Penalties Applied for no Employment Agreement

A part-time employee working afterschool hours each week and between university classes has succeeded in a claim against their previous employer in The Employment Relations Authority. When the employee resigned from their position, the employer failed to pay holiday pay of $640 and wages due. The employer also did not provide this employee with a written Individual Employment Agreement.

Holiday Pay:

The employer argued that holiday pay had been provided at the same time as wages. However holiday pay – pay-as-you-go, with wages is only allowed if the employee is on a casual or fixed term agreement. In this case the regular weekly part time hours worked by the employee meant that the employee was on neither a casual or fixed term working arrangement. Therefore, holiday pay should have been accrued and paid out at termination of employment.

Individual Employment Agreement:

The employer was ordered to pay the holiday pay of $640 and wages owing, but on top of that, they were fined $2,500 for their breach of the Employment Relations Act for not providing the employee with a written individual employment agreement. All employers must pay wages and holiday on time and provide an employee with a written and signed individual employment agreement prior to the commencement of their employment. The employee was given a total of $1,473. Of the $2,500 penalty $833 was also ordered to be paid to the employee. The rest went to the crown.

The employer would have been better off if he had complied with the Employment Relations Act and supplied the employee with a written and signed employment agreement. His total penalty was almost four times that of the unpaid wages and holiday pay.

Employees Must Pay for Availability Hours

Employers who expect their employees to work extra hours should include a valid availability clause in their agreement. Otherwise, the employee can refuse extra working hours.

A valid availability clause is determined by the Employment Relations Act. It clearly states that employees may refuse extra working hours above and beyond their normal hours but only if their agreement does not contain a valid availability clause. This clause needs to include (amongst other things) how the employee is to be paid for these additional hours and compensation for being available. In this specific case, the employee’s agreement specified the employee’s normal hours of consistent work and also stated that they may be required to work reasonable overtime. This agreement did not incorporate a method for how the employee would receive compensation on top of their original salary.

This is important as one argument that was made by the employer was that the employee’s agreement already contained a reasonable compensation for availability in the salary itself. Unfortunately for the employer, the Court disagreed. It determined that the Individual Employment Agreement did not provide reasonable compensation for the employee’s availability. Therefore, the employee was reasonably able to refuse the additional hours of work.

Employers should ensure that if they require their employees to be available outside of their normal hours of work, the Individual Employment Agreement must comply with current law.

90 Day Trials

It is important for an employer, when relying on a 90-day clause for dismissal, to ensure the employee has not been employed previously in any capacity prior to the commencement of the 90-day trial. If the employee is carrying out a true assessment of capabilities or volunteering under any capacity, it is vital that it is recorded in writing, so both parties are aware that there has been no employment prior to the 90-day trial/start date of employment.

This comes after the Employment Court upheld a claim for unjustified dismissal when a mechanic was fired under a 90-day clause. The mechanic was in the process of getting a working visa and had been provided with a Individual Employment Agreement to start employment. During the time in-between receiving the agreement and when the visa was to be granted (which was also the agreed start date), the employee carried out tasks at the workplace.

In court the employer claimed that these tasks were fulfilled as either an unpaid assessment or in the capacity of a volunteer. Regardless of this claim, the Court found these tasks classified the mechanic as an employee even though it was an unlawful employment at that time because the visa had not been granted. Because of this, the tasks the mechanic had undertaken as an employee (not a volunteer) classified him as previously being employed by the employer prior to the start of the 90-day trial period. This means the employer could not justifiably dismiss the employee under the 90-day clause as the mechanic was a previous employee.

In this case, the Court provided the mechanic with a $10,000 compensation plus their lost wages.

All of these examples could have been avoided had the correct wording and processes been followed. It pays to ask for advice before relying solely on any provisions to dismiss an employee. If you feel like you are in a similar position as an employer, please feel welcome to contact Lynda Mathieson at Mathieson’s Chartered Accountants. Lynda is more than equipped to help navigate you through the sometimes-challenging changes in our New Zealand Employment Law.

If you would like to know if you comply with the New Zealand Employment Relations Act please view our website here, were you can find a handy survey for Employers.

Lynda Mathieson
Employment Relations and Health & Safety
AHRINZ, Laws363-16S2 Employment Law

Ph (03) 307 6455    Cell 027 5544747
P O Box 660, 123 Burnett street, Ashburton, 7740