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Employment Obligations - Time for a Warrant of Fitness

18 August 2017

The fact that dairy farm workers, in particular, often work longer hours than usual over spring makes it important for farmers to be vigilant during this time in ensuring they meet their legal obligations. We have written articles that have addressed this very point on a number of occasions. But the issue continues to rear its head.

One of the latest examples comes about from a West Coast farm. Following a hearing in Employment Relations Authority (“the ERA”) the employer was ordered to pay $8,550.84 for failing to the pay the minimum wage to a farm worker (along with failing to keep holiday and leave records, and failing to provide the correct pay on a public holiday).

The case

The employee (whom we shall call P) was a typical dairy farm employee. P’s pay was based on an annual salary of $30,000, which meant that she could only work up to 81 hours each fortnight before her payments fell below the minimum wage. Unsurprisingly, when she was required to work for 126 hours one fortnight, during peak season, her pay rate fell below $10 an hour.

They had been warned…

Two years prior to the incident, the employer had agreed with the Labour Inspector to rectify previous breaches for not paying the minimum wage by means of an ‘enforceable undertaking’. The Inspector had since accepted the farm met the requirements of the undertaking. However, this made it particularly discouraging when the follow up audit of the farm’s employment practices revealed further failures to comply with minimum standards.

The ERA decision

The ERA found that the employer’s actions had clearly breached P’s rights.

Remember it is not enough to argue that farmers (or any employer for that matter) will make up for low wages (unlawfully too low) by high payments in another part of the year (where, for example, workers may work significantly less hours and thus ‘balance’ the payments overall).

Labour Inspectorate regional manager Natalie Gardiner says, “Whether in the office, at your local shop, or on the farm, every employee in New Zealand must be provided with at least their minimum entitlements and the onus is on the employer to get it right – employers caught in breach will face consequences.”

The costs of non-compliance

A penalty was incurred by the employer (the farmer) for failing to comply with basic employment law requirements.

Employers need to be aware that the risk of underpaying employees is not simply having to pay additional wages after the fact, they may also be stung with a hefty penalty.

In some cases the penalty could well exceed the additional wages, as was the case with P.

Practical guidance

To ensure you are complying with your legal obligations in relation to remuneration and record keeping, it may be helpful to think through your own “warrant of fitness” checklist. For each employee think:

  • Am I paying at least the minimum wage at all times?
  • Am I making the payments as set out in the employment agreement?
  • Am I paying holiday leave to staff before they go on leave, unless otherwise agreed in writing?
  • Am I keeping accurate records of all payments for at least the last six years?

It’s also worth noting that employees must be paid the minimum wage rate in money. It cannot be lowered to compensate for non-cash benefits and allowances (except in certain circumstances and where the parties agree in writing).