Submission on “Playing by the rules: strengthening enforcement of employment standards”

Posted By TEU on Jul 23, 2014 |

Submission of the Tertiary Education Union Te Hautū Kahurangi o Aotearoa to the Ministry of Business, Innovation & Employment on “Playing by the rules: strengthening enforcement of employment standards”


The Tertiary Education Union Te Hautū Kahurangi o Aotearoa (TEU) welcomes this opportunity to respond to the Ministry of Business, Innovation and Employment’s discussion document Playing by the rules: strengthening enforcement of employment standards”.

The TEU is the largest union and professional association representing staff in the tertiary education sector (in universities, institutes of technology/polytechnics, wānanga, private training establishments, and REAPs).  As an affiliated union of the Council of Trade Unions Te Kauae Kaimahi, we extend our industrial and professional interests into the concerns of the wider union movement, society, the economy and the environment.

The discussion document prepared by the Ministry of Business, Innovation and Employment provides a very thorough analysis of issues relating to the enforcement of employment standards, and we congratulate the Ministry on its excellent work.  In our view, a key measurement of how well a society functions lies in how it’s most vulnerable citizens are protected.  The abuses and anomalies in employment conditions uncovered by the Ministry’s work and the work of unions illustrate the need to strengthen and better resource enforcement procedures and the need to strengthen social partnerships to address these issues.

Enforcing employment standards – the problem

  1. How widespread do you think the problem of non-compliance with employment standards is? What types of non-compliance are you aware of (i.e. not receiving the minimum wage, not having an employment agreement, not receiving entitlements relating to annual holidays/public holidays/sick leave/bereavement leave/parental leave, illegal deductions from wages)?

  • Because non-compliance with employment standards (in particular deliberate non-compliance) disproportionately affects vulnerable workers, its extent and impacts can be difficult to measure. However recent research, MBIE investigations, and media exposes suggest the problem is severe for some groups of workers.  In particular, children and young people, migrant workers and temporary workers are likely to be more severely affected – because of the potential for limited understanding of their employment rights, English as a second language and workplace isolation (e.g. piece workers and agricultural workers).
  • Therefore, given the likely demographic of workers most affected by non-compliance of employment standards, there is a risk that methods for gathering information about the extent of the problem (such as the Survey of Working Life) may have difficulty reaching these groups of workers. The potential for under-reporting of the problem may be significant.  Field data collected by the Labour Inspectorate and unions is likely to be able to provide a more complete picture of the extent of the problem (notwithstanding the usefulness of survey methods).
  • The discussion document provides a thorough overview of the types of breaches that are currently occurring. In the tertiary education sector, public institutions largely meet their responsibilities in terms of minimum employment standards.  The main areas where we have experienced issues has been with fixed term and casual employment and an increase in practices such as contracting out (particularly in service areas) and use of subsidiary business models.  The use of subsidiaries makes it more difficult for the union to establish who the employer is, and to reach these groups of workers to offer them the opportunity of collective agreement coverage.  In the private tertiary education sector, we suspect that minimum standards breaches may be more of a problem however our membership in this part of the sector is limited, so it is more difficult to get a sense of what is happening.
  • We are aware of very serious breaches in other sectors however, such as those affecting migrant and agricultural workers. We are extremely pleased that MBIE is looking very carefully at how these and other vulnerable workers might be better protected.
  1. Why do you think some employers do not comply with employment standards?

  • With regard to deliberate non-compliance, the simple answer is that the benefits to employers of exploiting workers outweigh the current consequences for breaches. For these employers, non-compliance makes good economic and business sense.  And because the current employment standards system is weak in terms of labour inspectors and other parties’ ability to enforce minimums, some employers choose to exploit this, to the detriment of workers, the country as a whole and ultimately their own businesses.
  • Staffing and resourcing of the Labour Inspectorate needs to be reviewed, so that this important work and other parts of its mandate (such as education) are able to be fully met.

