A business owner has been banned from hiring employees, after being held responsible for serious breaches of employment provisions. Changes to the Employment Relations Act of 2000 (‘the Act’) were introduced in 2016 and were exercised for the first time in this case, in the Employment Court in March of this year.

The spotlight is now on for better employment standards in New Zealand. At JB Morrison, our team of Employment lawyers are committed to good employment practice and can guide you through tricky employment issues.

Gordon Freeman operated the Watershed Bar and Restaurant in Christchurch.  In a case brought to court by the Labour Inspectorate (A Labour Inspector v Victoria 88 Limited t/a Watershed Bar and Restaurant, 26 March 2018), the Employment Court found that Mr Freeman had withheld pay from employees and been responsible for “serious and persistent breaches of minimum employment provisions”.  This case observed the first exercise of a new statutory power introduced in 2016, section 142A of ‘the Act’, whereby the Court banned Mr Freeman from hiring employees for a period of three years.  Breaching a ban is a criminal offence which can result in a conviction with a fine of up to $200,000, a three-year prison sentence, or both.

Mr Freeman and his business were also ordered to pay penalties of $20,000 with nearly half of it being repaid to employees as outstanding wages.

The Labour Inspectorate first took action against Mr Freeman in 2015 when employees of his company were forced to take annual leave against their wishes by being rostered for a day of annual leave every week.

The present case involved the unlawful use of a “forfeiture” clause which provided that if staff failed to give six weeks’ notice of resignation, then equivalent wages would be “forfeited and deducted from any final pay including holiday pay”.  The Employment Court held that the purpose of the clause was to compel employees to give notice by holding over them the threat of lost wages if they did not comply.  As such it amounted to an unlawful penalty clause, which resulted in the Court banning Mr Freeman from hiring employees for three years.

Mr Freeman’s disregard for employment regulation came at a high cost. This case demonstrates the importance of seeking sound legal advice when constructing employment agreements.

For More Information:

Whether employee or employer, if you’ve experienced circumstances of this nature, or simply want to safeguard your business from careless breaches of minimum employment standards, we can provide early and confidential advice to help you navigate tricky employment issues.

Reach out to our employment team on (04) 472 0020.