All in a day's work
Employment lawyer Bridget Smith blogs on workplace and HR issues. Bridget is a senior associate at law firm Minter Ellison Rudd Watts.

All in a day's work: You can't always get what you want

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Photo / Thinkstock
Photo / Thinkstock

Two recent decisions of the Employment Relations Authority confirm an employee's contractual entitlement to payment in accordance with the terms and conditions of their employment agreement.

However, actually recovering the money may be another matter. Which begs the question, is going to the Authority to get money from a company which you know lacks the ability to pay, throwing good money after bad?

Mr Kumar worked for Maharaja's Indian Restaurant in Wellington. His employment agreement provided that he was entitled to be paid $11.80 per hour and that his normal hours were at least 55 hours per week.

The issue was that the company had been unable to provide Mr Kumar with those hours and had not agreed any variation with him. Accordingly, Mr Kumar sought, and was successful in obtaining, an order for the difference between the hours he was paid and his contractual entitlement to 55 hours per week.

In terms of further costs incurred by the company in failing to pay Mr Kumar correctly, he sought a penalty for the company's breach. A penalty of up to $10,000 could have been awarded against the company.

The Authority took into account the fact that Mr Kumar had 'tolerated the breaches for nearly all of his 4 years of employment' and balanced that against one of the purposes of a penalty; to send a message that the behaviour is unacceptable and to deter others. The Authority awarded a penalty of $1,000 and further ordered that it be payable directly to Mr Kumar (penalties are otherwise payable to the Crown).

There was also at least $24,000 in upaid wages owing to him.

In good news for Mr Kumar, the company indicated it could pay the money owed, but in monthly repayments of $1,000. Accordingly, the Authority ordered repayment in increments of $1,000 per month. It also ordered the payment of interest at the rate of 5 per cent per annum on the money, from the date of determination until the date the amount was paid in full.

There is, I suspect, less good news on the recovery front for Ms Kidston and Ms Anderson, employees of another Wellington company; Energy Research Laboratories NZ Limited.

Ms Anderson was employed by the company for 25 weeks and Ms Kidston for 19 weeks. Ms Anderson received payment for 2 weeks and Ms Kidston did not receive any payments.

In response to the employees' claim, the company blamed the employees, as well as the failure of promised investors to materialise, for the financial failure of the company.

Ms Anderson was appointed as the company's National Operations Manager and her work involved setting up the company. She approached central and local government for funding for various projects, but provided evidence that she was blocked by the company from spending money in support of those initiatives.

Ms Anderson's contractual entitlement to a salary of $120,000 per annum and a clothing allowance of $75 per week, was set out in a letter of appointment. In addition, she appointed (with the approval of the company) Ms Kidston, in the role of Marketing Manager, on a salary of $90,000 per annum, plus a weekly clothing allowance of $75.

Again, despite being in financial difficulty, the company never agreed any variations in respect of salary or payment terms with either of the employees. Instead it 'stalled on the payment of salaries and other company debts'. The employees eventually resigned in September after their phones were cut off, they were locked out of their offices and their employer was difficult, if not impossible to contact.

The company director and sole shareholder did not attend the Authority Investigation Meeting and accordingly, it was not surprising that the Authority ordered payment of the employees' outstanding salary and clothing allowances. Interest and penalties do not appear to have been sought or ordered.

Practically speaking, I fear the chances of Ms Kidston and Ms Anderson actually recovering that money are slim. If not, non-existent. That said, a quick check of the Companies Office website confirms the company is still registered, so there is at least a legal entity against which the order can be enforced.

I wish them luck.

In the current economic environment you can't always get what you want, so you want to make sure, you are at least getting what you're owed.

Bridget Smith is an employment lawyer at Minter Ellison Rudd Watts

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