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Strengthening Enforcement of Employment Standards

Published 01 Jul 2015

The Government has approved a package of measures to strengthen enforcement of employment standards, as referred to in previous newsletters. These measures include including tougher sanctions.
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.

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 and include:

  • 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).

Compliance costs

  • Allegedly 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).

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.

Source: DOL

Employers Assistance will provide you with an updatewhen the new law has been passed.