ERA investigates employer's breaches and improper payroll practices
The Employment Relations Authority (ERA) recently dealt with a case involving wage and holiday pay arrears for a former employee. The worker, a migrant, claimed significant underpayments and breaches of employment standards over several years.
The case raised important questions about minimum wage compliance, holiday pay calculations, and the potential personal liability of company directors for employment law breaches.
The ERA examined the worker's claims of underpayment and improper leave practices. The case underscores the importance of proper payroll practices and highlights the potential consequences for those responsible for ensuring compliance with employment standards.
Worker’s initial struggles
The case centred on a migrant worker who had been employed as a cashier at an Asian supermarket in Flat Bush, Auckland, from July 2019 to January 2024.
The supermarket was operated by a company that was placed into liquidation in June 2024. The worker started proceedings in the ERA in March 2024, initially naming only the company as the respondent.
During her five-year stay in New Zealand, the worker remained in the country as the partner of a work visa holder or as a residence class visa holder. The supermarket was her only employer during this time. As a new migrant, she was unfamiliar with New Zealand's employment laws and trusted her employer to comply with regulations.
The worker typically worked five days a week, with 10-hour shifts from 8:10 am to 6:40 pm. She received payslips via email, and her wages were electronically deposited into her bank account. While she had signed an employment agreement, she was not provided with her own copy.
Uncovering discrepancies in pay and entitlements
Upon reviewing her payslips and rosters, the worker discovered numerous discrepancies and potential breaches of employment standards.
These issues included failure to immediately adjust her pay rate when minimum wage increases occurred, non-payment of time-and-a-half for working on public holidays, failure to provide alternative holidays for working on public holidays, underpayment of wages for hours worked, unauthorized payment of annual leave without consent, and incorrect use of annual leave instead of providing sick leave.
The ERA investigation looked into whether the employer had failed to comply with various employment standards, including the Holidays Act 2003, the Minimum Wage Act 1983, and the Wages Protection Act 1983.
Inconsistencies in pay and roster records
The worker provided 62 payslips covering a 43-month period of her employment. These payslips, along with her work rosters, showed several inconsistencies. For example, there were discrepancies between the hours worked as recorded in her roster and the pay she received for those hours as shown in her payslip.
The ERA noted in its decision: "When the payslip and roster information are individually and cumulatively considered, it has been demonstrated that [the worker] is owed a considerable sum of money in wage and holiday pay arrears by her employer."
Additionally, the worker provided WhatsApp messages between herself and one of the company directors. In one message, the worker warned the director not to include annual leave in her wages without prior approval.
Despite this warning, the company continued to pay alternative holiday pay and annual leave pay without the worker's consent.
Personal liability of employer’s directors
A significant aspect of the case was whether the company's two directors could be held personally liable for the wage and holiday pay arrears under sections 142Y and 142W of the Employment Relations Act 2000.
The ERA had to determine if the directors were sufficiently involved in the breaches of employment standards to warrant personal liability.
The ERA examined the directors' roles and knowledge of the company's payroll practices. It considered whether they had sufficient awareness of the alleged breaches to be considered "persons involved" under the Act.
After examining the evidence, the ERA calculated the total amount it believed was owed to the worker. This included unpaid wages for hours worked, public holiday pay and annual leave arrears, annual leave owed due to incorrect use of leave balances, and alternative holiday pay arrears.
The ERA also considered whether interest should be applied to any arrears owed, given the length of time over which the alleged underpayments occurred.
In its decision, the ERA addressed whether the worker was indeed owed the claimed arrears, the total amount of these arrears, whether the company directors could be held personally liable, and the appropriate interest to be applied to any owed amounts.
The ERA awarded a compensation package which includes several components: a gross sum of $22,794.01 for wage, holiday pay, and annual leave arrears; accrued interest of $2,268.73; and reimbursement of the $71.55 filing fee.
Regarding the directors' liability, the ERA explained: "The Authority finds that [the directors] are persons involved in a breach of employment standards under ss 142Y and 142W of the Act. As the employing company, [the company] is in liquidation, the Authority orders [the directors] to pay [the worker] the following monies no later than Friday 1 November 2024."
