Usually the breach of a contract gives the innocent party a right to compensation for losses caused by the breach. But sometimes the obligation to compensate provides an insufficient incentive to comply with the terms of the contract, or the particular breach or conduct is sufficiently serious that a penalty is justified in addition to any compensation that might be available. Alan Stuart, of Webster Malcolm Kilpatrick in Auckland, discusses penalties under the Employment Relations Act 2000.
The Employment Relations Act 2000 ("ERA") contains a number of provisions the breach of which attracts a penalty or fine over and above any other rights to compensation or to enforce compliance that might be available to an innocent party, or obligations and damages that might be awarded against or imposed on an offender. The Act also provides that any breach of an employment agreement can attract a penalty.
This section deals with those parts of the ERA that impose penalties. Because of the importance of the problem resolution scheme, and of the recovery of wages, they are also noted here.
When a penalty can arise
Breach of an employment agreement
A person, whether individual or corporate, who breaches an employment agreement is liable to a penalty. A person who incites, instigates, aids, or abets any breach of an employment agreement is liable to a penalty.
Breach of any provision of the ERA
Generally, for a person to be liable for a breach of the ERA the action that causes the breach must be done by that person. However, in certain situations the actions of an employee or agent may be deemed to be the actions of an employer. Such situations are sexual or racial discrimination, or denying a union representative access to a workplace. The provisions of the ERA that provide for a penalty are listed below.
Jurisdiction
An action for the recovery of a penalty is brought in the first instance before the Employment Relations Authority ("the Authority"). The action may be referred to the Employment Court.
Amount of penalty
Every individual who is liable to a penalty may have to pay up to $5 000. If a company or other corporation is found liable the penalty may be up to $10 000. The penalty will be paid to the Authority or Court, but the Authority or Court may order that the whole or any part of it must be paid to any person. This penalty is in addition to any compensation the Authority or the Court may award (e.g., loss or arrears of wages, or an award for humiliation and distress).
Compliance order
If a person has not observed or complied with an employment agreement, the ERA or certain other Acts that apply to the employment relationship, the Authority may make a compliance order. A compliance order may require a person to do, or to desist from any specified thing or activity, for the purpose of ensuring future compliance or observation of the agreement or Act.
Penalties imposed by the ERA
Undue influence
The authority may impose a penalty on any person who exerts undue influence on a person to:
1. join a union
2. not join a union;
3. leave a union;
4. not act on behalf of an employee; or
5. leave employment because he or she is or is not a union member.
Union representative allowed access to a workplace
Every person is liable to a penalty who refuses to allow a union representative to enter a workplace, or who obstructs a union representative entering a workplace. Access to a workplace may be lawfully denied if access would prejudice the security or defence of New Zealand, or the investigation or detection of offences, or on religious grounds.
Union meetings
Every employer who fails to allow a union member to attend a union meeting that is allowed under the ERA is liable to a penalty.
Misleading the Registrar of Unions
It is an offence to mislead the Registrar of Unions, and can result in a conviction and a fine of up to $5 000.
Employer's obligations in respect of a new employee who is not a member of a union
An employer must advise new employees of any collective agreements that apply to the work done by the new employee. An employer must advise the new employee about how to contact the union. A new employee's terms and conditions of employment comprise the collective agreement and any additional terms and agreements that are not inconsistent with the collective agreement. Any employer who fails to do this is liable to a penalty.
New employee is to be given the opportunity to seek independent advice on the agreement
If no collective agreement covers the work done by a new employee, the new employee will enter into an individual employment agreement. Before signing the agreement the employee must be given a copy of the agreement in writing, certain terms and conditions must be included in the agreement, such as a job description, an indication of hours to be worked, salary or wages, and a dispute resolution clause. The employer must advise the employee that the employee is entitled to seek independent advice about the agreement, and the employee must be given a reasonable opportunity to seek that advice. Every employer who fails to comply is liable to a penalty.
Providing public with notice before strike or lockout in certain passenger transport services
Public who use certain passenger road or rail services must be advised as soon as possible if a strike or lockout will affect them. An employer must take all practicable steps to notify the public as soon as possible and the union of an employee working in these services must give an employer sufficient notice of an intended strike. Otherwise the employer and the union will be liable to a penalty imposed by the Court.
Performance of duties of striking or locked out employees
An employer may only replace striking or locked out employees in certain conditions. First, the employer may ask another employee to perform the work of a striking or locked out employee, as long as that is not the main employment of the replacing employee. Secondly, if there are reasonable grounds for believing that the work must be done for reasons of safety and health, then the employee can be replaced by a current or new employee. The replacement can only last the duration of the strike or lockout. An employer who replaces a striking or locked out employee in any other manner is liable to a penalty imposed by the Authority.
