Direction to take annual leave during the lockdown is an unlawful instruction

Any notice to employees that they are required to take annual leave during the level 4 lockdown is unlawful.

If an employer is utilising the wage subsidy, then the subsidy must be paid as wages. An employee cannot use annual leave while being paid wages. The only exception to this is section 28A of the Holidays Act 2003 which allows for an employee to request that up to one week’s holiday pay is paid out. The employee cannot be required to do so.

The purpose of annual leave is outlined in section 3(a) of the Act:

to provide the opportunity for rest and recreation

This opportunity is not available during the lockdown, so a requirement to take annual leave does not meet the purposes of the Act.

When an employee takes annual leave is governed by section 18 of the Act, which states:

When annual holidays are to be taken by the employee is to be agreed between the employer and employee. [s 18(3)]

and

An employer must not unreasonably withhold consent to an employee’s request to take annual holidays. [s 18(4)]

So the starting point is that an employer must try and accommodate an employee’s wishes as to when they take annual leave and must not unreasonably withhold consent.
 
This is a high bar. An example of where a refusal has been deemed reasonable is where the employee wanted to take leave when other employees were already taking leave and the employer would have had to pay penal rates to employ temporary replacements (Brownless v Tasman Pulp & Paper Co Ltd [1994] 2 ERNZ 647)
 
If there are valid reasons (like the example above) why the employee’s wishes cannot be accommodated and the employer and employee cannot agree on other alternative arrangements, then the employer can direct the employee to take annual leave by giving at least 14 days notice [s 19(2)].
 
Annual leave is an individual issue. Each employee is entitled to annual leave based from the date of their anniversary, so every employee will be at a different stage of how much annual leave they have and when they need to use it by (if they are required to use all their leave each year).
 
A direction to take annual leave should not be made unless:

  • The employer and employee have consulted with each other and the employee has made suggestions on when they want to take leave;
  • The employer has genuinely not been able to accommodate the employee’s wishes (consent has not been unreasonably withheld);
  • The employee and employer have not been able to agree on other suitable arrangements;
  • The direction is made toward the end of an employee’s anniversary and the employee may not be able to take leave within the year if a direction is not made (e.g. if an employee has 9 months until their anniversary in which to take leave, it is very unlikely that there are no reasonable opportunities for the employee to take leave during those 9 months. This would be a breach of s 18(4)).

A blanket requirement for all staff to take annual leave during lockdown is unlawful because:

  • The purpose of annual holidays is to provide the opportunity for rest and recreation (s 3(a)) and this opportunity is not available during a lockdown.
  • The employer has not individually consulted with each employee under s 18(3) in order to reach agreement on when leave should be taken;
  • Each employee will have different times at which they want to take leave and will be at different stages between their anniversaries (e.g. their requests and the reasonableness of those requests will vary);
  • Therefore, the employer and employee cannot have reached a stage where they have not been able to agree;
  • A requirement to take leave will be a breach of s 18(4) and s 19 (1)(a).
     

There is no penalty available for breach of sections 18 and 19, but the employee can refuse to take the annual leave.

If the employer puts through the annual leave regardless, the employee can raise a personal grievance for unjustified disadvantage (Woodward v Totally Boating 2004 Ltd [2013] NZERA Christchurch 231 at [64]).