ERA finds multiple breaches of employment standards in retail business case
The Employment Relations Authority (ERA) recently dealt with a case involving a worker who claimed extensive wage arrears and dismissal compensation against his former employer and family members, with the ERA finding multiple breaches of employment standards and awarding significant remedies.
The worker argued he was underpaid throughout his employment, denied proper holiday entitlements, and unjustifiably dismissed when the family business was sold.
He sought to hold the company director and her husband personally liable for unpaid wages, claiming the business had failed to meet basic employment obligations despite family connections.
Employment arrangement and visa complications
The worker arrived in New Zealand in July 2023 under an Accredited Employer Work Visa arrangement facilitated by his uncle and the uncle's wife, who operated a small retail store.
The family had arranged the employment opportunity to help the worker and his wife get ahead financially, with the company becoming an accredited employer solely for this purpose.
The worker's visa required him to be employed as a "Retail Supervisor" for at least 30 hours per week at not less than $29.66 per hour.
However, the company director told him the business could not afford this rate and agreed to record $29.66 in the employment agreement for visa purposes while actually paying only $23.00 per hour, later increased to $23.50.
The worker's role was supervisor in name only, as he performed the same duties as other retail assistants without supervisory responsibilities.
The business operated seven days a week with a flat structure where all employees, including the owners, performed identical tasks in the store located in a small shopping mall.
Working hours and payment disputes
The ERA found significant disputes about the worker's actual working hours and start date.
While the worker claimed he began work in July 2023, the Authority determined his employment likely started on 1 October 2023, one day earlier than the company's records showed.
The worker initially worked six days per week, including every Sunday, until March 2024, when his hours were reduced to four days per week to accommodate his wife's employment.
The company's owners reduced their own salaries to fund the additional staffing, treating the couple as "supernumerary" employees since the business was already fully staffed.
Due to the company's failure to maintain legally compliant wage and time records, the ERA applied provisions allowing acceptance of the worker's evidence unless proven incorrect.
This resulted in findings that the worker had worked 1,428.5 hours over his employment period, including work on multiple disputed dates and public holidays.
Extensive wage arrears and entitlement breaches
The ERA found the worker should have been paid $53,676.89 total gross wages, but only received $48,787.56, resulting in wage arrears of $4,889.33.
The underpayment stemmed from being paid at the lower agreed rate rather than his contractual $29.66 per hour throughout his employment.
The Authority identified multiple holiday and leave entitlement breaches, including failure to pay time-and-a-half for seven public holidays worked, totaling $637.69 in additional payments.
The worker was also entitled to $1,660.96 for seven alternative holidays accrued but not used, and $711.84 for three public holidays not worked but falling on normal working days.
When the worker's employment ended in August 2024, the company failed to pay four weeks' notice ($3,618.52) and annual holiday pay ($3,536.66).
The ERA also awarded $277.29 interest on the wage arrears, calculated from the day after employment ended until the determination date, with interest continuing to accrue until full payment.
Dismissal circumstances and procedural failures
The company sold its business in August 2024, with the worker receiving dismissal letters on 5 and 6 August 2024 that he did not see until after his employment had ended.
The first letter gave him until 20 August to identify redeployment opportunities, while the second letter, sent the next day, stated he had been made redundant for not responding to the first letter.
The ERA found the dismissal was substantively justified due to genuine commercial reasons, including declining sales, the director's health problems, and the purchaser's decision not to employ the worker.
However, the dismissal was procedurally unjustified due to failures to comply with good faith obligations and minimum procedural fairness requirements.
The Authority determined the company failed to provide adequate consultation before the business sale, did not give the worker a reasonable opportunity to respond to the restructuring proposal, and did not genuinely consider his feedback before making final decisions.
These procedural failures resulted in an award of $9,000 compensation for humiliation, loss of dignity and injury to feelings.
Director liability and penalty assessment
The ERA granted the worker leave to pursue the company director personally for wage arrears if the company defaulted on payment, finding she was "a person involved in breach of employment standards" as the sole director responsible for ensuring compliance with employment obligations.
The Authority imposed a total penalty of $5,400 on the company for breaches of the employment agreement and employment legislation, with $3,000 payable to the worker and $2,400 to the Crown.
The penalty reflected the serious nature of underpaying a vulnerable visa holder over an extended period while failing to maintain proper employment records.
The ERA found the worker's uncle was not liable as he was not an officer of the company and did not exercise significant influence over management decisions, which remained exclusively with the director.
The total award to the worker was $22,238.17, including wage arrears, interest, penalty payments, compensation, and legal cost contributions, with the director potentially liable personally if the company could not pay.
