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Employment: Increased Penalties and Awards

3 September 2018

In April 2016, legislation changes were introduced, which intended to strengthen the enforcement of employment standards. The aim of the changes was to ensure that breaches of employment standards, such as paying minimum wages, holiday entitlements, and keeping proper wage and time records, are dealt with appropriately. The changes also aimed to provide an effective deterrent while trying to avoid imposing unnecessary compliance costs on employers.

 The amendments increased maximum penalties in the Employment Court from $10,000 to $20,000 for an individual and from $50,000 to $100,000 for a company or three times the amount of any financial gain made from the breach (whichever is greater). The amendments also introduced tougher sanctions; such as, an employer could be publicly named, some individuals could be banned as a manager for serious or persistent breaches, and stand down periods could be imposed for supporting visa applications.

 The Employment Court has stated (in the decision in Borsboom v Preet PVT Limited [2016]) that the reason for the increased penalties is to:

  • punish those who breach minimum standards;
  • deter employers from deliberately breaching minimum standards by emphasising that they will be punished;
  • provide compensation for victims; and
  • eliminate unfair competition in business.

 In determining the appropriate penalty, the Court will take a four-step approach:

  • identify the nature and number of breaches;
  • assess the severity of each breach;
  • consider the financial circumstances of the person/company in breach; and
  • look at the proportionality of the outcome.

It is apparent from a series of decisions throughout 2017 and 2018 that there is a clear trend in the Employment Relations Authority (ERA) and the Employment Court towards the imposition of higher penalties for breaches of minimum standards. In addition, the Government announced in the recent Budget that additional funds will be set aside to provide for double the number of Labour inspectors.

In view of these developments, employers should be sure to take steps to keep up to date with current legislation and any changes which may be introduced. The ERA has made it clear in recent decisions that ignorance of the law is no defence.

If you would like us to review your employment agreements or discuss any issues concerning employees please contact Brett Vautier at b............@glaister.co.nz