The role of unions

  • We support moves to make Labour Inspectors more effective and to create stronger disincentives for breaches of minimum employment standards. However, if this review of the approach to enforcing minimum employment standards does not acknowledge the important role that unions play, a valuable opportunity for very useful partnerships will be lost.  To underline the significance of unionisation on minimum employment standards, it is illuminating to consider that the most de-unionised sectors tend to be those where the most serious breaches are encountered (including serious breaches of health and safety).  Unfortunately, the Government’s plans to further undermine the ability of workers to collectively bargain for their employment conditions will work against any initiatives to ensure workers’ minimum employment rights are protected and maintained.
  • If the Government is serious about the protection of employment standards it will embark upon a programme of strengthening and extending the role and ability of unions to protect basic employment standards, including the repeal of legislation hindering unions’ ability to represent and assist workers.
  • The inspectorate should also enforce the right of workers to belong to a union, and not to suffer intimidation or disadvantage from employers as a consequence of taking steps to do join or remain in a union.
  1. Generally speaking, what do you consider are the main impacts of not complying with employment standards?

  • The discussion document sets out the major reasons why non-compliance with employment standards has consequences for the well-being of workers affected (and their families), consequences for the New Zealand labour market and respect for the rule of law.  The widespread breaches of employment standards are a consequence of the prevalence in several sectors of the economy of business models that rely on driving down the cost of labour.  This comes at the expense of long term productivity and skills development – the ‘low wage, low skill, low productivity’ equilibrium.  The causes for this are multifaceted but notably include issues of management competence, particularly with regard to personnel management.
  1. As an employee, does non-compliance with employment standards have an impact on you? If so, how?

  • To our knowledge, little if any New Zealand research has been carried out on the effects of breaches of employment standards on the workers who suffer them. We recommend that the Ministry of Business, Innovation and Employment undertakes research to understand the effects of breaches of employment standards on these workers.  This form of victim impact research would ideally ultimately be part of consideration during sentencing or assessment of penalties by the Employment Relations Authority or Court.
  1. As an employer, does non-compliance with employment standards affect you or your industry? If so, how?

  • N/A
  1. Is non-compliance with employment standards a bigger issue in some industries? If so, which ones, and why?

  • See our response to questions one and two above.
  1. Is non-compliance with employment standards a bigger issue for some groups of workers? If so which ones, and why?

  • See our reply to questions one and two above.
  1. Do you have any further comments on the nature and extent of the problems associated with non-compliance with employment standards?

8.1       What is clear to us is that resolution of this problem requires a multi-faceted approach – through legislative change, support and resourcing of the Labour Inspectorate so that it is able to addressed all of its legislated priorities, and through building constructive partnerships with unions and community organisations that support workers, particularly those who are most vulnerable.

Sanctions for breaches of employment standards

  1. What is working well with the current sanctions regime? What is not working well?

  • The main positive feature of the current sanctions regime is the ability for workers and their representatives to access specialist expert mediation and adjudication at relatively low cost compared to the general court system. The significant increase to Employment Court fees and mooted changes to the Employment Mediation Service threaten this.
  • The ‘low’ cost of access to the Employment Relations Authority is relative to the high cost of accessing the general courts, however and must be considered in light of the low quantum of available remedies and penalties.
  • Many employment disputes (including those involving breaches of employment standards) are often simply uneconomic for workers and their representatives to take because the projected cost recovery (including damages, costs awards and penalties) is significantly outweighed by issues such as court fees, legal costs and disbursements. This is a significant issue throughout the employment law jurisdiction.  A system needs to be designed that ensures access to justice for breaches, and appropriate remedies that take into account the potential for applicants to not make an application because the balance of cost versus remedy means it is not worthwhile.
  • As the discussion document identifies there are significant issues of appropriateness of procedure in some cases, such as mediation for breach of minimum employment standards. Given that breaches of minimum employment standards disproportionally affect particular groups of vulnerable workers, we would question the appropriateness of mediation at all.  The case studies in the discussion document make it clear that exploitation of these workers occurs in part because of an extreme power imbalance between workers and employers (whether this is because of educational, cultural, age or other factors).  Putting these workers in a situation where they are expected to go through mediation does not recognise this fundamental problem; further thinking needs to be applied to considering how these workers can best be supported through such processes.
  • We agree with Playing by the Rules that remedy need not always be through the Employment Relations Authority or Employment Court and support proposals for Labour Inspectors to have more power to make certain determinations (subject to appeal). Strengthening the role of unions would also assist.
  1. Should we introduce performance disclosure measures, such as naming and shaming, for non-compliant employers? If so, what kinds of measures should be used, and for what kinds of breaches?

