Personal liability for breaches of minimum employment standards


On 1 April, substantial changes to our employment laws were made that all business managers, owners and HR managers should be aware of.

Why the changes?
The changes are aimed at ensuring that employers comply with minimum employment standards, such as paying the correct holiday pay. 

In the past it has become clear that a number of employers have failed to meet their obligations, even following an order from the Employment Relations Authority.  Many of these then chose to avoid having to pay what they owed, by closing down their business and starting again as a new business, therefore leaving the disaffected employee without redress.

The changes may also be aimed at employers who may have previously worked abroad and are unfamiliar or unwilling to become compliant with New Zealand’s minimum employment law requirements. 

What are the changes?
The new legislation changes the Employment Relations Act 2000 (the Act). 

It introduces the concept of ‘Officers’ within an employing entity, such as a company, trust, or any other organisation that has employees. 

Officers can include directors, partners, those in a position comparable to that of a director if the employer is not a company (such as a partnership or limited partnership) and those who can exercise significant management or administration influence.  Therefore, a CEO, CFO or HR Manager could be an Officer.

The changes allow both the employing company and any Officers to be penalised.

How do the changes affect managers, business owners and HR Managers?
Where an employer has breached minimum entitlement provisions (for example, not paying minimum wage), and the breach is serious (for example, involving a significant amount of money, is repetitive, or was intentional or reckless) a Labour Inspector can apply to the Court for a declaration of breach against the employer and any relevant Officer. 

What are the penalties?
Once a declaration of breach has been made, the Court can then make the following orders against the Officer or employer:

  • Pecuniary penalty order – The could be $50,000 for individuals (such as HR Managers) and $100,000 for the employer or three times the amount of the financial gain made by the employer from the breach;

  • Compensation order – This is where the affected employee(s) affected by the breach have, or are likely to, suffer loss or damage.  The Court can order compensation against a person involved in a breach for wages or other money payable to an employee.

  • Banning order – The Court can ban a person from; entering into an employment agreement as an employer; being an officer of an employer; or, being involved in the hiring or employment of employees.  A banning order can last for 10 years.  A breach of a banning order will attract a fine not exceeding $200,000, or a term of imprisonment not exceeding 3 years or both.

The Court is not limited to only one of the above orders.  It can make multiple orders against a person in relation to the same breach.

Do you need help?
If you believe that you may be deemed to be an Officer and/or your business may not be meeting minimum employment provisions, please do not hesitate to contact AJ Lodge, the head of our employment team.  AJ’s direct telephone number is 03 339 5627.


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