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Government Enforcement of Employment Standards

Published 10 May 2015

The Government has approved a package of measures to strengthen enforcement of employment standards.
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.

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.

More on this next month to follow.

Source: MBIE.