ERA rules two directors must personally cover arrears after their firm's liquidation
Two company directors have been held personally liable for more than $60,000 in unpaid wages and holiday pay owed to a former worker after their firm went into liquidation, the Employment Relations Authority (ERA) has ruled.
Authority member Sarah Blick ordered PA Service 2018 Limited (in liquidation) to pay former employee Gurdev Singh Arora $60,656.60 following an investigation into wage shortfalls, Stuff reported. She ruled that directors Amandeep and Harpreet Singh Luthra are personally liable for the arrears as persons involved in employment standards breaches, to the extent the company cannot pay.
The total includes $56,103 in arrears for wages, time-and-a-half payments and alternative holidays, plus $4,553 in annual holiday pay. It covers the period from November 2022 to February 2024. Arora had received $34,440 in pay from mid-October 2022 to mid-February 2024.
The ruling follows an earlier ERA determination on Monday. That determination found Arora had a personal grievance against the company for unjustified disadvantage but required more information to calculate the shortfall.
Blick issued the final determination on Monday on the papers, after neither director made contact or submitted a response once they were served with Arora's calculation spreadsheet.
PA Service was placed into liquidation by the High Court at Auckland in February, following a petition by the Commissioner of Inland Revenue. The liquidators consented to the employment matter proceeding.
The company and the directors must pay within 28 days of the ruling, subject to any income tax payable. Costs were reserved, with any unresolved costs to be set on the Authority's standard "daily tariff" basis.
Liquidation is no shield
The case fits a well-established line of authority. Under the Employment Relations Act 2000, a person involved in a breach of employment standards can be personally liable, law firm Lane Neave notes. In a 2024 case it reported, the ERA held a director and his wife, the company's day-to-day manager, personally liable for more than $90,000 after the employer company was liquidated.
The Court of Appeal's 2021 decision in Labour Inspector v Southern Taxis Ltd set a low bar for liability. The court held that directors' knowledge of the essential facts was enough, even if they wrongly believed their drivers were contractors, according to Employment New Zealand.
Directors cannot assume that liquidation ends their exposure, lawyers say. Lane Neave described such cases as a reminder that directors and managers "cannot hide behind the corporate veil" where they were involved in a breach. A director's personal involvement in paying wages and holiday pay can be enough to attract liability, law firm Rainey Collins has also noted.
What HR leaders should note
The breaches here fall within basic minimum entitlements. Time-and-a-half and alternative holidays relate to work on public holidays, while annual holiday pay and wages are core obligations. Rainey Collins notes that keeping accurate wage and time records is a legal requirement in New Zealand, and the ERA has found employers in breach for failing to do so regardless of the reason.
Consequences can extend beyond arrears. Immigration New Zealand's operational manual says an employer who has had an infringement notice or an ERA or Employment Court penalty is treated as non-compliant. Such employers appear on a Labour Inspectorate list and face a stand-down from supporting migrant worker visas.
For HR and payroll teams, the ruling reinforces three practical points:
- Payroll accuracy for public holidays and leave should be audited regularly.
- Directors should know that they, not only the company, can be pursued.
- Employers should respond promptly to claims. In this case, no response was received before the Authority ruled on the papers.
