Focus on wage arrears after Lovisa owes $153,000

Australian-owned Fashion jewellery store Lovisa hit the headlines recently for having to pay employees in New Zealand over $153,000 in wage arrears following a Labour Inspectorate investigation in 2021.

Breaches were found in relation to a number of matters including incorrect calculations for sick leave, and use of annual holidays on public holidays.

Unfortunately, says Jaime Lomas, employment lawyer, this type of case is not uncommon.

 “This is a reminder to employers to make sure they’re complying with obligations so that they don't then face an investigation where they're having to pay out large sums of money on wage arrears and paid holidays.

“Employers have an obligation to know what their duties are, and what the law is, and then they also have a duty to comply. It’s something that could have been avoided if Lovisa had sought advice and followed it.”

In addition to the damages paid, a case of this nature can have costly impacts in terms of tarnishing an organisation’s brand and ability to attract talent, says Lomas, partner at DTI Laywers.

Keeping on top of legislative changes  

To keep up with legislative changes and updates, employers need to regularly review their employment practices, she says, and for international companies, ignorance of New Zealand employment law is not an excuse for non-compliance.

“Given there are often legislative changes, you need to make sure that you keep on top of those, and many businesses just aren’t seeking the advice they should to ensure they are compliant.

“There're a lot of resources out there that provide basic information about what the legal obligations are, so that is certainly a good place to start.”

One source of confusion for employers is around the Holidays Act, says Lomas. “The Act dates back to 2003 and doesn't necessarily cater for work schedules that fall outside of the nine-to-five standard working day.

“So while you can be looking online to find out more about what those Holiday Act obligations are, it does get quite tricky when you're trying to then adapt it for your particular work practices when it doesn't necessarily cater to that.”

The government has been looking at updating the Act, says Lomas. “A number of recommendations have been made but for now it continues to be a bit of a minefield for employers at times.

“When you think about work practices 20 years ago, times have changed. There’s a lot more flexibility now in terms of when people work and the hours of work.

“There're other things too that, quite often, we're having employers coming to us seeking advice because it's really quite ambiguous under the Holidays Act.”

Contracts should truly reflect the nature of the organisation

It’s important to ensure employment contracts truly reflect the needs of the employers’ business, Lomas says.

“So if you’re in an industry in which you believe that shifts could be cancelled and there could be little notice, then you need to make sure that your employment agreement actually provides for that.

“To change or cancel shifts, employers need to ensure that their employment agreements include a shift cancellation clause – that’s a legal requirement if you have a business that is likely to be in a situation where you have to cancel shifts at the last minute.”

This clause would set out what notice is needed to make changes to shifts. If that notice isn't provided, it sets out the compensation that's then payable, she says.

Making sure managers and supervisors know those obligations too is also essential.

“Anyone that has direct reports needs to be aware of those obligations to make sure that they are implementing them, so it’s a training issue too,” Lomas says. Having a good workplace culture is absolutely critical for any business to be successful. If you don't look after your staff it can lead to a range of issues, including difficulty retaining them, higher sick leave and absences, lower productivity, and then risks of grievances and other claims. Employees need to feel valued, she says. 

“This is not just an issue in New Zealand. In the UK, the government just this year provided a list of more than 200 companies that were named and shamed for failing to pay staff minimum wage. The list included high profile retailers as well,” she says.

“It’s certainly not a good look when you have your brand associated with underpaying employees.”