COVID-19: The shift back to Alert Level 4

In this update we look at some of the key issues businesses will need to think about at Alert Level 4, including trading restrictions, the implications for leases and what the lockdown means for employers and employees.

Trading restrictions

During Alert Level 4, only those businesses offering essential Alert Level 4 services or products are permitted to open. The Government has repeated its warning that any business in doubt about whether it provides Alert Level 4 services or products should be closed at this time.

What is an Alert Level 4 business or service?

Alert Level 4 businesses and services are defined and listed in schedule 2 of the COVID-19 Public Health Response (Alert Level Requirements) Order (No 9) 2021 (which can be found here) (Public Health Response Order). Workplaces can only open if they are listed in the Public Health Response Order, and are operating safely (this includes fulfilling all other health and safety obligations) and in accordance with the specific requirements set out in the Order. The Public Health Response Order also confirms which workplaces can be accessible by the public during Alert Level 4.

This means businesses like supermarkets and dairies, pharmacies, self-service laundries, and food banks can open to the public if they have systems and processes in place to prevent food and drink being served for consumption on the premises. Hardware stores can open, but only for the purpose of selling to trade customers who work to maintain other Alert Level 4 businesses and/or services.

Full details of the 30 businesses and services identified as Alert Level 4 business and services can be found at the end of this article. One of the categories is the sale of “essential non-food consumer products via online delivery”. The Order does not define what is essential in this context, and it remains to be seen whether the government will provide any further guidance.

Mandatory mask wearing

The Government has also announced that face coverings will be mandatory for all staff and customers when accessing Alert Level 4 businesses or services which are open to the public. This order came into force at 11:59pm on Wednesday 18 August 2021.

Current exemptions for face coverings will continue to apply. For example, you do not need to wear a face covering if you:

• Are under the age of 12,
• Have a physical or mental illness, or
• Have conditions or disability that makes wearing a face covering unsuitable

Employment obligations

The case law following the Alert Level 4 period in 2020 confirms that employment law still applies. This includes the duty of good faith, normal contract law principles and the Holidays Act 2003.

There is no “one size fits all" approach to managing Alert Level 4 with employees (in terms of their pay and their duties), because the right approach will very much depend on factors such as:

• whether employees can perform their work from home (and if so, whether those employees are able to do so at a practical level, taking into account their home environment and any childcare responsibilities),
• whether the employer can continue to operate its business at Alert Level 4, and
• the particular contractual arrangements applicable, including any collective or individual agreements.

While these factors will apply differently to different employment situations, it is clear that the statutory duty of good faith applies in all circumstances. As such, any approach taken should incorporate consultation with employees and unions to the greatest extent practicable in the circumstances.

Health and Safety

If an Alert Level 4 business or service remains open, it must put in place alternative ways of working to keep employees safe to ensure compliance with the Public Health Response Order and the Health and Safety at Work Act 2015. Depending on the industry, this may include shift-based working, staggered meal breaks, flexible leave arrangements and physical distancing.

One difference between this lockdown and the 2020 Alert Level 4 period is that there is now a vaccination available as a means of minimising the risk of COVID-19 in the workplace. However, given that the vaccination is not yet widely available across the whole population, and in light of relevant privacy and employment law considerations, employers need to tread carefully in seeking information from employees about their vaccination status. In particular, employers should consider whether they have a lawful purpose in collecting such information (such as a compelling health and safety concern), and whether it is necessary for them to know an employee's vaccination status for that purpose.

Tenants' entitlement to rent abatement

Many leases, including the ADLS lease commonly used by many landlords and tenants, contain provisions entitling a tenant to an abatement of a “fair proportion" of rent and outgoings while the tenant is unable to access their premises during an “emergency" to fully conduct their business. In the ADLS lease, this is clause 27.5.

In most leases, an Alert Level 4 lockdown will trigger such a clause. However, there is no set formula for what constitutes a “fair proportion" of rent and outgoings. Despite a number of disputes arising last year between landlords and tenants, the courts have not yet considered this issue, and there is therefore no judicial guidance as to how the “fair proportion" by which the rent is to be reduced should be calculated. Most clauses contain arbitration provisions, and we are aware of arbitration decisions in which this issue has been considered. However, arbitration decisions are confidential, and therefore are not available as precedent in the same way as Court decisions are available. In our view, most tenants who have the benefit of clause 27.5 and who been required to close their premises will likely be able to claim that they are entitled to an abatement of rent and outgoings. For more detail from our earlier publications on this issue, click here and here.

Landlords should also be aware that they cannot simply issue Property Law Act (PLA) notices or statutory demands in respect of unpaid rent if tenants claim to be entitled to an abatement of rent and outgoings and stop making payments in respect of that abatement. In a recent case, SHK Trustee Co Ltd v NZDMG Ltd, the High Court highlighted the risk a landlord faces if it issues a PLA notice that claims the full value of rent and outgoings while there is a dispute as to the level of abatement to be provided. In such a situation, the PLA notices are likely to be found to be invalid and, to the extent that a landlord has acted in reliance on those notices to cancel the lease, the landlord may be held to have repudiated the lease. For more detail, see our earlier client update here.

If you are in any doubt as to whether your particular business, or aspects of it, are permitted to operate (either stand-alone or as part of the critical chain of supply for another Alert Level 4 business or service), please contact the authors or your usual Bell Gully advisor.

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Alert Level 4 businesses and services

Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.