  • We strongly support giving the Employment Relations Authority and Employment Court these powers.
  • The Government proposes to introduce similar ‘adverse publicity orders’ for health and safety offences under cl 171 of the Health and Safety Reform Bill. We support the introduction of a similar power for the Employment Relations Authority and Employment Court.  The power must be discretionary for the Authority or Court, but there is no good reason to restrict the ability to apply for such orders to the regulator.  These orders should be available as a discretionary remedy for workers and their representatives to seek also.
  • We also suggest looking to the Health and Safety Reform Bill for a framework for securing workers against company close-downs as a means of employers’ avoiding prosecution its consequences. This information could also form a key part of a responsible procurement initiative.
  1. Should we extend the range of financial penalties available for breaches of the legislation? If so, what penalties do you think are appropriate?

  • We agree with MBIE’s analysis that “available sanctions and penalties do not provide a sufficient deterrent, particularly for serious breaches of employment standards.” The average penalty is much too low to act as an adequate disincentive to poor employer behaviour.  When this is compared to other penalties, for example, breach of health and safety standards – other than serious harm (which is up to two years imprisonment and up to $500,000 fine) where the penalty is up to $250,000 – it is clear that there is room for introducing much higher penalties.
  • Whilst risk of death or serious injury is certainly worse than even very serious breaches of employment standards, the penalties for breach of employment standards should be immediately raised by amendment to the core minimum code enactments. The amount for corporations or individuals could be established by comparison with other jurisdictions such as Australia.
  • We think there is also a need to provide much clearer guidelines for sentencing criteria and application of penalties for breaches of employment standards. These should be developed by MBIE in consultation with key stakeholders and social partners.
  1. Should other parties be able to seek penalties directly from the Employment Relations Authority, without needing to go through a labour inspector? If so, in what circumstances should this apply?

  • Under the Employment Relations Act 2000, workers may seek penalties for breach of the Act along with damages (s 135(1)). Penalties may therefore be sought for unjustified dismissal, unjustified disadvantage, breach of good faith, failure to provide a written employment agreement and many other breaches.  Similarly, penalties under the Wages Protection Act 1983 may be sought by either the worker concerned or a Labour Inspector (s 13).
  • The various elements of minimum code legislation should be amended to create a consistent and logical framework that allows workers to ask the Employment Relations Authority to levy a penalty for all types of breaches of minimum employment standards along with other breaches such as breach of good faith, unjustified dismissal and other types of personal grievance.
  1. Should we introduce measures that would restrict the ability of non-compliant employers to do business? If so, what measures, and in what circumstances?

  • Beyond creating a register of previously non-complaint employers, directors and other officers, akin to that proposed in the Health and Safety Amendment Bill (see [10.3] above and [17.1] and [17.2] below, we support measures that will prevent the worst and repeated offenders from continuing to do business. In particular, bans on directorships and holding of senior office are appropriate.
  1. Should we introduce criminal sanctions, including imprisonment, for the most serious offences? If so, for what breaches, and what should the sanctions be?

  • We strongly support the introduction of criminal sanctions for the most serious breaches of employment standards. However, careful research and policy development is needed before any plans are made to introduce such sanctions.
  1. Could the process for enforcing judgment debts be improved? If so, how?

  • Yes.  This could be considered as part of the project to introduce criminal sanctions.
  1. Could more be done to make directors and other officers of a company liable for non-compliance (for example, expanding the applicability of section 234 of the Employment Relations Act)? If yes, then what?

  • Behaviours such as asset-stripping and ‘phoenixing’ constitute deliberate abuse of limited liability. We agree therefore that actions for recovery under s 234 should be able to be taken for penalties imposed by the Employment Relations Authority under any of the employment standards enactments.
  • We think that the power to take these actions should also be available to workers through their representatives and unions, given that this would be a discretionary power of the Employment Relations Authority.
  1. Do you have any other suggestions for, or comments on, improving the sanctions regime?

