The director of a company and his wife, a manager, have been ordered by the Employment Relations Authority (Authority) to pay over $90,000 in reparations to an employee after the company breached minimum employment standards.
Background:
Mr Y was the sole director of BDIT, which went into liquidation at the end of 2020. The employee, Mr S, worked for the company under a work visa, which tied him to working only for BDIT in its restaurant businesses.
The Labour Inspector brought claims against Mr Y and his wife Ms S, claiming they were personally liable to pay wage and leave entitlements BDIT owed Mr S, and for penalties for breaches of employment standards during his employment. The Inspector also sought an order requiring Mr Y to repay a premium he admitted charging Mr S for his employment.
The minimum employment standards, which were breached, included failing to:
- Pay Mr S time and a half for working on public holidays or for alternative holidays;
- Pay Mr S accrued holiday pay;
- Pay Mr S his minimum wage for all hours worked; and
- Keep wage, time, holiday and leave records for the period of Mr S’s employment.
Findings:
Under the Employment Relations Act 2000, a ‘person involved in a breach’ may be personally liable to pay a penalty. As a director of BDIT, Mr Y was ‘a person involved’ in the breaches. Similarly, the Authority was satisfied that Ms S was an officer of the company in her capacity as day-to-day manager. It found it was more likely than not that she was “at least indirectly knowingly concerned” with the breaches of employment standards.[1]
The Authority ordered BDIT to pay Mr S $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.
Due to BDIT’s liquidation it was unable to pay the Authority’s orders – however, Mr Y and Ms S were personally liable to pay the amounts, as persons involved in the employment breaches. In addition, Mr Y was ordered to pay a penalty of $20,000 for the breaches and $21,000 for the premium, while Ms S was ordered to pay a penalty of $10,000.
Takeaways:
This case is a stark reminder of the fact that directors and managers can be held personally liable for breaches of employment standards, and that they cannot hide behind the corporate veil, where they have been involved in a breach of minimum entitlements.
This was especially so in respect of keeping accurate employee records – a task which may seem like an administrative burden but is an absolute requirement for all employers.
As occurred here, the Authority has a statutory discretion where an employer has not produced these records, to accept the employee’s account as proven that they have not been paid correctly.[2]
The Authority’s decision highlights how essential it is that both employees and employers are aware of minimum employment standards, and the personal consequences where a director or manager gets this wrong.
If you would like to know more about your rights and obligations as a director, manager or employer, Lane Neave’s specialist Employment Law team are more than happy to help.
Author: Stella Smith
[1] Labour Inspector v Yuan [2024] NZERA 189 at [62].
[2] Section 132 Employment Relations Act 2000.
