10.04.2015

Enforcing Employment Standards – heavy sanctions looming!

For a long time, enforcement of employment standards has been a bit of the proverbial slap on the hand with a wet bus ticket.   However, things are about to get quite a lot tougher for employers who intentionally break the rules around minimum wage, leave, and record-keeping.

The Government has announced a package of measures designed to strengthen enforcement of employment standards, including:

  • Tougher sanctions;
  • Clearer record keeping requirements;
  • Increased tools for Labour Inspectors; and
  • Change to the Employment Relations Authority’s approach to employment standards cases.

Tougher sanctions

For the most serious breaches, such as exploitation, cases will be heard in the Employment Court (as opposed to the Employment Relations Authority).  Maximum penalties will increase to $50,000 for an individual and the greater of $100,000 or three times the financial gain for a company.   An employer can also be ‘named and shamed’ by the Court or Authority if it is found to have breached minimum standards, and in the worst cases, can be banned as an employer, although there are no details yet about how that would work.

Another interesting concept is that “officers” of the company, being directors and other individuals who exercise significant influence over the management or administration of the business, may be held personally liable if they are knowingly and intentionally involved in a contravention of employment standards.   The Government gives the example of a senior payroll manager intentionally setting up the payroll system to deprive employees of their full holiday entitlements.  This concept appears to reflect the forthcoming change to health and safety legislation, in which ‘officers’ of a PCBU will owe individual duties of due diligence, separate to the obligations owed by the company.

Record Keeping

We have recently reminded our readers of the importance of keeping records and the consequences of failing to do so (see article here).   Recent case law regarding minimum wage rates (including the ‘sleepover’ cases) has also highlighted the importance of keeping records in a format that allows for an assessment of whether employees are being paid minimum wage for each hour that they work.   At present, the relevant legislation (the Employment Relations Act, Minimum Wage Act and the Holidays Act) requires slightly different records to be kept.   The intention is to standardise these requirements, but allow some flexibility for employers as to the form in which the information is kept.   The key requirement will be that employers can, on request from the employee or a Labour Inspector, produce a record of the number of hours worked each day in a pay period, and the payment for those hours.   Most employers will already be doing this, but if not, it’s time to get your records in order!

Increased Tools for Labour Inspectors

Infringement Fees (essentially spot fines) will be introduced for clear-cut breaches of the obligations to keep employment records, and to have (and keep) written employment agreements.  The fines will be imposed by Labour Inspectors, avoiding the need for proceedings in the Authority or Court.

Inspectors will also be able to share information with other regulators, and make information requests of employers, including requesting any record or document that the Inspector thinks will help prove or disprove a breach.  The example given by the Government is that of bank records or financial records.   The Privacy Act would continue to apply, and the Privacy Commissioner will work with MBIE to develop ‘Approved Information Sharing Agreements’ (AISAs) to make sure there are checks and balances for Inspectors and other regulators.

Changing Approach

Employment standards cases (especially serious, prolonged or repeated breaches) need not be directed to mediation in the first instance as that forum is not particularly helpful for these types of breaches.  Instead, the matter can be heard by the Authority or Court immediately, if mediation is not considered to be appropriate.

Employees will be able to seek penalties for breaches of the Minimum Wage Act and the Holidays Act (at present, penalties under that legislation can only be sought by a Labour Inspector).  This will remove the odd inconsistency whereby an employee can seek a penalty against an employer for a breach of the Wages Protection Act, but not the Minimum Wage Act.

So, all in all, a pretty significant package of reforms with some interesting new concepts.  The Minister for Workplace Relations & Safety has announced that the changes will be reflected in an Employment Standards Bill which will be introduced to Parliament this year.  Of course, the Bill still has to get through the select committee and the rest of the legislative process, so it is a wee way off yet.  We’ll keep you posted on developments.   In the meantime, if you have any questions about whether your processes and practices are in order, or whether any of the proposed changes could affect you, please contact us.

Do you need expert legal advice?
Contact the expert team at Hesketh Henry.
Kerry
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

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