Regulator’s focus on minimum employment entitlements

Regulator’s focus on minimum employment entitlements continues

Smiths City Group Limited (Smiths City) is the latest in a string of businesses to come under fire for failing to provide employees with minimum statutory entitlements. This trend, driven by the Labour-led Government and the Ministry of Business, Innovation and Employment (MBIE) is centred on ensuring businesses of all sizes, in all sectors, are not short-changing employees.

One thing is clear in the current environment - non-compliance with minimum entitlement legislation can lead to significant legal, financial and reputational consequences.

Smiths City in firing line for widespread practice

A key point from the Smiths City case is that all of its waged employees attending meetings outside of rostered hours were held to be working for the purposes of the Minimum Wage Act 1983.

For at least 15 years Smiths City, which has about 400 store-based employees across 34 stores, has been holding 15-minute sales meetings before opening. The meetings, which Smiths City claimed were optional to attend, were unpaid. However, the Court found that in practice there was an expectation that all employees were to attend, with some employees even being disciplined for non-attendance. As such, the Court held that the meetings were ‘work’ and employees should be paid for their time.

This decision highlights the ease with which a breach of minimum entitlements can occur, and the potential cost of such a breach. The case has increased scrutiny on the retail industry, and prompted many businesses across a wide range of industries to re-consider internal practices and whether these could give rise to compliance issues.

Unpaid meetings the tip of the iceberg

First Union has disclosed that following the Smiths City decision, some 500 retail employees have responded to its survey with complaints about being required to attend unpaid meetings, arrive early to set up, or stay late to clean or cash-up. First Union has disclosed that at least 16 retail chains have been accused of underpaying staff (with more to be named shortly). These complaints have led to a number of employers launching proactive investigations into their pay practices.

Where waged workers have not been paid for time worked, there will also be an associated liability under the Holidays Act 2003: because more work equals more pay, this in turn means more holiday pay.

This of course is the ‘issue du jour’ for MBIE.

As of September 2017, MBIE had completed 129 audits into Holidays Act compliance and of those completed audits:

- 64 employers entered into enforceable undertakings,
- 32 were issued improvement notices,
- two were referred to the Employment Relations Authority,
- two entered into a record of settlement, and
- three voluntarily complied with the undertaking sought by MBIE.

Non-compliance has cost employers $4.8 million in arrears payments (as at September 2017), not including the New Zealand Police, which paid $39 million in arrears (with more to come as they await implementation of a new compliant payroll system). Just this week, it has been announced that Auckland Council may have underpaid holiday entitlements to 20,000 staff since its establishment in 2010.

Employers must be proactive in this space. The number of MBIE audits are expected to increase as the Regulator sharpens its focus on employment practices, and increases the size and resources of the Labour Inspectorate.

As a number of the cases have demonstrated, it only takes one complaint by one employee or union to kick off an investigation into a business’s minimum entitlement compliance.
ENDS

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