$200,000 penalties for short-paid wages…

The Employment Court has convicted and imposed penalties on two employers who were in partnership in the hospitality industry.  They intentionally short-paid wages and holiday pay over many years to their staff, amounting to over a quarter of a million dollars. 

After an investigation by the Labour Inspector they paid the staff the short-paid wages and holiday pay.  The Court also imposed penalties totalling $200,000 on the husband and wife for these intentional breaches, which involved not paying the minimum wage rate and not paying holiday pay.  They also failed to keep wage, time, holiday pay and leave records. 

The Court commented that the failure to pay the proper wages and holiday pay was a complete breach of good faith.  The wife was involved in the short payments to a lesser extent and her penalty was assessed as $20,000.  The husband, who more involved, was fined $180,000.

Alan Knowsley

Employment Lawyer Wellington

Unjustified dismissal for poor drug testing process and botched disciplinary process…

In a recent case, a worker was asked to undertake a drug test following accusations by a co-worker.


The worker’s employment agreement required drug testing to be in accordance with the employer’s drug testing policy, but there was no policy in existence.

When the employer suspected the employee was using drugs at work, they tried to introduce policies the next day, but would not give the employee a copy to take away and get advice on.  They only allowed her to read it overnight.  This was because where they had bought the policy from prohibited copying of it and would have charged $100 for a further copy (which they did not want to pay).The employer subsequently invited a drug tester on site. The worker refused to take the drug test, and as a result disciplinary proceedings were initiated and the employee was terminated.

The Employment Court upheld the personal grievance claim and found it was an unjustified dismissal of the worker because:

 (1)   Retrospectively implementing a drug testing policy and immediately requiring the    employee to undergo screening was in bad faith; and

(2)    The dismissal of the employee for refusing to consent to the drug test was “not the fair and reasonable actions an employer could have done in all the circumstances”, nor did they comply with procedural requirements in the Employment Relations Act.

The Employment Court found that the dismissal of the employee was both procedurally and substantively unjustified.  The Employment Relations Authority had found the dismissal to be procedurally unjustified, but substantively justified and therefore had only awarded compensation for the poor process, rather than any lost wages.  The Employment Court overturned that finding and decided to order payment of six weeks lost wages because of the substantive problems with the dismissal.

This poor process made the dismissal unjustified.  In addition to having no actual policies in place the employer should not have terminated the employee for refusing to undergo a drugs test.  There was no policy in place, so there was no right to insist on a test and the employee could not be dismissed for standing by her right not to undergo the test.

The ERA had originally awarded $10,000 compensation for the poor process reduced by 10% for contributory conduct by the employee.  The Employment Court would have increased the deduction off the remedies for the employee’s behaviour, as it believed her contributory conduct was more serious.  It involved drug taking at work and bad behaviour towards other staff and the employers.  However, the Court felt that the compensation of $10,000 awarded was too low to start with and so it left both that award of compensation and the limited 10% deduction unchanged.

The Court has for some time been signaling that the compensation awards would be significantly increased over what has happened in the past and even for a low level of hurt and humiliation, awards are likely to be around $20,000.  For more serious matters the awards will be significantly higher.

The Employment Court found the summary dismissal was unjustified, and the employer was required to pay a compensation payment of $10,000 (discounted by 10% for the employee’s part in the process), and six week’s wages.

It is essential to have your policies in place, and to follow proper procedures in accordance with those policies.

Alan Knowsley

Employment Lawyer Wellington

Restraint of trade enforced against employee…

The Employment Relations Authority has upheld a restraint of trade clause in an employment agreement.  The employee was not to do any work for any clients of the employer that they had dealings with while employed for a period of six months.  The employee resigned and immediately went to work for a client of the employer that she had worked with. 

The ERA held that the restraint to prevent a worker working for clients, doing the work that the employer does was reasonable.  It also held that the six month restraint period was reasonable and that the balance of convenience and justice favoured issuing an interim injunction.

The Employment Relations Authority issued an interim injunction to prevent the employee working for the six month period following her resignation or the earlier determination by the Authority of the full case on this matter.  The ERA said it considered that the employer had a strong case to enforce the restraint of trade at the full hearing.

Alan Knowsley

Employment Lawyer Wellington

Employer’s application to pay by instalment rejected…

The Employment Relations Authority has refused an employer’s request to pay the $12,500 damages awarded for unjustified dismissal by $500 monthly payments.  This would have taken over two years to pay off the award.

The company provided some bank statements, which showed income and outgoings, but no financial accounts to show its assets and liabilities.  It also failed to explain to the Employment Relations Authority what the payments shown in the bank statements were, as it was suggested that some of the payments, listed as payroll, were actually to the owners of the business.

