Personal liability for breaches of minimum employment standards...

In a recent case, an employer was ordered to pay a significant sum to an employee after the company breached the employee’s minimum employment entitlements. The employer did not pay the employee the appropriate minimum wage for all hours worked, and failed to provide the correct annual leave and holiday pay.

The employer was ordered to pay the employee over $103,000 and the employer was also fined over $61,000.

In addition, the Director of the company was personally fined $12,000 for her part in the breach of the employment standards.

Under the Employment Relations Act, a person may be considered to be involved in the breach of employment standards if that person:

• has aided, abetted, counselled, or procured the breach; or
• has induced, whether by threats or promises or otherwise, the breach; or
• has been in any way, directly or indirectly, knowingly concerned in, or party to, the breach; or
• has conspired with others to effect the breach.

The penalties did not stop there for the employer, as the Director’s husband was also fined $12,000 because, while he was not a Director, he was in a position to exercise significant influence over the management or administration of the company.

In order to be liable, a person must be an officer of the company or entity. Officers can include Directors, partners, or those in comparable positions.

However, it is unclear how wide the definition of an officer extends, other than, that person must be in a position to exercise a substantial or considerable influence over the management or administration of the company or entity.

In order to avoid the significant penalties, the employer should have paid the employee at the appropriate hourly rate and ensured the employee received all other minimum employment entitlements.

The initial ‘savings’ made by the employer not paying the employee correctly were well and truly lost by the time the Authority made its orders, not to mention the damage done to the reputations of the company, its officers, and the Director’s husband.

Jaenine Badenhorst

Employment Lawyer Wellington