Labour inspector uncovers several violations after one worker filed a complaint
The Employment Relations Authority (ERA) recently dealt with a case involving multiple breaches of employment standards.
The matter was brought forward by a labour inspector following a worker's complaint about unfair payment practices and excessive work hours.
The worker claimed they had paid a substantial sum to their employer for their job and were consistently underpaid for their actual hours worked.
This case sheds light on the complex issues surrounding employment standards, particularly for migrant workers. It raises important questions about fair compensation, proper record-keeping, and the responsibilities of employers in maintaining lawful employment practices.
Multiple employment standards breaches
The investigation began in August 2021 when a worker complained to the Labour Inspectorate. The worker reported paying their employer $14,000 for their job, of which $10,000 had been repaid at the time of the complaint. They also claimed to be paid for only 40 hours of work per week despite frequently working longer hours.
Following this complaint, the labour inspector identified five affected employees in a restaurant business. After investigation and mediation, one employee was removed from the claims. The restaurant and its directors accepted guilt for several breaches of minimum employment standards.
The breaches included seeking and receiving a premium from one employee, requiring another to repay a portion of their wages throughout their employment, failing to pay the applicable adult minimum wage, and failing to keep accurate wage and time records.
The labour inspector argued, "[The employer] took advantage of the inherent inequality of power in the employment relationship by intentionally failing to provide the named employees with their minimum entitlements, thereby gaining financial advantage."
Exploitation of vulnerable workers
Three of the affected employees were migrant workers, with two holding visas dependent on their employment with the restaurant. This situation increased their vulnerability in the workplace.
One employee was particularly affected. Over three years of working for the restaurant, they were owed more than $20,000. The ERA noted that the restaurant's directors had requested a "business loan" from this employee, which actually met the definition of a premium under the Wages Protection Act 1983.
The labour inspector described this arrangement as "cynical and the exploitation of a vulnerable employee."
ERA decides appropriate penalties
In deciding on penalties, the ERA considered several factors. These included the nature and extent of the breaches, whether they were intentional or negligent, and any loss or damage suffered by the employees.
The ERA also looked at steps taken to mitigate the effects of the breaches, the circumstances surrounding them, and the vulnerability of the employees involved. The need for deterrence and consistency with previous decisions was also taken into account.
The labour inspector pushed for significant penalties, arguing, "Penalties should not be reduced so as to create perverse incentives for [employers], and inadvertently encourage non-payment."
However, the ERA also had to consider the restaurant's ability to pay. The business provided information showing a significant tax liability and argued they were "facing significant financial hardship to merely stay afloat and maintain the employment of some 15 employees."
After weighing all factors, the ERA ordered the restaurant to pay a penalty of $40,000. The directors were made jointly and severally liable for a penalty of $20,000. A portion of these penalties was to be paid to one of the affected employees, with the remainder going to the Crown account.
The ERA explained its decision by stating, "Having considered all matters, and the guidance provided by the Court, in respect of penalties I order as follows."
The labour inspector had initially sought higher penalties, saying, "There is often a correlation between arrears and penalties and in this case, [the labour inspector] submits that the penalty should reflect the totality of the breaches and not just the monetary amounts involved."
This case serves as a reminder to employers about the importance of complying with employment standards, especially when employing migrant workers. It highlights the need for proper record-keeping, fair payment practices, and adherence to all aspects of employment law.
