Criminal liability for employers for intentional wage theft as Bill becomes law

The Crimes (Theft by Employer) Amendment Bill has passed into law, to provide that the intentional failure of an employer to pay wages owing to employees is theft, and to hold employers to account by the possibility of criminal sanctions.

What is the law change?

Before the law was passed, employees could only recover lost wages and statutory entitlements through claiming for wage arrears either in proceedings brought directly themselves, or by a Labour Inspector.

Under section 220AA of the Crimes Act 1961, it is now an offence to fail to pay money owed to an employee under an employment agreement or statute (e.g. the Holidays Act 2003, Minimum Wage Act 1983, and Wages Protection Act 1983), where an employer does not have reasonable excuse.

Alongside an intention to penalise employers who intentionally do not pay employees wages owing to them, the new law is intended to address and potentially minimise the exploitation of vulnerable workers in New Zealand. It gives employees an option of advising Police if they are not paid money owed by their employers. This includes both wages, and other monetary entitlements that may exist within the employment agreement.

What is the test for liability?

Under the new law, an employer will be liable for wage theft where they are required to pay money to an employee and:

1.       Intentionally fail to do so; and

2.       Do not have a reasonable excuse for the failure to pay. 

What may amount to a “reasonable excuse” and how this defence is to be interpreted, is not defined.

What are the consequences for employers who intentionally fail to pay wages, without reasonable excuse?

If an employer is found guilty of wage theft, the following penalties apply:

1.       For individuals, a fine of $5,000, up to one year’s imprisonment, or both; and

2.       In any other case, a maximum fine of $30,000.

Accordingly, employers are on notice that if they fail to pay wages, there is a risk of criminal prosecution.

For any questions about this new law, or other employment law matters, the specialist employment law team at DTI Lawyers can assist. You can contact us by email at [email protected] or phone 07 2820174.