Wages and time record
Every employer must keep a wages and time record of every employee showing:
1. the name of the employee;
2. the employee's age if the employee is under 20;
3. the employee's postal address;
4. the kind of work on which the employee is usually employed;
5. whether the employee is employed under an individual employment agreement or a collective agreement;
6. in the case of an employee employed under a collective agreement, the title and expiry date of the agreement, and the employee's classification under it;
7. where necessary for the purpose of calculating the employee's pay, the hours between which the employee is employed on each day, and the days of the employee's employment during each pay period;
8. the wages paid to the employee each pay period and the method of calculation;
9. details of any employment relations education leave; and
10. any other particulars as may be prescribed.
This record must be kept for 6 years. The employee or the employee's representative has the right to immediate access to the record. If requested the employer must provide access to the record, or a copy of it, or an extract from any part of the record.
If a wages and time record is kept in accordance with any other Act then the employer is not required to keep a record under the ERA. In all other situations if an employer does not keep a record or does not allow access to it a penalty may be imposed.
If a Labour Inspector requires production of the record and the employer fails to produce the record, and then fails to comply with a notice requiring production of the record, the employer is liable to a penalty imposed by the Authority.
Compensation
Compensation in relation to personal grievances
If the Authority or the Court determines that an employee has a personal grievance remedies available include:
1. reinstatement;
2. reimbursement of lost wages or other money; and
3. compensation.
If the personal grievance is based on a complaint of sexual or racial harassment, then the employer may be found liable for actions by the employer, the employer's representative, another employee, or a customer or client of the employee.
Recovery of wages
If the employer defaults in paying wages or other money due under an employment agreement, or pays less than the legal minimum, the employee can commence an action before the Authority for recovery of that money.
If a Labour Inspector brings an action before the Authority to recover money payable by way minimum wages or holiday pay, and such amount is unlikely to be paid in full because the employer is in liquidation or does not have sufficient assets, then an action to recover that money may be brought personally against any officer, director, or agent of the company.
Conclusion
The ERA outlines areas where a penalty may be imposed against an employer for certain actions over and above any right to compensation, enforcement or damages that may arise. Penalties may also be imposed under the ERA for breaches of the Minimum Wage Act 1983 and the Wages Protection Act 1983.
While this paper outlines the penalties that may be imposed and of which you should be aware, in each particular situation you should take professional advice.
CopyrightThe Lawlink Group Ltd 2000
Every effort has been made to ensure that this information is accurate. However, it is general introductory information only. It does not constitute legal advice and should not be relied on as such. Specialist legal advice should be sought in particular matters.
Alan Stuart is a partner in the Lawlink firm of Webster Malcolm Kilpatrick. He works primarily in the areas of business and property litigation, arbitration, and dispute resolution.
Web site: : Webster Malcolm Kilpatrick
Email: a.stuart@wmklaw.co.nz
September 2000
The Employment Relations Act 2000 ("ERA") contains a number of provisions the breach of which attracts a penalty or fine over and above any other rights to compensation or to enforce compliance that might be available to an innocent party, or obligations and damages that might be awarded against or imposed on an offender. The Act also provides that any breach of an employment agreement can attract a penalty.
This section deals with those parts of the ERA that impose penalties. Because of the importance of the problem resolution scheme, and of the recovery of wages, they are also noted here.
When a penalty can arise
Breach of an employment agreement
A person, whether individual or corporate, who breaches an employment agreement is liable to a penalty. A person who incites, instigates, aids, or abets any breach of an employment agreement is liable to a penalty.
Breach of any provision of the ERA
Generally, for a person to be liable for a breach of the ERA the action that causes the breach must be done by that person. However, in certain situations the actions of an employee or agent may be deemed to be the actions of an employer. Such situations are sexual or racial discrimination, or denying a union representative access to a workplace. The provisions of the ERA that provide for a penalty are listed below.
Jurisdiction
An action for the recovery of a penalty is brought in the first instance before the Employment Relations Authority ("the Authority"). The action may be referred to the Employment Court.
Amount of penalty
Every individual who is liable to a penalty may have to pay up to $5 000. If a company or other corporation is found liable the penalty may be up to $10 000. The penalty will be paid to the Authority or Court, but the Authority or Court may order that the whole or any part of it must be paid to any person. This penalty is in addition to any compensation the Authority or the Court may award (e.g., loss or arrears of wages, or an award for humiliation and distress).
Compliance order
If a person has not observed or complied with an employment agreement, the ERA or certain other Acts that apply to the employment relationship, the Authority may make a compliance order. A compliance order may require a person to do, or to desist from any specified thing or activity, for the purpose of ensuring future compliance or observation of the agreement or Act.
Penalties imposed by the ERA
Undue influence
The authority may impose a penalty on any person who exerts undue influence on a person to:
1. join a union
2. not join a union;
3. leave a union;
4. not act on behalf of an employee; or
5. leave employment because he or she is or is not a union member.
Union representative allowed access to a workplace
Every person is liable to a penalty who refuses to allow a union representative to enter a workplace, or who obstructs a union representative entering a workplace. Access to a workplace may be lawfully denied if access would prejudice the security or defence of New Zealand, or the investigation or detection of offences, or on religious grounds.
