Pay your employees, or pay the price

Employment

Last week the Employment Court found retailer Smiths City Group Limited (Smiths City) has breached the Minimum Wage Act 1983 by failing to pay employees for morning meetings held before the store opens. Smiths City are required to conduct an audit to quantify the cost of non-compliance, and then make payment to those employees who have been underpaid.

Smiths City, like many retailers, hold a 15 minute morning meeting for its sales staff prior to the stores opening each day. Staff are expected to attend those meetings, but receive no additional remuneration for doing so. The Labour Inspector issued an improvement notice requiring Smiths City to fix its practices. Smiths City disagreed with the Labour Inspector’s views, and the case made its way through the Employment Relations Authority, and then the Employment Court.

The first issue was whether the 15 minute meetings are ‘work’ for the purposes of the Minimum Wage Act 1983. Unsurprisingly, the Employment Court found they are. The meetings are held for the sole benefit of the employer, and the employees are expected to be present and attentive.

The second issue involved payment and wages. Again, as is common in the industry, the sales staff are paid a base hourly rate or salary, and commission or incentive payments on top of the base rate. Where the base rate is the equivalent to the minimum wage, the morning meetings have the effect of dropping the hourly rate below minimum wage, which is a breach of the Minimum Wage Act 1983. The Court did not take commission and incentive payments into consideration when reaching this decision. Commissions and incentive payments are additional income earned over and above the contractual hourly rate, not in substitution for it, and there was no ability to earn commission or incentive payments during the 15 minute meetings.

We are seeing an increasing number of employers being pulled up by the Labour Inspectorate and/or former or current employees for not complying with minimum employment standards, including the Holidays Act 2003, Minimum Wage Act 1983, and the Wages Protection Act 1983. These pieces of legislation are outdated, and compliance can be difficult and complicated. The government has recognised this, insofar as the Holidays Act 2003 is concerned in any event, today announcing a new taskforce to recommend changes to unravel its complexity and cope with a fast changing labour market. However, until such time as those changes are made, it is imperative that employers ensure they are compliant.

If you have any questions relating to this article, or whether your business complies with minimum employment standards, please contact a member of our employment team.

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