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Common sense crucial when crisis hits

14 October 2014


Readers will no doubt have paid attention to Auckland's plight during the recent blackout.

The blackout was caused by a fire at Transpower's Penrose substation when Vector electricity cables caught fire about 2am on a Sunday. It cut off power to about 85,000 households.

Traffic lights were without power and some businesses were forced to shut down. Fletcher Building, for example, had to close several factories and apparently sustained a loss in the millions of dollars.

The blackout took far longer to fix than was anticipated. As a result, a number of employees were told to stay home come Monday morning.

Looking back, one is reminded of the effect of the Christchurch earthquakes on businesses in that city. And just so that we don't feel too comfortable in Wellington, we have now been told of the discovery of a new fault line under Wellington Harbour.

The question that will trouble both businesses and workers is who pays wages when the business can't operate because of a natural disaster or an event such as Auckland's blackout.

The worst-case scenario is obviously when the business is effectively destroyed. That would have happened to many central city businesses following the Christchurch earthquakes. In this case, the employment contract comes to an end on the basis of it being impossible to perform the contract, or by the operation of an "act of God" clause. There is also the possibility of the business being liquidated.

The more common situation is when the business is shut down for a finite period of time. If this is lengthy then the employer may have to make employees redundant.

If the closure is for, say, only a week or two, then normally the employer and employees would come to an agreement about taking annual leave and perhaps anticipated annual leave to cover the time off.

Usually common sense prevails. Failing that, employers could be stuck paying wages.

Highly profitable businesses may be happy to continue to pay wages for a couple of weeks to retain the goodwill of their staff. For smaller employers, though, that can be more difficult.

Bringing staff back into the workplace after an enforced closure can be an equally thorny issue as shown in a case heard in the aftermath of the second big Canterbury earthquake.

James McMurdo was an apprentice boat builder and employed by Dave Norris Boat Builders Ltd in Christchurch. On February 22, 2011 the Canterbury quake struck. McMurdo was working at the time.

The employer allowed the staff to leave the workplace and check their family and friends were safe. An announcement was made that the employer hoped to reopen the following Monday, though it was later admitted that some staff may not have heard it.

McMurdo had to seek alternative accommodation because of damage to his lodgings. As a result, he drove to Hastings, where he and his son stayed with a relative.

McMurdo's phone ran out of battery and was not recharged until March 1. He saw that he had missed a call from his employer. McMurdo called back the following day and left a message on the employer's answerphone advising that he hoped to be back for work by March 9.

When McMurdo returned to the workplace, he found that "no word from him - abandonment of employment" had been written in his time book.

The note on the time book caused McMurdo considerable anxiety and he sought answers from the company director, Dave Norris, as to the status of his employment.

A number of discussions occurred between Norris and McMurdo, and McMurdo was ultimately invited to return to work. McMurdo, however, was prepared to return only part-time so that he could accommodate his son's needs. This did not work for the employer and McMurdo did not return to the workplace.

McMurdo brought claims in the Employment Relations Authority for unjustified dismissal and unjustified disadvantage.

The dismissal claim was unsuccessful as the authority found that there was no intention to dismiss McMurdo. The authority found that because McMurdo was unwilling to work fulltime, the employment relationship would have ended in any event.

The company was, however, held responsible for the entry in the time book that led to the confusion surrounding McMurdo's situation and had failed to alleviate McMurdo's belief that his employment was at risk. As a result, it was ordered to pay $4000 for the resulting distress McMurdo experienced.

The case highlights that communication is key. The Christchurch earthquake caused remarkably little employment litigation because of the common sense and goodwill displayed.

Hopefully the Auckland blackout will strike a similar chord with employers and workers.

Cullen - The Employment Law Firm is one of only eleven law firms in New Zealand approved to provide employment law services to Government and the public sector.

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