The ERA explained that the onus was on the company to prove that it cannot pay the award all at once and that by failing to provide information and explain its financial affairs it had failed to do so.  Its application was therefore rejected.

Alan Knowsley

Employment Lawyer Wellington

Business owner’s wife awarded lost wages following redundancy…

The Employment Relations Authority has upheld a personal grievance for unjustified dismissal following the redundancy of the business owner’s wife.  There were two owners of the business and the wife of one of them also worked in the business.  A meeting was held between all three at which the other owner alleged that a settlement had been reached with a payment of $30,000 to the other owner and his wife for all pay, holiday pay and redundancy notice.  No record was kept of that meeting, nor any settlement agreement signed by the parties.

The other owner and his wife both deny that the $30,000 payment (which was made) was in relation to the wife. 

The Employment Relations Authority held that as there was no signed agreement and no proof that the wife had agreed to receive such a payment in settlement of her claims, she was entitled to compensation as no proper redundancy process was carried out.  She was awarded $11,781 lost wages and $5,437 for unpaid notice.  She was also awarded $7,140 holiday pay.  Interest on the holiday pay and unpaid notice was also ordered to be paid.

The ERA declined to award her any unpaid wages for the period she was employed.  The wife had alleged that, although the books showed she had been paid in each pay period, she had in fact never received any pay.  The ERA said that she had failed to prove that claim as the books clearly showed payments to her.  She was also not entitled to any compensation for hurt and humiliation in relation to the poor redundancy process as she was intimately involved in the running of the business and was well aware that it was in financial trouble and likely to close.

As the settlement agreement between the two owners involved the transfer of all shares from one owner to the other, the owner who bought the shares is responsible for payment of all of these payments to the other former owner’s wife.

A failure to document the settlement agreement reached has cost the second owner dearly in this case.

Alan Knowsley

Employment Lawyer Wellington

Constructive dismissal following non-payment of wages…

The Employment Relations Authority has upheld a personal grievance for a constructive dismissal.  The employee was paid irregularly and when he was paid, it was not the full amount he was due.  After putting up with this for some time he eventually told his boss that he could not continue with the situation if he was not being paid properly.  He therefore resigned.  This is a clear case of constructive dismissal, because failing to pay an employee is a fundamental breach of the employer’s obligations.

The ERA awarded short paid wages of $46,550, unpaid holiday pay of $7,200, unpaid Kiwisaver of $1,984, plus compensation for hurt and humiliation of $23,000 and costs of $6,000.

As the reason for underpayment and non-payment of wages was the poor financial position of the employer it is doubtful whether the employee will see anything from the employer by way of payment. However, he could bring a claim against the director personally if the director was involved in the non-payment of the wages.  That will enable the employee to get access to the director’s personal assets, rather than those of the company.

Alan Knowsley

Employment Lawyer Wellington

Unjustified dismissal claim rejected…

The Employment Relations Authority has thrown out a claim for unjustified dismissal by an employee who alleged that the terms of her employment agreement had been unilaterally changed without her consent.

The employee alleged that accommodation was provided as part of her employment package and that that accommodation was taken away without consent.  She also alleged that, because she was living in the accommodation, she was on call throughout the night and had not been paid on call wages for those hours.  She also alleged that her holiday pay was incorrectly paid.

The Employment Relations Authority found that accommodation was not part of the employee’s employment agreement.  She had been allowed to live in the accommodation as a favour by the employer because other accommodation was not available.  It turned out that the employee did have a rental property, but was subletting that to someone else and staying free at the employer’s accommodation.

Because the employee was not required to be on call at night time her claim for on call wages was dismissed, as was her claim for incorrectly paid holiday pay. 

The ERA held there was no unjustified dismissal and that the employee had abandoned her employment by failing to return after a period of sick leave.

Alan Knowsley

Employment Lawyer Wellington

Employment Court overturns ERA on compensation and contribution…

The Employment Court has upheld a challenge to an Employment Relations Authority finding following a successful unjustified dismissal and unjustified disadvantage claim.

The ERA had found that a redundancy was carried out without a proper process and was unjustified.  It had awarded $10,000 compensation, but reduced that award because it held that the employee was 50% responsible for the redundancy, having acted inappropriately towards his employer and other staff during the process.

The Court held that the $10,000 compensation award made by the ERA was too low.  It was outside of the range which should have been awarded which was between $10,000 to $40,000 and that a proper compensation amount was $22,500.

The Court also found that the 50% contribution level found by the ERA was incorrect.  A 25% contribution was substituted.

