Employer penalised over $140,000 for breaching employee rights…

The Employment Court has penalised an employer for significant breaches in underpaying minimum entitlements and failing to provide employment agreements.

The Labour Inspector investigated the employer and requested copies of all wage and holiday pay records. Limited records that had been poorly maintained were provided by the employer.

After piecing together the available records, the Inspector established that several employees had been paid below minimum wage and hundreds had not received correct holiday pay or employment agreements.

Despite the arrears of over $45,000 being repaid in 2019, the Court imposed further penalties of $86,400 on the company and $40,800 on the Director personally.

The Court accepted the breaches had not been deliberate, accepting the Director understood limited English and had a poor understanding of employment law practices, but maintained this was no excuse. The breaches were significant and extensive, affecting over 300 employees.

It is vital that employers maintain their records to a high standard and adopt appropriate employment practices. Failure to do so can result in significant penalties.

If you are unsure of your employment practices, or are concerned your minimum entitlements are being breached, it pays to consult a professional experienced in the area.

 

Alan Knowsley

Employment Lawyer

Wellington

Employers ordered to pay more than $15,000 for sub-standard redundancy process…

The Employment Court has ordered an employer to pay an employee $15,000, and one week’s wages, after following a sub-standard redundancy process.

The employee had been working for the employer for over two years. During this time, the business did not perform well. The employer called a meeting with the employee and a colleague. During the meeting they discussed the business’s viability and the likelihood of closure.

A few days later other workers told the employee that the employer had decided to close the business and that they were to be made redundant.

The employee requested another meeting with the employer. During the meeting she was provided with written notice to work out her two-week notice period before being made redundant. The employee raised personal grievances for unjustified dismissal and lost wages.

The Court noted that despite the business having legitimate financial grounds to undertake a redundancy process, the process undertaken did not comply with the law.

It explained that a fair redundancy process requires an employer to meet with staff and discuss the process and impacts of the process.

The Employer must then accept input from all affected staff and genuinely consider it before coming to a conclusion. This includes meeting individually with employees.  Once a conclusion has been reached, employees may then be given notice of redundancy.

In this case, the Court decided the failings were significant, and a $15,000 penalty and one week of lost wages should be paid to the employee.

When undertaking a redundancy process, it is vital that all stages are followed correctly, otherwise employers may be leaving themselves vulnerable to personal grievances.

If you are considering undertaking a redundancy process, or think your employer has failed to follow the correct process, it is advisable to consult a professional experienced in the area.

 

Alan Knowsley

Employment Lawyer

Wellington

Holiday pay calculation to include bonus scheme payments…

The Employment Court has found an employer liable to include bonus payments to employees in total remuneration when calculating holiday pay.

Holiday pay is calculated on gross earnings, being the greater of the earnings at the time the annual leave is taken or the average over 12 months.  The issue for the Court in this case though was whether a payment under a bonus scheme fell within the definition of gross earnings.

There is an exemption from gross earnings for discretionary payments that an employer is not obliged to pay an employee.  In this case the employer had called its bonus scheme a discretionary payment and had specifically said that any payment under it was not to be included in the calculation of gross earnings.

The Court decided, however, that the discretionary payment exemption in the Holidays Act applies only to a payment which is truly discretionary, for example, a gift given at Christmas time by the employer that it has no obligation to do and that would include a monetary gift.  In this case the “discretionary” payment was referred to in the employment agreement and was said to be in exchange for a longer restraint of trade period.  The Court held that it was therefore a contractual obligation and not a discretionary payment.

The outcome of the case, therefore, is that if you want to maintain a payment to employees as being truly discretionary, it should not be in the employment agreement, there should be no formula for working out what a discretionary payment should be, it should not be based on any performance issues and it should not be in exchange for any promise by the employee.

In this case the employer will now have to calculate annual leave based on the salary plus bonus.  The employees will therefore receive a higher rate of annual leave pay with the bonus taken into account.

 

Alan Knowsley

Employment Lawyer Wellington

Payments for annual leave during a close down.

