Cleaning companies penalised $55,000

26 March 2019

Cleaning companies penalised $55,000 after misclassifying employees as ‘casuals’

Two Timaru cleaning businesses and their owners have been penalised $55,000 for treating permanent staff as ‘casuals’ following a Labour Inspectorate investigation.

Cleantime Solutions Ltd and ‘Busy Bees’ employed 53 employees and misclassified 29 of them as ‘casuals’ when their working arrangement meant they were, in fact, permanent employees and entitled to all of the associated benefits.

By misclassifying their workers, they failed to provide basic minimum entitlements such as paid sick and bereavement leave and payment for public holidays. The businesses were able to secure an unfair cost advantage over their competitors as a result of their non-compliance.

Even though Cleantime had paid the casual workers an eight per cent loading to reflect annual holiday pay, their misclassification means they must pay these amounts again, in the form of proper annual leave entitlements. The two businesses owed nearly $15,000 in arrears to these employees.

As well as having to repay and remediate their workers, Cleantime has been penalised $40,000. It’s owners, Binesh Shukul and Ranjana Reddy, were individually penalised $10,000 and $5,000 respectively.

The penalties follow an ERA determination in November 2018, which found Mr Shukul and Ms Reddy breached the Holidays Act 186 times, involving non and incorrect payments, with arrears owed to 29 employees, and inaccurate record keeping relating to 53 employees.

“The ERA penalties send a clear message that misclassification of workers to avoid minimum standards will cost employers significantly more than treating workers correctly and paying the right amount in the first place,” says Labour Inspectorate Regional Manager Jeanie Borsboom.

“The determination calls for franchises to be mindful to assure employment standards exist throughout their franchisees. Though Ms Reddy has since sold Busy Bees, any business exploiting their workers can have a damaging effect on the entire brand name.

“Customers can make an active stand against worker exploitation by choosing not to buy from businesses which breach employment standards,” Ms Borsboom says.

Employment Services has guidance for both employers and employees on employment rights and obligations, and guidance notes on Holidays Act payroll compliance here.

MBIE encourages anyone who has information about minimum standards not being met, to phone the Ministry’s service centre on 0800 20 90 20, where all concerns will be handled in a safe environment.

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