The Court’s findings increased the compensation from the $5,000 awarded by the ERA (after a 50% reduction) to $16,875 (after a 25% reduction).

The Court dismissed the employee’s claims for increased lost wages.  The ERA had awarded three months and the Court reached the same conclusion, but for different reasons.  The Court also dismissed the claim that the employer should be penalised for breaches of good faith and for breaches of the employment agreement.

In setting the compensation award the Court adopted the three band approach.  Low level hurt and humiliation will result in awards of up to $10,000, mid-range compensation will be in the range of $10,000 to $40,000 and high level compensation will be over $40,000.

It pays to get your processes right and the business case for redundancies correct before embarking on a redundancy process.  Getting it wrong can prove very expensive.

Alan Knowsley

Employment Lawyer Wellington

No change to employment rights during COVID-19 lockdown…

Despite New Zealand implementing a mandatory four-week lock down due to the COVID-19 pandemic, the application of employment law has not changed.


The effects of the lock down have impacted the majority of businesses in New Zealand. Many businesses that are not essential have been forced to close down for the duration. Many of those that are essential services have seen a significant downturn in business.


In the current circumstances, many employers will be exploring ways to reduce expenses in order to survive in the long term. This includes reducing hours of staff and, in some cases, redundancy and closure.

It is important to note that despite granting of Government subsidies, provisions within employment agreements must still be followed.

Agreed hours of work

If an employment agreement states the number of hours an employee is to work, the employer must pay the employee for that number of hours. Additionally, where hours of work are set, the employer may not cut them without the employee’s consent.

Where agreements provide that hours may be changed, the employer still owes a duty of good faith toward the employee and should act fairly toward them in the circumstances.

Taking leave

Annual leave may be taken immediately if it is agreed to by both parties. During this time the employee should be paid their usual entitlements in accordance with their employment agreement.

The parties may also agree for the employee to use their sick leave if annual leave has been used up. However, an employer cannot require an employee to take leave immediately or without pay. An employer must give an employee 14 days’ notice that they require annual leave to be taken, and this must be after proper consultation with the employee.

Income

The Wages Protection Act requires employers to pay their employees in full and without deduction on every date the employee is usually paid. This means employers cannot delay payment due to the pandemic or the lock down measures.

This also means that employers cannot unilaterally cut employee’s remuneration. Nor can employers require their employees to sign new contracts with lower pay rates, or altered terms without their consent.

Employers and employees may however negotiate in good faith. If both parties agree to any changes, they should be recorded in writing and signed, to avoid any future disagreements.

Redundancies

Some businesses may simply be unable to maintain their current workforce despite the Government subsidies. In this case, the correct redundancy process must still be followed.

If the outcome of the proper process is redundancy, those employees affected will still be entitled to work out, or be paid for, any notice period, and to redundancy entitlements under their employment agreement. Employers may not use redundancy under the pandemic or lockdown as a reason for dismissing staff immediately or without entitlements.

 
If there are concerns surrounding practices by employers, uncertainties about provisions in employment agreements, or what the correct processes to follow are during the lock down, it is advisable to consult a professional experienced in this area.






Alan Knowsley
Employment Lawyer
Wellington

Unjustified dismissal following conviction…

The Employment Relations Authority has upheld a personal grievance for unjustified disadvantage and unjustified dismissal after a cleaner was dismissed following getting a conviction.  When the client company of the employer heard of the conviction it required the employer to remove the employee from its work site.  The employer undertook to do that but failed to give the employee any opportunity to comment on the client’s concerns before doing so.

The employer tried to find alternative work for the employee, but because of the conviction could not place him at any other client sites and he was therefore dismissed on one week’s notice.

The Employment Relations Authority found the dismissal was unjustified. This was because the employer should have tried to preserve the employee’s role at the client. It should have pointed out that employees have statutory rights that cannot be ignored and that the employer could not simply bow to demands before it had investigated the matter and given the employee an opportunity to comment.

The ERA found that suspending the employee without providing information or reasons for the suspension was an unjustified disadvantage and that the dismissal was unjustified.  It awarded $9,454 lost wages plus $12,000 compensation.

Interestingly, it refused to reinstate the employee to his position with the cleaning company because no other clients of the employee would accept the employee with the convictions that he had.

If the employer had followed a proper process and given the employee an opportunity to comment before it suspended and before it dismissed, then it is likely that the dismissal would have been justified because of the inability to place him with any clients.

Alan Knowsley

Employment Lawyer Wellington

COVID-19 pandemic effects impact on court hearing...

