Legislation criminalising intentional failure to pay employees has first reading

Introduced to parliament by Labour’s Ibrahim Omer in April, the Crimes (Theft by Employer) Amendment Bill had its first reading on August 1.

The bill inserts a new section 222AA into the Crimes Act 1961 that provides that an employer's intentional failure to pay an employee any money owed in relation to their employment is theft.

If brought in, “it would be a big shift for employers making this a Crimes Act provision,” said Julia Leenoh, director at K3 Legal.

“Then, it's a matter of the police getting involved, and employers could be liable for imprisonment.”

If an employer is an individual, the maximum penalty is either one year of imprisonment, a fine of $5,000, or both. In any other case, the maximum penalty is $30,000.

Is wage theft widespread?

The bill was drawn from the ballot in April, and Omer said during the reading that he had received many messages and emails from workers who have been subject to wage theft.

But National’s Paul Goldsmith disputed this, saying there was no particular evidence to back up talk of widespread and systemic practices of wage theft.

Leenoh said she hadn’t seen an increase in the number of wage theft cases and thinks the elevation of this to a criminal level is more about enforcement.

“In New Zealand employment jurisdiction, you don’t have to be represented by a lawyer — we have a subset of people called employment advocates — but even if you were able to get a successful determination against the employer, the next issue that arises is whether or not you’re able to enforce it.”

Can HR be held liable for wage theft?

Like many legislation changes that affect organisations, HR leaders will be the ones leading compliance.

“In terms of the steps HR people will need to take, they’ll need to make sure accurate time and wage records are kept at all times, make sure they review any updates in the minimum wage, make sure they have accurate records of statutory holidays,” said Leenoh.

There are grey areas that HR will also need to look out for, such as pay deductions.

Currently, employee agreements have provisions saying the employer has the authority to make reasonable deductions; for example, if an employer and employee mutually agreed that payment for a training course would be deducted from their wages.

“It'll be interesting to see how this operates because it will be necessary for HR to make sure they've got accurate written records that say, ‘Yes, we've agreed to a deduction.’ So, it will be a matter of creating a process that allows you to check off agreed deductions so that they don't get put under the gun for any deductions they were lawfully able to make,” said Leenoh.

During the first reading, Act’s Simon Court also touched on this, saying, “Employers extend all kinds of loans and allowances to employees, which may not be covered.”

“Now, there may well be an opportunity for an employee to get a benefit from an employer and then for that employer to need to make a deduction, and if it's not documented, then, potentially, that employer is exposed to charges of theft,” he continued.

Another grey area that Leenoh says will need to be defined is the “individual person.”

“Given the authority we have, and the precedents that we have in the employment jurisdiction, I think it will be pretty tough to try and argue HR people will be liable under this proposed act, but it really depends on how they define that individual person A,” she said.

“But it would be going a step too far to pull in HR people.”

Opposition to wage theft bill

During the reading several political parties voiced opposition to the bill.

“The issue is that it is actually a reasonably complex area of employment law and this one-page bill… baldly states that anybody who intentionally fails to pay an employee goes off to face potential criminal changes — and we in the National Party won't be supporting this bill,” Goldsmith said.

 ACT believes that business owners should be trusted to treat their employees well, said Court.

“Employees are extremely valuable. Anyone who's ever had to hire someone in the past few years knows how difficult it is to get good staff, how important it is to treat them well, how important it is to pay them on time. If you don't treat them well and you don't pay them on time, then they can leave and go somewhere else, take their labour with them. It's much harder to do business if you don't have workers.

“The ACT Party trusts employers to get this right. If they don't get it right, there are already mechanisms for employees to take action and recover their wages. ACT won't support this any further.”

The debate was interrupted and did not carry into the next day.