Posted on: Jul 24, 2017

This case highlights the heavy consequences and financial implications of knowingly breaching minimum employment standards.

BBS is a horticultural company which contracts services to horticultural growers, particularly asparagus producers in the Waikato.  Upon a Labour Inspector visit in 2013, it was discovered the employees were not provided with individual employment agreements, there were no time and wage records, no payments being made for annual and public holidays, and serveral of the employees were working in breach of their visitor visa conditions.  BBS were subsequently issed with an Improvement Notice, which was initially complied with.

However, upon a second follow-up audit in 2016, the Labour Inspector found that one employee was working in breach of her visitor visa conditions, there ten other immigrant employees, and all 11 employees had not been given individual employment agreements or completed timesheets.

In this case there were breaches under 7 separate heads, potentially resulting in a maximum penalty for BBS of up to $940,000:

  1. Failure to retain employment agreements for to 16 employees. The maximum penalty is $320,000 (16 x $20,000)
  2. Failure to keep a wage and time record for 16 employees. The maximum penalty is $320,000 (16 x $20,000)
  3. Failure to keep a holiday and leave record for five employees. The maximum penalty is $100,000 (5 x $20,000)
  4. Failure to pay one employee minimum wages. The maximum penalty is $20,000
  5. Failure to pay annual holidays to five employees. The maximum penalty is $100,000 (5 x $20,000)
  6. Failure to pay two employees public holiday pay. The maximum penalty is $40,000 (2 x $20,000)
  7. Failure to provide two employees with an alternative day for working a public holiday (or to pay an alternative day on termination). The maximum penalty is $40,000 (2 x $20,000)

The factors the Court must have in regard to determining the appropriate penalty under s 133A of the Act have been summarised in the recent Employment Court case of Lumsden v SkyCity Management Limited as including:

  • whether the breaches were committed knowingly or calculatedly
  • the duration of the breach
  • the number of people affected adversely and the extent of any departure from the statutory requirements
  • a history of previous breaches may also be relevant

In this case, BBS had previously been subject to an Improvement Notice and had appropriate systems in place. Employers in New Zealand are expected, especially in this case where BBS was made aware of the compliance requirements by a Labour Inspector, to know the minimum legal requirements in respect of their employees and adhere to them. Ignorance of the law is no defence.

The  Authority found that BBS’s failures to maintain correct records in respect of employment agreements, wage and time records and holiday and leave records was deliberate.

Balancing the need to avoid setting the level of penalty at such a level that there would be a significant risk of non-payment by BBS against the public interest to impose a penalty which acts a deterrent to others who may contemplate engaging in such behaviour, the Authority considered in all the circumstances that applying a penalty of $57,120 was appropriate.

To read the full Authority decision click here


This article, and any information contained on our website is necessarily brief and general in nature, and should not be substituted for professional advice. You should always seek professional advice before taking any action in relation to the matters addressed.