Government to get even tougher on employment standards

Geoff Bevan

March 2015 . . .Continuing a trend of toughening up on bad employers, the Government last week announced significant new measures aimed at ensuring that all employees receive their minimum entitlements.

The changes will catch employers that:

fail to pay employees at a rate equivalent to the minimum wage;

fail to pay proper holiday pay; and

make unauthorised deductions from wages or salary owed to employees.

Penalties will be tougher and owners, senior managers and advisers will now be squarely and personally in the gun.

Smaller businesses and rural employers need to pay attention

Although these changes are largely aimed at serious exploitation, all businesses (particularly small and newer companies) should take a hard look at what they are doing. Complying with minimum standards is particularly challenging in the rural sector, where employees often work highly irregular hours, without supervision. The potential consequences of getting this wrong will now be far more serious.

Key changes

Fines for serious breaches such as exploitation will jump dramatically to $50,000 for an individual (currently $10,000) and at least $100,000 for companies (currently $20,000). The maximum fine will be the greater of $100,000, or three times the company’s financial gain as a result of the breach.

Employers that breach minimum standards will be publically named.

Individuals that commit serious or persistent breaches will face being banned as employers.

Employers must be able to produce records showing how many hours an employee worked each day during a pay period, and the pay received for that period. Employers will have flexibility as to how they keep those records, but they must be provided in an easily accessible format if a Labour Inspector or employee asks. If these obligations are breached Labour Inspectors will be able to issue $1,000 infringement notices, with a cap of $20,000 for multiple breaches.

Labour Inspectors will also have greater powers to request information from employers and to access information from other Government departments.

Directors, senior managers, legal advisors and other entities will be personally accountable for breaches if they are knowingly and intentionally involved in breaches of minimum employment standards. It will be a defence if the individuals can show that they took “reasonable and proper steps” to ensure that the employer complied or that they reasonably relied on information supplied by another person.

Employment standard caseswill no longer be automatically referred to mediation, meaning they will normally go straight to the Employment Relations Authority for a decision.

Timing

Just when the new laws will take effect is uncertain. Draft legislation is expected to come before Parliament in the middle of this year, but we suspect the changes won’t come into force until the first quarter of 2016, at the earliest.

Next steps

We’ve set out an initial checklist below. If your business has (or might have) issues then they should be sorted out as quickly as possible. You should also seek more detailed advice once the legislation is finalised, and keep an eye out for information from the Ministry of Business, Innovation and Employment.

Initial Checklist

Do you have accurate and easily accessible records showing all hours that staff work, what they are paid each pay period and when they take leave?

Are you paying holiday pay correctly? For example:

Are you paying holiday pay on non-discretionary bonus/incentive payments?
Are you paying holiday pay on the cash value of accommodation provided to staff (this requirement is frequently ignored)?
Are employees always paid time and a half when they work on a public holiday?

Are you meeting minimum wage requirements? You might not be if, in some weeks, employees work significantly longer hours - see two of our previous updates for more details:

Rural Update: http://www.gallawaycookallan.co.nz/library/legal-updates/rural-update-employing-staff

Fortnightly Averaging: http://www.gallawaycookallan.co.nz/library/legal-updates/employment-update-fortnightly-averaging

Government to get even tougher on employment standards

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