The New Zealand Government has approved a package of measures to strengthen enforcement of employment standards, including:
All these changes will be reflected in an Employment Standards Bill which will be introduced to Parliament this year. The Bill will go through a normal select committee process including public submissions before it is passed into law.
Before the new law comes into force, MBIE will develop an information and education plan to inform businesses, including small businesses, and workers of the changes.
Tougher sanctions
- For the most serious breaches, such as exploitation, cases will be heard at the Employment Court and carry maximum penalties of $50,000 for an individual and the greater of $100,000 or three times the financial gain for a company. Previously the maximum fine was $10,000 for an individual and $20,000 for a company.
- Employers will be publically named if the Employment Relations Authority or Employment Court finds they have breached minimum standards.
- Individuals will also face the possibility of being banned as employers if they commit serious or persistent breaches of employment standards.
- Persons other than the employer – such as directors, senior managers, legal advisors and other corporate entities – will also be held accountable for breaches of employment standards if they are knowingly and intentionally involved when an employer breaks the law. These cases can be pursued even if the employer ceases to exist.
Who will be covered by the proposal for persons other than the employer to be able to be held accountable for breaches of employment standards?
- These provisions will only apply to ‘officers’ of the company, being directors and other individuals who occupy positions where they exercise significant influence over the management or administration of the whole, or a substantial part, of the business.
- Persons other than the primary contravener will only be accountable if they are knowingly and intentionally involved in a contravention of the employment standards provisions.
- A person would not be liable if they took reasonable and proper steps to ensure the employer complied or if they reasonably relied on information supplied by another person.
- For example, a senior payroll manager, under direction from the company’s director, who has set up the payroll system in such a way that employees do not receive their full holiday entitlements, could be caught by these provisions because they could meet the definition of an ‘officer’ of the company. However, a more junior payroll clerk would not be covered.
- The accountability provisions can also potentially cover individuals or other companies in a contractual relationship with the employer (for example, a legal advisor who aids the employer to manipulate corporate structures to avoid paying entitlements).
Will there be costs for employers in complying with the new requirements?
- Most businesses will not experience any increase in compliance costs resulting from these proposals.
- The focus of the proposals is on businesses that are not currently meeting their obligations. They will face minor compliance costs to become compliant and risk facing financial penalties if they don’t (with serious breaches resulting in significantly higher penalties).
What are the penalties for less serious breaches?
The penalties at the Employment Relations Authority for minor to moderate breaches would remain at $10,000 for an individual and $20,000 for a company.
Clearer-record keeping requirements
- Record-keeping requirements for wages, time, holidays and leave will be made consistent across all employment legislation.
- There will be flexibility around the format for records, so long as they can show compliance with the law.
- Infringement notices will be introduced for clear-cut breaches of these obligations with a maximum penalty of $1,000 per breach with a cap of $20,000 if there are multiple breaches.
Why are changes to record keeping requirements needed?
- The current requirements do not ensure that compliance with minimum entitlements can be assessed in all circumstances and are, in some places, inconsistent across the legislation. For example, the Employment Relations Act and Minimum Wage Act have different requirements for recording time worked and this has led to difficulties in assessing whether low salaried and piece workers (workers who are paid by the number of products they create or tasks they complete) are receiving adequate pay. The changes address these issues.
What will the costs be for complying with record keeping requirements?
- For most employers there will not be any costs associated with complying with the new record keeping requirements. This is because compliant employers will already be recording the necessary information.
- The key requirement is that employers can produce a record of the number of hours worked each day in a pay period, and the pay for those hours, in an easily accessible form on request from the employee or from a labour inspector. Employers will have flexibility as to what form this record takes.
- For those employees who work regular hours for regular pay, a simple statement of what the regular hours and pay for the employee are (for example, as set out in the employment agreement) is likely to be all that is needed to comply. However, more detailed information may be required when employees’ hours vary from day to day and from pay period to pay period, or when there is a significant departure from contracted hours.
What is the aim of the infringement notices for failure to keep records?
- Infringement fees are an additional tool for labour inspectors and commonly used in other sanction regimes.
- Labour Inspectors will use infringement fees for clear-cut breaches of the obligations to keep employment agreements and the prescribed records and to produce them at the request of a labour inspector.
- This will reduce the need for proceedings at the Employment Relations Authority or Employment Court.
Increased tools for labour inspectors
- Information sharing: There will be enhanced information sharing powers with other regulators such as Immigration New Zealand, the Companies Office and Inland Revenue to improve the ability of labour inspectors to identify and investigate alleged breaches.
- Information requests: Labour inspectors will be able to request any record or document from employers that they consider will help them determine whether a breach has occurred – for instance financial records or bank statements.
What protections will accompany the new information sharing powers for labour inspectors?
- All information shared (both business and personal) will continue to be subject to the protections of the Privacy Act. Memoranda of Understanding and Approved Information Sharing Agreements (AISAs) will outline the necessary checks and balances for how labour inspectors and other regulatory parties with whom they share information are required to handle both business and personal information.
- Only in very specific circumstances in which there is an Approved Information Sharing Agreement (AISA) between labour inspectors and another regulator, would the Privacy Act’s information sharing principles be modified or overridden to allow for specific personal information to be used or disclosed. However, an AISA must specify the safeguards to ensure that any interference with an individual’s privacy is minimised. The Office of the Privacy Commissioner will work with MBIE on the development of AISAs.
Why do labour inspectors need more information from employers?
- Labour inspectors may request further records and documents from employers when they need to obtain supporting evidence to substantiate an alleged breach – for example, when the required wages and time records are incomplete or not evident.
- Labour inspectors will need to have a reasonable belief that the records and documents they request will assist in determining whether or not a breach of an employee’s minimum entitlements has occurred.
Changes to Employment Relations Authority’s approach to employment standards cases
- More employment standards cases, particularly those that involve more serious and systemic and/or intentional breaches of employment standards will be resolved at the Employment Relations Authority or Court, rather than being automatically directed to mediation services in the first instance as is now the case.
- If it wishes, the Authority will continue to be able to send standards cases to mediation if they are mixed up with other employment relationship problems, or if it considers that mediation will contribute constructively to addressing the problem (for example, through clarifying the facts of the case).
- Employees will be able to seek penalties at the Employment Relations Authority for any minimum entitlement breach – currently this is only possible for breaches of the Wages Protection Act.
Why will the role of mediation be reduced for standards cases?
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For many employment standards cases, particularly those that involve more serious and systemic and/or intentional breaches, mediation is not appropriate because:
- alleged standards breaches are matters of fact to be determined, as opposed to other employment relationship problems for which mediation between the employer and employee is more suitable
- it cannot provide the enforcement outcomes sought (i.e. sanction/deterrence)
- it can result in the case being prolonged if mediation cannot determine the breach as the case will end up back at the Authority
- The statutory obligation to direct standards cases will be removed and instead the Authority will be required to consider them.
- However, the Authority will retain discretion to send standards cases to mediation if they are mixed up with other employment relationship problems, or if it considers that mediation will contribute constructively to addressing the problem (for example, through clarifying the facts of the case).
Why can employees seek their own penalties at the Employment Relations Authority?
- Employees can already seek penalties under the Wages Protection Act. Extending this right to the Minimum Wage Act and Holidays Act is consistent with the ‘self-enforcement’ nature of the employment legislation.
- It means that the opportunity for the Authority to penalise employers will not be dependent on who brings the case (i.e. an employee or a labour inspector).
Sourced directly from Employment NZ here.
