Employers who intentionally fail to pay wages or statutory entitlements owed to employees (such as under the Holidays Act 2003, the Minimum Wage Act 1983 or the Wages Protection Act 1983) can now face criminal liability.
In the past, claims relating to unpaid wages could only be pursued through the Employment Relations Authority or Employment Court. Now, an employee or the Labour Inspectorate can ‘up the ante’ and go straight to the police. The Crimes (Theft by Employer) Amendment Act has now been signed into law, inserting a new offence under section 220AA of the Crimes Act 1961.
Under the new law, an employer who intentionally and without “reasonable excuse” fails to pay money owed to an employee under an employment agreement or an Act could be charged with theft under the Crimes Act.
It is yet to be seen how the term “reasonable excuse” will be interpreted. Parliament has indicated that it was not intended to capture employers who make genuine mistakes. Instead, the purpose of the new provision is intended to address the exploitation of workers, particularly vulnerable workers, in New Zealand.
POTENTIAL EMPLOYER LIABILITIES
Originally, the proposed penalty for an individual was a maximum fine of $5,000 and / or one year of imprisonment, and for all other employers a maximum fine of $30,000. However, on 19 February 2025, the Government voted that an offence under the new provision should carry the ordinary punishment for theft that applies under the Crimes Act. This means the penalty for an offence under section 220AA applies in three bands:
- If the value of the property stolen exceeds $1,000, the maximum penalty is imprisonment for no more than seven years; or
- If the value of the property stolen is more than $500 but less than $1,000, the maximum penalty is imprisonment for no more than 1 year; or
- If the value of the property stolen is no more than $500, the maximum penalty is imprisonment for no more than 3 months.
WHAT DOES THIS MEAN FOR EMPLOYERS?
If an employer has knowledge that it is withholding an employee’s wages and they don’t remediate it, then it will likely be in breach of this new offence. Employers will need to be aware that once they know of an issue with their payroll or annual holiday calculations, allowing that underpayment to continue without reasonable excuse is likely to amount to an intentional withholding of money owed to that employee, and therefore potential criminal liability.
It is also still unclear at this point how the new provision applies to companies, body-corporates or directors. There is a possibility that a director of a company that is an employer or any other member of the employers’ staff could be held liable alongside the employer if they aid, abet, incite, counsel or procure an offence.
If you have any questions about the development, or any other proposed employment law changes, please get in touch with our Employment Team.
