Rogue employers face a day of reckoning

OPINION: In a New Zealand first, the former owner of a Christchurch bar and eatery has been banned from employing staff for three years.

Gordon Freeman, and his company, Victoria 88, were found by the Employment Court to have intentionally and persistently breached minimum employment standards.

As a result, Freeman was banned by the Labour Inspectorate from hiring staff, being involved in hiring staff or being an officer of an employer, for three years. Freeman was also required to pay a penalty of $20,000, of which $7845 was paid to affected employees.

The power to ban an employer in this way was introduced by the former Government in 2016, but this is the first time that it has been used. It is arguably an extreme measure but equally, it is only likely to be used in serious cases. In this regard the purpose of the law is to enforce minimum employment standards where they are consistently and flagrantly breached.

In Freeman’s case, he persisted in including an illegal clause in his employment agreements, which attempted to hold back holiday pay where employees gave less than six weeks’ notice when resigning. This was even after the authority declared the provision illegal and fined Freeman.

You might say, what did the guy expect? Or to put it another way, he got what he deserved.

So, what are the other situations in which an employer might be banned from employing staff?

Under the Employment Relations Act, the court can impose a banning order for up to 10 years where an employer has been found guilty of a serious breach, where the court is satisfied that the employer has persistently breached one or more employment standards, or where the employer has been convicted of an offence under section 351 of the Immigration Act 2009. Only a labour inspector or an immigration officer can apply for a banning order – employees cannot.

Although this is the first time in New Zealand that an employer has been banned from hiring any staff, a number of employers have recently been banned from employing migrant workers.

This follows an amendment to the immigration rules in 2017, with the effect that employers who are found to have breached employment or immigration laws by exploiting migrants now face stand-down periods preventing them from hiring migrant workers for up to two years.

As at April 11, 2018, stand-down periods had been imposed on more than 100 employers.

Auckland restaurant Urban Turban was banned from hiring migrant workers for 11⁄2 years after it was found that the business had breached the minimum entitlements of migrant worker Sachin Nayak.

Nayak claimed that he was often required to work more than 12 hours per day, six days a week, but was paid for only 45 hours per week. Further, he claimed that for more than a year he was paid $2 less than the minimum wage. He also said that he was given a day’s notice that he would be working part-time and that his salary would be reduced by 50 per cent.

When Nayak requested that he be given three weeks’ notice before his hours and salary were reduced, to work out how he would now support his family, his request was declined. As he could not afford to support his family on a part-time wage, he resigned.

Following his resignation, Nayak claimed that he did not receive his final pay or his entitlement to holiday pay and when he brought a claim for arrears, his employer threatened him with unspecified allegations.

The authority accepted Nayak’s claims and, as well as being banned from hiring migrant workers, Urban Turban was ordered to pay $40,000 to Nayak and $30,000 in penalties. In its decision, the authority was scathing of the way the company had treated Nayak.

There is a clear trend towards greater penalties being imposed on employers who flagrantly and persistently breach minimum employment standards. These include hefty fines and even bans on employing staff.

This should be a wake-up call to rogue employers who think that they are above the law, and can abuse vulnerable employees. Unfortunately there will always be some employers who fall into this category, but empowering the authorities to ban them from hiring staff is a significant step towards stamping out these practices.

There is a clear trend towards greater penalties being imposed on employers who flagrantly and persistently breach minimum employment standards.

❚ Susan Hornsby-Geluk is partner at Dundas Street Employment Lawyers.