An international employer has been granted an adjournement of proceedings before the Employment Court due to newly implemented international travel restrictions due to COVID-19. The employee was set to bring proceedings before the Employment Court in order to determine whether they are an employee or contractor.

The employer’s New Zealand based solicitor submitted at the hearing that the adjournment was required in order for the company’s international representative and further legal personnel to attend the hearing, and that their absence would unduly disavantage them.

The Employment Court agreed with the employer’s submissions and adjourned the hearing for eight weeks. The judge explained that given the measures put in place by the government in response to the COVID-19 pandemic, the employer’s representatives would require enough time to estabish systems to work from while they underwent the required 14 day isolation upon arrival in New Zealand.

Given the increased restrictions due to the COVID-19 pandemic, it is important to understand how this may impact on a complaint or other proceedings an individual may be intending to bring before a court or tribunal and the impacts any potential delays may have on the case involved whether it be in a family, employment, or other legal context. These impacts should be discussed thoroughly with an individual that is experienced with the affected processess. Be aware that time limits may not be able to be extended, so ensure you comply with them. If you cannot, in an emergency situation, make sure you apply for an extension before the time limit expires. 

Alan Knowsley

Employment Lawyer Wellington

$22,000 compensation for poor redundancy consultation process…

The ERA has found that an employer was genuine when undertaking a redundancy process, but that the actual process followed was insufficient. 

The employer decided to reduce the number of foreman from six to four and developed a scoring matrix to assess each of its six employees before reaching conclusions as to redundancy.

The ERA found however, that although the scoring mechanism was fair, the employer failed to discuss the individual scores with the two employees selected for redundancy before it reached the decision to make them redundant.  In addition it failed to consider alternative positions within the company before making them redundant.  The employer did offer alternative positions within a related company, but this would have involved them being made redundant.  It should have considered positions within the company they were employed by rather than a related company.

One employee was awarded $10,000 compensation for the poor consultation process and the other employee was awarded $12,000 compensation.  Neither employee was awarded any loss of wages because both employees had set up a business in competition with the employer and carried on that business after they were made redundant.  They had therefore failed to mitigate any losses from their redundancy.  The two employees were penalised $4,000 each for undertaking work in competition with their employer when they were still employed.

Alan Knowsley

Employment Lawyer Wellington

Reasons for dismissal unsupported by evidence…

The Employment Relations Authority has upheld a personal grievance claim for unjustified dismissal after an employee was dismissed from her job.  The employer gave varying reasons for the dismissal, both in writing and at the Employment Relations Authority hearing.  The employer alleged at various times that it was for serious misconduct.  At other times it was for poor performance and other times it was because of redundancy.

Unfortunately for the employer there was no evidence of any process being followed to investigate any issues of serious misconduct or any issues of poor performance and there was no consultation in relation to any redundancy situation.  The dismissal was therefore unjustified and the employer was ordered to pay $12,800 in lost wages, $2,500 for arrears of wages and unpaid holiday pay, plus $9,000 compensation for the unjustified dismissal.  The employer was also ordered to pay a penalty of $1,000 for the non-payment of holiday pay.

Alan Knowsley

Employment Lawyer Wellington

Employee dismissed after asking to buy goods from employer…

The Employment Relations Authority has upheld a personal grievance for unjustified dismissal after an employee was dismissed for trying to purchase goods from his employer.

The goods were placed by the employer for sale on TradeMe and the employee asked that they be removed TradeMe and sold to him.  The employer claimed this amounted to serious misconduct, but had no written rules around employees buying goods.  The ERA held that it was unreasonable to dismiss the employee when the company could not show what rule the employee had breached.  The employer also tried to justify the dismissal on the basis that the employee had discussed his concerns over not being paid for overtime with other employees.  The ERA held that it was unreasonable to hold this to be serious misconduct.

It appears that the employer’s attempts to get rid of the employee for serious misconduct arose because the employee was seeking to be paid for many hours of unpaid overtime.  That triggered the employer’s dismissal efforts.  The ERA awarded $19,800 compensation for the unjustified dismissal, plus lost wages of $1,973.

If an employer is claiming serious misconduct they must be able to point to a particular breach by the employee that amounts to serious misconduct.  If no rules exist or the rules have not been brought to the attention of the employee then they cannot be enforced.

Alan Knowsley

Employment Lawyer Wellington

Minimum wage rise from 1 April 2020…

On 1 April 2020 the minimum wage will rise to $18.90 (up from $17.70).  This is the second to last step in the Government’s planned increase of the minimum wage to $20 in 2021.

The starting out and training wage will increase to $15.12 per hour from 1 April which is 80% of the adult minimum wage.

Alan Knowsley

Employment Lawyer Wellington