The Employment Court has ruled that an employer has no choice, but to pay employees who have been employed for less than 12 months, 8% of their gross earnings at the start of a closedown.

The employee’s service is then treated as starting (for annual leave purposes) on the date the closedown commences, so they are not entitled to any leave for a further 12 months.  The Court has said that employers and employees can agree for leave to be taken in advance. 

Many employers have a closedown period, for example, for seasonal work or over the Christmas holiday period.  The Holidays Act provides that if an employee is not entitled to annual holidays i.e. they have not worked for the full 12 months before the closedown commences, then they must be paid 8% of their gross earnings at the start of the closedown.

If any employee does not have enough leave, then if the employer agrees, they can take leave in advance for the balance of the period, or they will be on leave without pay.

The group of employees who will be most affected by this ruling are those who have earned more leave before the closedown commences than they need for the closedown, but are not yet entitled to that leave because they have not worked for 12 months. 

For example, if a closedown is to last one week, but the employee has earned 3½ weeks of annual leave because they have been employed for almost 12 months, then the employer has no choice under the Act, but to pay them 8% of their gross earnings at the start of the closedown period. They then treat their service for annual leave as having commenced on the date the closedown period commences. The employee will be paid out for the full 3½ weeks of annual leave, even though they are only taking one week of annual leave, and they won’t be entitled to any more annual leave for a further 12 months.

This unintended consequence results in the employee being paid for all of their leave, but missing out on the ability to actually take leave without the employer’s consent.   That leave, when taken, will then be without pay or in advance of the next year’s entitlement, because the employer has already paid for the leave in the 8% they have to pay out at the start of the closedown.

An employer that allows employees to keep leave up their sleeve and to only pay them for the leave used in the closedown is not complying with the Holidays Act.  As the employer in this case found out, the Labour Inspector will take them to Court no matter that they were complying with employees’ wishes and paying (over time) all of the entitlements the employees had at the time the employees wanted to receive them.

However, as the Court has pointed out the Act provides no alternative in this situation.

Alan Knowsley

Employment Lawyer Wellington

Enforcement of the wage subsidy scheme…

Since the wage subsidy became available in early April, vast numbers of employers have taken up the scheme to help retain staff when revenue has significantly declined due to coronavirus.

There are requirements which employers must comply with in order to receive the subsidy, including using their best endeavours to pay staff at least 80% of their normal pay during the 12 weeks of the subsidy. A full list of the requirements can be accessed on Employment New Zealand’s website.

Any employer that is granted the subsidy is placed on a public register. Employers are searchable by name, and if they have been granted the subsidy, the register will show the amount paid out and how many employees this is in relation to. The register may be accessed on the Ministry of Social Development’s website.

Making public information on employers receiving the subsidy allows employees to determine if a subsidy has been claimed on their behalf.

If, for example, an employer had claimed the subsidy and subsequently made some of their workforce redundant, they would not be entitled to the compensation for the redundant workers.

Employees can check the register to determine how many employees had been claimed for, and if fraud is suspected, notify the Ministry through their website.

It is important, during these uncertain times, to ensure that employment law is being observed and neither employer nor employee is unfairly taking advantage of the system.

If you are concerned about any of the actions or employment practices of your employer during the lockdown, it is wise to consult an experienced professional in the area.

Alan Knowsley

Employment Lawyer

Wellington

Employer penalised over $76,000 for breaching employee rights…

The Employment Relations Authority has penalised an employer for failing to pay its employees correctly and not providing employment agreements.

A Labour Inspector opened an investigation and requested all pay and employment records from the employer. A number of employees were being paid less than the minimum wage, several were not receiving the correct holiday pay, and nearly two hundred employees had not been given employment agreements.

The employer has to pay $16,532 to employees for breaches of holiday and minimum wage entitlements. Additionally, the business must pay a further $50,000 in penalties for the breaches.

The Managing Director, as the person directly responsible, was also personally fined $10,000 for failing to keep adequate records and provide employment agreements.

