How would you fare if a Labour Inspector came a knocking?

The Labour Inspectorate of the Ministry of Business, Innovation and Employment (MBIE) enforces and monitors compliance with minimum employment standards in New Zealand including ensuring that employees are being paid at least the minimum wage, are being correctly paid for their holiday and leave entitlements and that employers are keeping accurate records in line with their legal obligations.

A Labour Inspector has wide-ranging powers to audit employers and, from there, take measures to ensure compliance where failings are identified. Such measures can range from requiring an employer to enter into an enforceable undertaking to issuing proceedings before the Employment Relations Authority seeking awards for arrears of pay and penalties. Proceedings can be brought against both the legal entity that employs staff and those who are “involved” in the breaches.

There is a current focus on the retail and hospitality sectors, who typically employ more vulnerable employees such as migrant workers and minimum wage earners. Over the past year, the Labour Inspectorate has taken 19 cases to the Employment Relations Authority/Employment Court that have resulted in awards of almost $260,000 in wage and holiday pay arrears and over $450,000 in penalties to be paid personally by individuals.

The recent case of Labour Inspector v Satyam Limited¹ was a case where penalties were awarded against both the employer and director as follows:

• A penalty of $18,000 against the employer for failure to keep accurate records and public holiday entitlement breaches; and

• A penalty in the sum of $9,000 against the sole Director, as a person involved in the breaches.

Although not the largest penalties we have seen this year, this case is significant because of the relatively high penalty awarded for a failure to keep records and is a timely reminder to all employers to get their documentation and records in order.

Employment agreements

Every employee must have a signed, written employment agreement in place that contains at least the minimum details dictated by law.

Employees must be on the correct type of employment agreement. There are three types of employment agreements: permanent (full time and part time), casual and fixed term. Each agreement affects the employee’s entitlements to holidays and leave; thereby showcasing the imperative need for employers to get this right from the outset.

Other essential details in employment agreements include:

• Ensuring there are no illegal clauses in the agreement (including, but not limited to any boarding house agreements which are not legally compliant, or any “working for free” provisions;

• The amount the employer will pay in wages or salary to the employee;

• A description of the work to be performed by the employee; and

• The place of work.

Wage/time records

Employers are required to keep accurate written records of all employee’s time worked, payments, holidays and leave taken, and entitlements, in accordance with s130 of the Employment Relations Act (Act). Records need to be sufficient to enable the employer to demonstrate they have complied with minimum standards and entitlements.

The employer must be able to show, for each employee:

• The number of hours the employee has worked in a pay period and the pay for those hours;

• Records showing the employee’s postal address;

• A valid IRD number; and

• Documentation to prove that PAYE was paid by the employer.

Leave records

Recently, McDonalds and District Health Boards have been scrutinized for miscalculating holiday entitlements of their employees, resulting in millions of dollars of “back-pay” being owed to their employees. The problem is wide-spread and stems mainly from employers relying on payroll systems that are either not fit for purpose or have been input with incorrect information.

Getting the employment agreement right from the outset is crucial as only casual employees or those on fixed term agreements of 12 months or less can be paid 8% of their gross earning in lieu of accruing annual leave.

From there, employers must keep compliant holiday and leave records in accordance with s81 of the Holidays Act 2003 (HA). S81 lists over 20 requirements that an employer must be able to show for each employee.

¹ [2019] NZERA 631.

Any questions?

Feel free to contact a member of the workplace law team to have your business reviewed, including a thorough analysis of each employee, or to have a confidential chat about minimum employment law standards.

Please note, this article is provided purely from an employment law perspective, however there may be accounting or immigration matters that need to be separately addressed.

Workplace Law team

Employment: Andrew Shaw, Fiona McMillan, Gwen DrewittMaria Green,  Hannah Martin, Joseph HarropHolly StruckmanAlex Beal, Giuliana Petronelli, Abby Shieh
Immigration: Mark Williams, Rachael Mason, Daniel Kruger, Nicky Robertson, Julia StrickettKen Huang, Mary Zhou, Shi Sheng Cai (Shoosh)Sarah Kirkwood, Janeske SchutteLingbo Yu
ACC: Andrew Shaw
Health and Safety: Andrew ShawFiona McMillan

News and events

Click here for other Employment Law articles.

Meet the team that makes
things simple.

Andrew Shaw
Fiona McMillan