appropriate or possible for staff to continue working, employees and employers will need to agree on what basis the employee is off work and how that period is going to be managed.

Alternatives to working from home

If you’re employee is unable to work from home, there are various options for leave and/or payment. These include:

annual leave;
annual leave in advance of entitlement;
using any entitled alternative holidays;
discretionary special leave, either as provided for in employment agreements or workplace policies, or by an ad hoc agreement between the employer and employee;
leave without pay;
sick leave (if their partner or dependents are injured or sick);
other paid or unpaid leave either as provided for in employment agreements or workplace policies, or by agreement between the employer and employee;
advance on wages, i.e. a temporary loan with the obligation to repay.

Some examples:

Situation:	Possible outcome:
The business cannot operate due to damage as a result of the disaster	If other options aren't able to be reached, then the employer may have the obligation to pay if the employee(s) is ready, willing and able to work.
The business cannot operate and has a force majeure* clause	Depending on the wording and coverage of the clause, this period might be unpaid. You should consult with staff before relying on this type of clause.
An employee cannot come to work as partner or dependant is sick	Use sick leave
An employee cannot come to work as child's daycare or school is closed	Able to work from home – normal pay. Unable to work from home – annual or unpaid leave
An employee cannot come to work as their house has been damaged	Annual or unpaid leave, (or discretionary special leave if employer wants to offer it)
Employee cannot get to work as no transport or roads are closed	Able to work from home – normal pay. Unable to work from home - try to arrange transport. If cannot work from home, or get to work, then annual, or unpaid leave.

Whatever option is agreed on may depend upon the circumstances, including the nature, extent, and duration of the disaster. Once all leave entitlements are exhausted, further options will need to be considered, in good faith, between employers and employees. Employers will need to consider the impact these options will have on business recovery later.

Employers should also carefully check any terms in their insurance policies, particularly any concerning paying staff wages during a natural disaster, and contact their insurer, or insurance broker as soon as possible.

*Force majeure, or as it is often referred to ‘act of God’, is when a natural disaster, or similar unexpected event, makes it impossible to keep a business running. Because of this, the employee’s job may no longer exist.

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