Employment Court awards highest penalty amounts in history

Where an employer breaches minimum employment standards, penalties may be awarded against it by the Employment Relations Authority. The purpose of penalties is to punish those who breach minimum employment standards; deter companies and individuals from committing employment breaches; compensate victims of such breaches; and eliminate unfair competition.

In a move that has set a new bar for penalty amounts, the Employment Court has ordered four defendant companies that operated liquor stores in the Tauranga/Bay of Plenty region to pay over $1.55 million in penalties alone, in Labour Inspector Of The Ministry Of Business, Innovation And Employment v. Samra Holdings Ltd (T/A Te Puna Liquor Centre), [2022] NZEmpC 234.

In its original decision - Labour Inspector v. Samra Holdings Ltd (t/a Te Puna Liquor Centre), [2021] NZEmpC 149 - the court determined that over a period between September 2015 and November 2019 there were 120 discrete breaches of minimum employment standards by the defendants and the total amounts owing were $516,378.87 (gross). The breaches included:

• Not paying the employees their minimum entitlements, such as a minimum wage, pursuant to the Minimum Wage Act 1983 and the Holidays Act 2003, such as annual leave and public holiday payments.
• Charging unlawful premiums for employment from each of the employees in breach of the Wages Protection Act 1983.
• Failing to keep complete employment records that did not reflect the employee’s true hours of work.
• Providing individual employment agreements that did not comply with the Employment Relations Act 2000 (Act) by not specifying agreed hours of work or arrangements relating to the days and times the employees were to work.

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Owner liable if companies couldn’t pay

The sixth defendant (an individual) was also found to be in all respects the controlling mind behind each of the defendant companies, and was a party to each breach. He was ordered to compensate the employees should the companies be unable to pay for any of the amounts owing for the breaches, although he was ultimately not called upon to do so.

In determining the quantum of penalties, the court took into account that:

• The underpayments were substantial and provided significant financial advantage to the defendant companies, who received labour without having to pay for it.
• The defendant companies exploited the inherent bargaining power in the employment relationship.
• The employees were significantly disadvantaged as they were unable to have appropriate opportunities for rest and recreation.
• The employees were migrant workers on temporary visas which were tied to the employment with the defendants.
• There was a specific need for deterrence to the defendants, given the nature of the industry (liquor) and the sixth defendant’s lack of contrition for the breaches and his lack of insight into the impact of those breaches on the employees.

Three individuals were personally involved in a restaurant’s employment law breaches and were personally liable for arrears, the Employment Relations Authority ruled.

Following an application by the Labour Inspector, the court also agreed that an apportionment of the penalties was appropriate to compensate the employees for their hurt, humiliation and loss of dignity and ordered the defendant companies to pay their respective employee(s) amounts between $25,000 to $50,000.

This case is a reminder that there are potentially serious consequences for employers if they fail to adhere to minimum employment standards, especially where breaches are repeated and sustained over long periods of time.

Maria Green is a Special Counsel specializing in employment law and Elisabeth Giles is a Solicitor on the Employment Law Team, both at Lane Neave’s Christchurch office. This article first appeared on Lane Neave’s website on 31 January 2023.