Employer becomes personally liable for $120,000.00 after breaching minimum standards
In December 2016 the Labour Inspectorate successfully took a claim against Binde Enterprises Limited in the Employment Relations Authority for breaching the minimum standards. Binde Enterprises was a labour hire company who provided labour (workers) to a large commercial agriculture organisation based in Pukekohe.
Proceedings were commenced against Binde Enterprises after a complaint was made to the Labour Inspectorate and it was discovered that 75 Employees of Binde Enterprises were: not receiving the minimum wage; not receiving any leave entitlements under the Holidays Act 2003; and that the Employer was making unlawful deductions from pay and failing to keep accurate time and leave records.
The breaches were considered by the Authority to be in no way minor and Binde Enterprises became liable for $431,715.62 in damages to the Labour Inspectorate and the effected Employees. In March 2017, shortly after the determination was released, the Director of Binde Enterprises, Jujhar Singh, placed Binde Enterprises into voluntary liquidation. At that time, Binde Enterprises still owed $119,338.37 in damages to the Labour Inspectorate and the company’s funds had been exhausted after payments were made to the liquidator.
The Labour Inspector commenced proceedings seeking to join Mr Singh to the previous determination, making him personally liable for the outstanding amount owed by Binde Enterprises. The Authority found in favour of the Labour Inspectorate and joined Mr Singh to proceedings, making him personally liable for the outstanding amount with the full $119,338.37 being payable to the Labour Inspectorate within 80 days of the determination date.
Labour Inspector, Kevin Finnegan, has stated that this determination “sends a clear message to Employers that if minimum standards are breached and workers are exploited, closing down the business will not get its owners or directors off the hook.” We can expect to see more cases like this in the future as the Inspector went on to state that the Labour Inspectorate “will continue to pursue cases like this, targeting those who might be hiding behind a company name or failure, or closing it down deliberately, to get away with not paying what they owe for employment breaches.”
So what does this determination mean for Employers? This determination reinforces that there is a high expectation that Employers will uphold and abide by the minimum standards as governed by the Employment Relations Act 2000. It also means that Employers who have been found to have breached the minimum standards, will not be able to avoid damages imposed by the Authority by simply closing down their business, as Directors and Owners can be made personally liable to cover the costs of the damages.
We have seen in recent times that personal liability is not the only penalty that can be imposed on the Employer should they breach the minimum standard such as being prevented from hiring migrant workers for up to two (2) years (read more here). Therefore, it is imperative that Employers are ensuring that they are upholding and complying with the minimum standards.
Would you like to know more about the minimum standards, or would you like assistance with ensuring compliance with minimum standards? Feel free to give our team a call, it is better to ensure that you are upholding the minimum standards now, as you could potentially become personally liable for any breaches in the future.