'Unpaid' worker claims constructive dismissal

Can you expect a worker to 'tolerate' your failure to pay? ERA decides

'Unpaid' worker claims constructive dismissal

The Employment Relations Authority recently dealt with a case involving a head pastry chef who claimed she was constructively dismissed by her employer. The worker also made several other claims against the company and its director.

In a decision that discussed the importance of upholding employment standards, the Authority investigated the worker's grievances and the company's alleged breaches of employment law.

The case highlighted the consequences that employers may face when failing to meet their obligations towards their employees.

Employer's failure to pay

The worker's issues with non-payment of wages began in December 2021 and continued until the end of her employment in May 2022. Despite raising the issue with senior staff members on several occasions, the worker's wages remained frequently unpaid or partially paid.

"My decision to resign is based upon to my wages unpaid, all of us work for money and we all depend on it. I am also required to pay my bills and I am completely dependant (sic) on the salary I receive from this job as I don't have any other source of income," the worker stated in her resignation letter.

The Authority found that the employer breached the worker's employment agreement and the Wages Protection Act 1983 by failing to pay her wages when they were due.

Additionally, the employer failed to correctly pay the worker's holiday entitlements in accordance with the Holidays Act 2003.

Constructive dismissal and remedies awarded

The Authority determined that the worker's resignation amounted to a constructive dismissal arising from the employer's breach of duties owed to her. It said that it was “foreseeable” that the worker would “not tolerate the non-payment of her wages any further and would likely resign.”

“It was only a matter of time,” the Authority said, adding that the employer’s actions “were not fair and reasonable.”

As a result, the Authority ordered the employer to pay the worker lost wages and compensation for humiliation, loss of dignity, and injury to feelings. The worker was also entitled to arrears of wages and holiday pay, along with interest on those amounts.

"The worker clearly tried to mitigate her loss by making a reasonable attempt to secure employment before and after her resignation," the Authority noted.

Penalties imposed and director's liability

The Authority said that the employer's failure to pay the worker's wages and holiday pay constituted breaches under the Employment Relations Act 2000 and the Holidays Act 2003. Consequently, the Authority imposed penalties against the employer for each breach.

Furthermore, the Authority granted the worker leave to recover the arrears of wages owed to her from the company's director personally if the employer, which was in liquidation, was unable to pay those arrears.

"As the sole director, he was likely involved in the decision-making process for the business," the Authority stated regarding the director's influence on the company's affairs.

The case reminded employers and their management of the importance of complying with employment standards and the potential consequences of failing to do so.

"A person is knowingly concerned in a breach if they have actual knowledge of all the essential facts giving rise to that breach or are wilfully blind in relation to those facts," the Court of Appeal endorsed, emphasising the responsibility of those in positions of influence within a company.

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