Aviation catering company Gate Gourmet used lockdown to try dodge minimum wage hike

A global aviation catering company which claimed more than $1.5 million in Covid-19 wage subsidies tried to use New Zealand’s lockdown as an excuse to not pay staff the minimum wage and in doing so breached employment law.

Gate Gourmet is a Zurich-headquartered company that provides airline catering services for airlines and lounges at over 200 airports worldwide, including Auckland International Airport.

It’s part of Gate Group which is owned by Asian investment companies RRJ Capital and Temasek and made Fr$5b (NZ$8b) revenue in the 2019 financial year. Its New Zealand operation made an after tax profit of $259,000 on revenue of $27m in the same period, Companies Office records show.

It also received more than $1.5m in wage subsidies for just over 130 employees however, a recent Employment Relations Authority (ERA) ruling said Gate Gourmet breached the Minimum Wage Act by failing to pay staff the minimum wage during lockdown.

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The case was brought by the Aviation Workers United union and five full-time Gate Gourmet employees, who said the company did not pass on a minimum wage increase, which came into effect on April 1, while New Zealand was in a nationwide lockdown to stop the spread of Covid-19.

Following the Alert Level 4 lockdown, which began on March 26, Gate Gourmet told employees that as a result of having very little work due to the pandemic, it would need to partially shut down operations.

Gate Gourmet was deemed an essential service and was operating throughout the lockdown.

The company said if an employee had not been rostered on, and they had not been asked to work, then that meant Gate Gourmet had no work for them, and they should stay at home, the ruling said.

During its partial close-down, employees were being paid 80 per cent of their normal pay, conditional on Gate Gourmet receiving the Government wage subsidy.

It presented a written offer setting out three options that it was offering staff.

Under option one staff could take all entitled annual leave until it was exhausted, at which point the employee could move to option two which was, on condition of the company receiving the wage subsidy, the employee would be paid at a rate of at least 80 per cent of their normal pay.

Option three, also conditional on Gate Gourmet receiving the wage subsidy, was pay staff at the rate of at least 80 per cent of their normal pay, and the employee could then use their annual leave entitlement to supplement their income in order to receive 100 per cent of their normal pay.

The union, on behalf of its members, rejected option one and agreed to options two and three, subject to Gate Gourmet complying with all applicable legislation.

The employees are paid weekly and are paid the minimum wage. Prior to March 30, they were paid $17.70 an hour or $708 a week for working a 40-hour week.

On April 1 the adult minimum wage increased by $1.20 to $18.90 per hour.

Since April 1 the applicants, who have not worked much since the company partially shut down, have been paid at 80 per cent of their normal pay or $604.80 per week.

Gate Gourmet told staff those who worked would be paid the new minimum wage rate and that employees who were not rostered, and did not work, would continue to be paid at 80 per cent of normal pay.

The union objected and also advised Gate Gourmet that it believed it was not entitled to reduce the pay of any full time employee below the minimum wage of $756 per week, the ruling said.

Gate Gourmet agreed to apply the minimum wage rate increase to $18.90 per hour to employees whether they were working or not.

However, Gate Gourmet maintained its position that it was only required to pay non-working employees 80 per cent of their normal pay, including the increased minimum wage rate.

Gate Gourmet defended its position in reliance on a “no work, no pay” policy and also on “partial performance, partial remuneration”.

Gate Gourmet said for those employees not working, it did not believe, based on legal and government advice, that it had to make the wage increase until such a time as those employees were working.

Gate Gourmet said it had very little or no work for the applicants to do over the relevant period.

The ERA member overseeing the case Geoff O’Sullivan said the payment was made on the basis of the employment agreement between the applicants and Gate Gourmet. It was also made as part of Gate Gourmet’s agreement with the Government when it accepted the wage subsidy.

“It follows therefore that if the applicants were ready, willing and able to carry out their function in an essential industry, Gate Gourmet was required to pay them at least the minimum wage, notwithstanding any agreement it may have made to the contrary,” O’Sullivan said.

Gate Gourmet was of the view that the applicants were not ready, willing and able to work and it was not required to pay them anything, he said.

“I disagree with that conclusion. Gate Gourmet is an essential industry which had availed itself of the wage subsidy, had not dismissed the applicants but indeed had confirmed it would carry on with their employment.”

Although a downturn in Gate Gourmet’s business may have meant it could not offer full time work for all of the applicants all of the time, it had not taken any steps to restructure its business, he said.

The applicants were not working because of Covid-19 restrictions, but rather at the direction of Gate Gourmet, he said.

In paying the applicants 80 per cent of their wage, Gate Gourmet breached the Minimum Wage Act, he said.

It was found the applicants were entitled to be paid at the minimum wage for 40 hours per week and Gate Gourmet was ordered to do so immediately and to reimburse them for the difference between what they had been paid to date and their entitlement to the minimum wage.

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