Workers argue company breached certified agreement causing stress and hardship
The Employment Relations Authority (ERA) recently dealt with a compliance application from five construction workers who claimed their former employer failed to honour a mediated settlement agreement, leaving them without promised compensation payments despite financial hardship.
The workers argued that the construction company and its director breached a clause in their records of settlement by stopping instalment payments that were due under the certified agreement.
They sought a compliance order to recover outstanding amounts totalling over $33,000 and penalties for the breach of the settlement terms.
The workers argue that they faced significant financial stress from the non-payments, with some supporting families and elderly parents while dealing with visa costs and mortgage obligations.
Employment background and initial disputes
The five workers were all employed by the construction company on Accredited Employer Work Visas between September 2022 and February 2024.
During their employment, they experienced delays in wage payments and were sometimes not paid at all, with several workers also not receiving correct holiday pay and public holiday entitlements.
Following termination of their employment, the workers lodged a Statement of Problem with the ERA.
The parties attended mediation, resulting in each worker entering into Records of Settlement with the company and its director. The company director signed the agreements on 11 June 2024, and each Record of Settlement was certified by a mediator on 26 June 2024.
The settlement agreements provided for compensation payments ranging from $7,500 to $13,000 per worker, to be paid in 10 monthly instalments.
The first payment was due on or before 4 August 2024, with a provision that if any payment was missed by more than five working days, the total remaining amount would become immediately due and payable.
Settlement payment breakdowns and arrears
The agreed compensation amounts and monthly instalments were structured as follows: one worker was owed $12,000 in $1,200 monthly payments, two workers were each owed $13,000 in $1,300 monthly payments, one worker was owed $7,500 in $750 monthly payments, and another worker was owed $10,000 in $1,000 monthly payments.
The company made the first few instalments to the workers, but then payments ceased.
Following a case management conference in May 2025, the parties attempted to resolve the outstanding payments, resulting in a further payment of the fourth instalment in two halves during May and June 2025, but payments then stalled again.
By the time of the Authority's determination, significant arrears had accumulated.
One worker was still owed $7,200, two workers were each owed $7,800, one worker was owed $4,500, and another worker was owed $6,000, totalling $33,300 in outstanding settlement payments across the five workers.
Impact on workers and financial hardship
The workers provided evidence of significant financial stress caused by the non-payment of settlement amounts.
One worker stated his current wages only covered his own living expenses despite having a wife and child in Auckland, his landlord had previously threatened eviction, he had to support his mother in China, and visa fee increases had added to his financial burden.
Another worker described suffering panic attacks and sleeplessness due to the mental stress caused by the non-payment situation.
A third worker explained the impact was significant as he had a child in school and elderly parents requiring financial support, while another stated the non-payment had strained his marriage due to financial issues and caused anxiety when payments were expected but did not arrive.
The fifth worker described facing difficulty making mortgage payments on a property in China while supporting a child in senior school and parents in China.
The ERA found that all workers had been put to additional cost in having to apply to the Authority to obtain compliance with an agreement freely entered into by the company.
Company's financial difficulties defence
The company director acknowledged that he and the company had not fully complied with the payment timeframe set down in the settlement agreements, but claimed this was due to financial difficulties in the business.
He stated that the company had been facing liquidation, and he had managed to reach an arrangement with Inland Revenue requiring regular monthly payments.
The director also mentioned the company had another large debtor with which it was trying to reach an agreement.
During the investigation meeting, he sought a new agreement with the workers for a revised instalment plan regarding the arrears, but the parties did not reach an agreement on modified terms.
The ERA noted that while the director understood the payments were an obligation he was committed to fulfilling, the financial difficulties did not excuse the breach of the certified settlement agreements that had been freely entered into by both parties.
ERA findings on compliance and penalties
The ERA found that the company and the director had not complied with clause 2 of each of the Records of Settlement and ordered them to pay the outstanding amounts within 14 days.
The Authority emphasised that Records of Settlement represent the resolution of employment relationship issues and failure to honour such agreements is a serious matter.
The ERA applied established principles for assessing penalties, including protecting the finality and integrity of settlement agreements, deterring similar breaches, punishing the transgressor, ensuring consistency with other cases, assessing the nature and extent of breach, considering remedial steps taken, and ensuring proportionality in the circumstances.
The Authority ordered a penalty of $2,500 to be paid to the Crown Trust Account, with $500 of that amount to be paid to each of the five workers.
The ERA emphasised that public confidence in settlement processes would be undermined if parties were permitted to breach agreements with impunity, and it was important that parties could have confidence in the enforceability of agreed settlement terms.