Union meetings
Every employer who fails to allow a union member to attend a union meeting that is allowed under the ERA is liable to a penalty.
Misleading the Registrar of Unions
It is an offence to mislead the Registrar of Unions, and can result in a conviction and a fine of up to $5 000.
Employer's obligations in respect of a new employee who is not a member of a union
An employer must advise new employees of any collective agreements that apply to the work done by the new employee. An employer must advise the new employee about how to contact the union. A new employee's terms and conditions of employment comprise the collective agreement and any additional terms and agreements that are not inconsistent with the collective agreement. Any employer who fails to do this is liable to a penalty.
New employee is to be given the opportunity to seek independent advice on the agreement
If no collective agreement covers the work done by a new employee, the new employee will enter into an individual employment agreement. Before signing the agreement the employee must be given a copy of the agreement in writing, certain terms and conditions must be included in the agreement, such as a job description, an indication of hours to be worked, salary or wages, and a dispute resolution clause. The employer must advise the employee that the employee is entitled to seek independent advice about the agreement, and the employee must be given a reasonable opportunity to seek that advice. Every employer who fails to comply is liable to a penalty.
Providing public with notice before strike or lockout in certain passenger transport services
Public who use certain passenger road or rail services must be advised as soon as possible if a strike or lockout will affect them. An employer must take all practicable steps to notify the public as soon as possible and the union of an employee working in these services must give an employer sufficient notice of an intended strike. Otherwise the employer and the union will be liable to a penalty imposed by the Court.
Performance of duties of striking or locked out employees
An employer may only replace striking or locked out employees in certain conditions. First, the employer may ask another employee to perform the work of a striking or locked out employee, as long as that is not the main employment of the replacing employee. Secondly, if there are reasonable grounds for believing that the work must be done for reasons of safety and health, then the employee can be replaced by a current or new employee. The replacement can only last the duration of the strike or lockout. An employer who replaces a striking or locked out employee in any other manner is liable to a penalty imposed by the Authority.
Wages and time record
Every employer must keep a wages and time record of every employee showing:
1. the name of the employee;
2. the employee's age if the employee is under 20;
3. the employee's postal address;
4. the kind of work on which the employee is usually employed;
5. whether the employee is employed under an individual employment agreement or a collective agreement;
6. in the case of an employee employed under a collective agreement, the title and expiry date of the agreement, and the employee's classification under it;
7. where necessary for the purpose of calculating the employee's pay, the hours between which the employee is employed on each day, and the days of the employee's employment during each pay period;
8. the wages paid to the employee each pay period and the method of calculation;
9. details of any employment relations education leave; and
10. any other particulars as may be prescribed.
This record must be kept for 6 years. The employee or the employee's representative has the right to immediate access to the record. If requested the employer must provide access to the record, or a copy of it, or an extract from any part of the record.
If a wages and time record is kept in accordance with any other Act then the employer is not required to keep a record under the ERA. In all other situations if an employer does not keep a record or does not allow access to it a penalty may be imposed.
If a Labour Inspector requires production of the record and the employer fails to produce the record, and then fails to comply with a notice requiring production of the record, the employer is liable to a penalty imposed by the Authority.
Compensation
Compensation in relation to personal grievances
If the Authority or the Court determines that an employee has a personal grievance remedies available include:
1. reinstatement;
2. reimbursement of lost wages or other money; and
3. compensation.
If the personal grievance is based on a complaint of sexual or racial harassment, then the employer may be found liable for actions by the employer, the employer's representative, another employee, or a customer or client of the employee.
Recovery of wages
If the employer defaults in paying wages or other money due under an employment agreement, or pays less than the legal minimum, the employee can commence an action before the Authority for recovery of that money.
If a Labour Inspector brings an action before the Authority to recover money payable by way minimum wages or holiday pay, and such amount is unlikely to be paid in full because the employer is in liquidation or does not have sufficient assets, then an action to recover that money may be brought personally against any officer, director, or agent of the company.
Conclusion
The ERA outlines areas where a penalty may be imposed against an employer for certain actions over and above any right to compensation, enforcement or damages that may arise. Penalties may also be imposed under the ERA for breaches of the Minimum Wage Act 1983 and the Wages Protection Act 1983.
While this paper outlines the penalties that may be imposed and of which you should be aware, in each particular situation you should take professional advice.
CopyrightThe Lawlink Group Ltd 2000
Every effort has been made to ensure that this information is accurate. However, it is general introductory information only. It does not constitute legal advice and should not be relied on as such. Specialist legal advice should be sought in particular matters.
Alan Stuart is a partner in the Lawlink firm of Webster Malcolm Kilpatrick. He works primarily in the areas of business and property litigation, arbitration, and dispute resolution.
Web site: : Webster Malcolm Kilpatrick
Email: a.stuart@wmklaw.co.nz
September 2000
July, 2001
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