Officers’ duty of due diligence

  • A useful concept contained in the Health and Safety Reform Bill is that of an officer’s duty of due diligence under cl 39.  It places a proactive duty on the officers of the company (including directors) to take reasonable steps to ensure that they have up-to-date knowledge of work health and safety matters, the nature and operations of their business, and put in place appropriate systems or procedures ensure that the business comply with its duties under the Bill.
  • We suggest that the employment standards framework could include a similar requirement:
  1. To acquire and keep up-to-date, knowledge of employment standards (compare Health and Safety Reform Bill cl 39(2)(a)); and
  2. To ensure that the employer has, and implements, processes for complying with any duty or obligation of the employer under the minimum code legislation.

Other powers of the court

  • The Health and Safety Reform Bill contains a number of very useful discretionary remedies (based on those granted to the Australian courts under the Model Work Health and Safety Act). Along with adverse publicity orders, the Court may:
  1. Make an order for the payment of the regulator’s costs in bringing the prosecution (cl 170 of the Bill). This allows the Court to order an offender to pay a sum it thinks “just and reasonable” towards to the costs of prosecution (including the costs of investigation).
  2. Make an order requiring an offender to undertake a specified project for the general improvement of work health and safety within a specified period. This power could be adapted to the employment standards context relatively easily.

Identifying and investigating breaches of employment standards

  • Should the requirements for record keeping be aligned across the different pieces of employment legislation?
  • Yes – given that employers will be required to comply with all three of the Employment Relations Act 2000, the Minimum Wage Act 1983 and the Holidays Act 2003, it is an anomaly that record-keeping requirements are not aligned.
  • We support a consultation process with key stakeholders and social partners to determine the key record keeping requirements needed under each of these Acts and to draft legislation that aligns these requirements into one cohesive record. This closes loopholes and makes administrative sense.
  1. Should employers of low paid salaried and/or piece workers be required to keep accurate time records?

  • Both piece rate and low paid salaried workers require accurate time records to assess whether their employer is complying with the Minimum Wage Act 1983. According to the Minimum Wage Order, piece rate workers will be assessed as hourly workers for the purposes of assessing the minimum wage.  We believe these employers should be required to keep accurate time records.
  1. Do you have any additional suggestions for or comments on, improving record keeping requirements?

  • No.
  1. Should the range of information that Labour Inspectors can require from employers be extended? If so, what additional information should they be able to collect?

  • We support broadening of the range of information that can be collected from employers by the Labour Inspectors. We agree that appropriate privacy safeguards should be put in place.
  1. Should the powers of Labour Inspectors to access information be extended? If so, what additional powers should they have?

  • We agree with the proposal to allow Labour Inspectors powers to enter workplaces and to seize documents where required.
  1. Should the powers of Labour Inspectors to make binding determinations be extended? If so, in relation to what matters?

  • We support the extension of the power of Labour Inspectors to make binding determinations as discussed in the document and subject to appeal rights. In particular, the ability for Labour Inspectors to determine the employment status of workers is crucial.  The need to apply to the Employment Relations Authority prevents many workers (for example those forced into false contractor roles) from ever challenging their status.
  • Alongside employment status in the wider sense of whether a person is an employee or not, we submit that Labour Inspectors should be entitled to determine whether a person is a permanent, fixed term or casual employee and the genuineness of any fixed term.
  • A Labour Inspector should also be empowered to determine what an employee’s regular hours are. This information is often misrepresented in employment agreements and sometimes in wage and time records.  It is critical to determining whether entitlements such as annual leave and the minimum wage are paid correctly.
  1. Do you have any additional suggestions for, or comments on, improving the powers of Labour Inspectors?

  • We suggest consideration of the range of powers granted to Health and Safety Inspectors under cl 185 of the Health and Safety Reform Bill as a comparison and that there is a requirement for the two kinds of inspectors to work closely together.
  1. How could changes to legislation improve information sharing between government agencies for the purpose of improving enforcement of employment standards?

  • Both Labour Inspectors and Health and Safety Inspectors should be empowered to collect the most relevant information to each other, do so, and share this information as a matter of routine. Given the significant crossover between labour inspection and health and safety and the very limited resources of each this is common sense.
  • Consideration should be given to sharing information regarding businesses’ financial health and business start-up and close down information between agencies as these can provide vital warning signs of increased risk.
  1. Do you think that mediators should be able to raise breaches of employment standards with enforcement agencies if these breaches come to their attention in a confidential mediation? If yes, in what circumstances and how could the possible risks to the mediation process be managed?

