Blog Layout

Personal liability for breaches of employment standards

June 6, 2024

 

The director of a company and his wife, a manager, have recently been held liable to pay over $90,000 in reparations to an employee after the company breached minimum employment standards.


The employee worked for the company for just over 12 months. The company went into liquidation at the end of 2020, but the employee claimed that he had not been paid for many of the hours that he worked. The employee also claimed that he had not been paid his annual leave and public holiday entitlements.


Despite the company being in liquidation, the Employment Relations Authority was able to look into the issue as the director and manager of the company could be held personally liable for the breaches.


The Authority first had to determine whether the employee’s claims were accurate.


Evidence showed that the employer had failed to keep wage and time records. The director provided various reasons for this failure such as the device that kept the wage records had been stolen. The director did not provide sufficient evidence to support these reasons.


In any case, the Authority held that the employer had failed to keep accurate wage and time records, regardless of the reason. Keeping wage and time records is a legal requirement for employers in New Zealand and the director therefore breached minimum employment standards.


The director had also failed to pay the employee his annual leave and public holiday entitlements. This was accepted by the director.


The Authority ordered the company to pay the employee $29,990 in minimum wages, $10,240 in annual leave entitlements, $1,970 for work on public holidays and $1,720 for alternative holidays for public holidays worked.


However, the company had been liquidated and therefore could not pay the Authority’s orders. 


The Authority held that both the director and his wife could be held personally liable to pay the orders made against the company, because they were persons involved in the employment breaches.


As director of the company, the director had a strong influence over the operations of the company. Further, the wife had sufficient influence over the management and administration of the company in her role as manager. The employee had raised various issues with the wife as manager, which she had failed to address.


The director and manager were therefore ordered to personally pay the Authority’s orders against the company. The director was also ordered to pay a penalty of $20,000 for his involvement in the breaches, while his wife was ordered to pay a penalty of $10,000.



The director was also ordered to repay a $21,000 premium that had been paid by the employee.


It is important to be aware of minimum employment standards, both as an employee and an employer. This case emphasises that individuals can be held personally liable for breaches of employment standards.


If you are confused about these standards or believe you have been treated unfairly, it pays to seek advice from a professional with experience in the area.


Source: Rainey Collins May 2024

By Stuarts Accountants February 26, 2025
An area of uncertainty for employers when contemplating restructuring & redundancy processes concern obligations associated with disclosing relevant information. The law requires employers provide employees who are adversely affected by any formal processes, for example - a redundancy process - with access to all relevant information (in writing) before any decisions are made. This is a requirement that employers often completely overlook and/or fail to do their due diligence on before commencing change processes with their employees. The important point to make here is: That failure to provide employees with relevant information in these situations can be fatal to defending subsequent personal grievance claim(s). Namely, a claim for unjustified dismissal premised on employer failing to provide access to all relevant information. Problems associated with this area of law can be illustrated in a recent judgment by the Court of Appeal in Birthing Centre Ltd v Matas [2024] NZCA 139, which dismissed an appeal from the Employment Court in Birthing Centre Ltd v Matas [2023] NZEmpC 162 that was in favour of five ex-employees who were employed as midwives. In this case, Birthing Centre Limited (‘BCL’) transferred its services to MidCentral District Health Board (‘MDHB’). The commercial agreement between the parties had a condition that the arrangement be strictly confidential. After the transaction was completed, announcements followed, and concerns subsequently picked up by Midwifery Employment Representation and Advisory Services Union (‘the Union’). In summary, employees were informed they would be transferred to MDHB – but the deal had already been completed by that stage. Five midwives who worked for BCL raised personal grievance claims for unjustified dismissal. Their claims centred on the lack of consultation and provisions of information occurring prior to being notified of their employment transferring. BCL attempted to argue that it was exempted from consulting with employees because there was a good reason to maintain confidentiality in terms of the commercial agreement between BCL and MDHB. The Court of Appeal declined the application for leave to appeal - essentially confirming the ruling of the Employment Court which was: ". . . A fair and reasonable employer could in the circumstances have considered options for exploring whether it could maintain the integrity of BCL’s commercial position as well as the DHB’s commercial position, while informing its employees of the proposal in a confidential way". The Employment Court determined that there had been a failure by the BCL to consider: Options for exploring whether the integrity of their commercial position could be maintained while informing employees of a potential sale in a confidential way. Whether providing information to the Union was viable on embargoed basis. Direct employees not to share information during the consultation process. Include a condition of sale that employees be consulted on a conditional basis and their views sought before the sale agreement became unconditional. As a result, remedies previously imposed in by the Employment Relations Authority (‘the Authority’) were required to be paid by BCL to the midwives. The total value of the claims exceeded $35,000.00 across each of the employees, including compensation payments for injury to feelings and four weeks wages equivalent for each of claimant. This is not to mention the legal costs and time which would have been incurred that were associated with three sets of separate legal proceedings, i.e. a determination in the Authority, the Employment Court and the Court of Appeal, which would have been significant. The outcome associated with this case is a chilling reminder to employers to ensure they do their due diligence when contemplating restructuring processes, including business transfers and sales. Failure to sufficiently plan and understand an employer’s legal obligations can translate to successful legal challenges. It is vital an employer does careful due diligence, along with understanding any specific areas of legal risk (and plan for contingencies – if necessary) before embarking on these sought of processes. If an employer is going to attempt to rely on confidentiality to withhold information from affected employees, then it must be able to show & explain why confidentiality is necessary to protect its commercial position. More importantly, employers who are considering withholding relevant information need to understand that the legal threshold for not disclosing information on grounds of ‘confidentiality’ and/or ‘commercial sensitivity’ is extremely high (and open to challenge). Accordingly, the ‘least risky’ approach is for an employer to consider making provision of all relevant information available to the affected employees via a formal consultation process before any decisions are made. Source: Employers Assistance Ltd 7.10.24
By Stuarts Accountants February 26, 2025
Disciplinary processes are difficult and stressful for all concerned. From my experience the 7 common mistakes employers make are: 1. Failure to tell the employee what the allegations are. Tell the employee what the allegations are and provide copies of statements from witnesses and relevant material. Also advise at the start of possible outcomes of the investigation if the allegations are proved to be correct. 2. Failure to give the employee a chance to respond to the allegations. Provide a reasonable opportunity for the employee to respond. Give them a fair amount of time to prepare. Also, before making a decision on suspension the employee should be informed that is being considered and invited to provide their views on the proposed suspension. If the allegations are proven give the employee an opportunity to comment on any proposed outcome. 3. Failure to allow for a support person or representative. The support person must be allowed to speak for and represent the employee. 4. Failure to carry out a fair investigation. It is the responsibility of the employer to establish what (if anything) has occurred. Keep an open mind and do not predetermine the outcome. Interview all relevant witnesses. 5. Failing to come to fact-based conclusions. What evidence is there to find the facts? 6. Getting the seriousness wrong. If the allegations are correct, how serious is the event? Finding serious misconduct, when it is not serious enough, happens too often. Misconduct should be dealt with at the appropriate level. What should the proposed outcome be? Should it be a warning or dismissal? 7. Failing to act consistently. How have others been dealt with (in the past or in this same event)? Outcomes do not have to be the same, but you need to be able to justify why you acted differently. The disciplinary process must be carried out correctly. Failure to do so risks businesses facing costs and disruption that would otherwise have been avoidable, and employees being subjected to processes that are unfair and do not give them a reasonable opportunity to answer the allegations. Source: Rainey Collins Employment Issues 5.2.25
By Stuarts Accountants December 2, 2024
Share by: