What happens if you don’t pay your employees?

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Several disastrous months into the implementation of a new payroll system (NovoPay) for the country’s education sector there are still scores of education workers who have not been paid in that time. While most of those workers have said they simply want to be paid, commentators and activists have started to query whether the Ministry of Education is, in fact, in breach of the law.

Teachers’ contracts say they have to be paid bi-weekly and, if they have not been, then their employer has breached their promise, employment lawyer Peter Cullen, from Cullen The Employment Law Firm, told a Campbell Live special on the Novopay debacle. “It’s as simple as that.”

Work for pay is at the heart of an employment relationship, Cullen continued. “And, if the employer defaults on their obligation by not paying wages when they should, it's a very serious matter.”

At the end of the day, every teacher – like most employees – has an employment agreement, employment specialist Don Mackinnon from Swarbrick Beck Mackinnon told Campbell Live. “That agreement has to be honoured. Clearly a key part of any agreement is the wages that have to be paid – at a certain amount, at a certain date. So, absolutely no doubt, contracts are being breached all over the country.”

One of the areas that could potentially lead to litigation is if a teacher missed a hire-purchase payment or a mortgage payment and that had significant consequences for them, Mackinnon added. “Then you have got real loss and, therefore, that teacher could look at damages for that loss, potentially interest on that loss, and even a penalty action against the Ministry.”

So, while the situation currently affecting the education sector might be an unusual one, what should HR know about the legal situation which can arise if an employer neglects to pay its employees?

Under The Wages Protection Act:

 

  • An employer has to pay the entire amount of the agreed wages or salary to an employee, without deduction, on the day and at the intervals agreed upon in the relevant employment agreement.
  • One of the few exceptions to this is when an employee consents, in writing, to a sum being deducted from their wages or salary.
  • Employers cannot change the agreed pay days without the agreement of the employee.

As wages/salary are considered to be a key component of any employment relationship, if any employer does not meet the minimum requirements – in terms of remuneration -  they could be subject to a penalty as a result, the Ministry of Business Innovation and Employment has advised. Further, the ERA can award penalties, against an employer, for breaching the Wages Protection Act.

 

 

 

 

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