  • There are significant countervailing interests at play here between the value of free and frank discussion as a critical part of mediation against the value of detecting and deterring breaches of employment standards. Should this change be made, very clear guidelines would need to be established, and the benchmark would need to be at a high level.
  1. Do you have any other suggestions for or comments on, improving information sharing between the Labour Inspectorate and other agencies?

  • No.

Improving compliance with employment standards

  1. As either an employer or employee, do you receive adequate information about your rights and obligations relating to compliance with employment standards? Does this information come from the Ministry or other sources? If it comes from other sources, which ones?  And what is the quality of the information you receive (either from the Ministry or elsewhere)?

  • The TEU’s network of union organisers give detailed and comprehensive employment advice and assistance to TEU members, including information relating to compliance with employment standards. We also make use of the knowledge and resources of the Council of Trade Unions and other unions, both here and internationally.
  • MBIE’s website and call centre also provide good quality advice which is particularly useful for workers who are not members of a union and of course for employers.
  1. As either an employer or employee, do you know where to go to get advice and information about your rights and obligations relating to compliance with employment standards?

  • N/A
  1. As either an employer or employee, do you use the Ministry’s website for information and tools to help you understand your rights and obligations? Is the information accessible, easy to understand and up-to-date? Is there any information missing? How could the information be improved?

  • The information presented on the website is of a high standard, although MBIE may wish to consider expanding the ways the information is presented, to take account for different learning styles.
  1. What particular groups of workers and/or industry sectors could be targeted to improve awareness of obligations, entitlements and processes for resolving complaints?

  • We think it is crucial that school pupils are given the opportunity to learn about employment rights, as part of the core curriculum. We suggest that MBIE work with the CTU and education unions (TEU, PPTA, NZEI) to develop resources.
  • Migrant workers have been identified as amongst those most affected by breaches of employment standards and must have the opportunity to be better informed of their rights at work. More work should also be done to ensure that employers who are recent migrants also understand employment standards applicable to the New Zealand context.
  1. What more could be done to ensure adequate protection for workers who want to speak out but are afraid to do so?

  • A potentially significant way to combat exploitation of migrant worker and workers generally is to encourage workers (and others) to ‘blow the whistle’ when they experience or witness exploitative or unlawful behaviour by employers (or others such as immigration agents).
  • The Protected Disclosures Act 2000 should be reviewed to assess its effectiveness in both the public and private sectors. The Labour Inspectorate should have the power to ensure that workers suffer no disadvantage as a result of actions they take to defend their rights or speak out.  This includes the right to contact, join and remain in a union, and to contact other advice such as MBIE’s Labour Contact Centre or inspectors.  Confidential or anonymous help lines should also be available.
  1. Do you have any further comments on the provision of information, advice and education in the employment standards system?

  • No
  1. Should the role of the Labour Contact Centre be expanded? If so, how?  What additional functions do you think it should take on?

  • See our response to question 32.2 above, in regards to the provision of confidential/anonymous help lines.
  1. Should less serious breaches be fast-tracked through a separate system or process? If so, how would this work?  And which breaches would this be appropriate for?

  • We think that a more effective approach would be to ensure that the Employment Relations Authority to be better able to deal with employment standards breaches, as per the suggestion made in our submission.
  1. What do you think the appropriate role for mediation services is in relation to resolving employment standards issues?

  • Many breaches of employment standards will also be breaches of contract or the personal grievance provisions of the Employment Relations Act 2000. A partial solution would be to expand the ability of the Employment Relations Authority to refuse to refer the issue to mediation where the matter relates to minimum employment entitlements.  This would ensure that resolution occurs in a timelier manner, and removes the need to put the worker through a process where the inherent power imbalance may interfere with addressing the issue.
  1. Do you have any other suggestions for, or comments on, improving the processes for dealing with breaches of employment standards?

  • No.


  1. Are there any issues relating to enforcement of, and compliance with, employment standards that we have missed in this discussion document?


  1. Do you have any further comments you would like to make on the issues discussed in this document?

  • The TEU is extremely pleased to see the issue of enforcement of employment standards receiving such careful attention.  Our hope is that as a result of this work and the feedback gathered from the consultation process, we will see a strengthened system that ensures all workers, but in particular our most vulnerable workers are afforded fair employment standards and resolution processes.
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