It is vital that employers utilise effective record keeping systems and adhere to employment standards. Failure to do so may result in steep penalties being imposed both on the employer and personally where appropriate.

In the case of uncertainty it is wise to speak with an experienced professional in the area.

Alan Knowsley

Employment Lawyer

Wellington

Director’s assets frozen over unpaid wages…

The Employment Court has frozen $14,000 of a Director’s assets to prevent them being removed from the country. This order was made after the company failed to pay its employee for several months.

The employee had continued working under the promise they would be paid in the near future. The company was then placed into liquidation.

The Employment Relations Authority held the Director personally liable for the unpaid wages.

The employee learned that the Director was about to travel overseas. This prospective travel was concerning to the employee as they had recently also learned the Director sold their home in a mortgagee sale.

The business also lacked assets to pay off its creditors. The employee believed the Director was attempting to leave the country in order to avoid paying any potential debts.

The Employment Court found the Director still had assets that were at risk of being transferred outside New Zealand. The freezing order was granted preventing their removal from the country subject to review after the fuller hearing in the Authority.

If you believe there is a risk that your debtor is trying to move assets overseas, it is important to consult with a professional quickly, before any potential transfers take place.

It is too late once the assets have left the country and you then have to consider taking potentially slow, difficult and expensive action overseas to enforce the debt.

Alan Knowsley

Employment Lawyer

Wellington

Employer penalised $69,500 for breaching worker entitlements to wages and holiday pay…

The Employment Relations Authority has ordered an employer to pay $25,000 in wage arrears, a $40,000 penalty, and $4,500, in costs for breaching its worker’s minimum entitlements.

The employer had been issued with a compliance notice by a Labour Inspector. 18 months later, the Labour Inspector initiated an audit and requested copies of all timesheets, records of holiday pay and leave, and pay records.

The employer provided a number of incomplete or incorrect documents. In respect of holiday pay and leave entitlements, they provided none at all. Additionally, it had become apparent during the audit that there were completed timesheets that had dates allocated to days that had never occurred in the corresponding calendar year.

The Authority found there were breaches in the requirement to maintain accurate time records in either a written form, or a way that could easily be accessed and converted into written form. The workers had also been significantly underpaid in their wages and holiday pay.

Furthermore, the employer failed to accurately record hours worked, or holiday and leave entitlements.

When it imposed the penalties, the Authority categorised the breaches as intentional, rejecting explanations from the employer.

It is essential that employers maintain accurate and up to date records of all hours worked and pay-related matters. Employers must be able to produce these records on request, and if unable to do so may face significant penalties.

If you are concerned you are not receiving your minimum entitlements, it pays to consult a professional experienced in the area.

Alan Knowsley

Employment Lawyer

Wellington

Employer fined for breach of settlement…

The Employment Court has imposed a $10,000 fine, plus costs, on an employer for breaching a mediated settlement, and ordered compliance with the settlement.

The settlement arose as the result of a claim by the employee that they had been unjustifiably dismissed. The employer agreed to pay $25,000 in compensation and a $2,500 contribution toward legal costs, as part of a confidential settlement.

The employer only paid $6,000 of what was agreed. The employee brought proceedings in the Employment Relations Authority, but the employer failed to appear.

The employee then sought to enforce the judgment in the Employment Court. The Court found that failing to attend at the Employment Relations Authority was acting contemptuously. In addition, failing to take any steps in the Employment Court, failing to honour the settlement agreement, and the prejudice to the employee by way of financial loss, were held to be aggravating factors in the Court hearing.

Had the employer complied with the settlement, they would have paid the employee $25,000 plus the $2500 costs, and the contents of the settlement would have remained confidential.

However, as a result of failing to pay fully, the total penalties now exceed $42,000.

When dealing with mediations and settlements it is important to understand your rights and the consequences of any agreement you sign. It is important to get advice from someone experienced in this area.

Alan Knowsley

Employment Lawyer

Wellington