Unlawful for gas station to deduct drive-off money & compensation increase - Employment Law Update

While the Wages Protection Act 1983 (the Act) requires all deductions from an employee’s pay to be agreed to writing, it does not automatically follow that any agreed deduction in writing will be lawful. In many cases, purported deductions can be unlawful irrespective of any agreement being reached with the employee. Section 5A of the Act prohibits unreasonable deductions and s 12A prohibits any premium for employment being charged regardless of whether it is agreed to in writing by the employee.

In a recent decision of the Employment Relations Authority, a gas station’s approach of deducting money from wages in respect of money lost due to customers driving off without paying for their gas was found to be an unlawful premium. Employment agreements signed between employees and the employer contained the following clause:

The drive off will be paid by the staff on the duty whoever is responsible to authorise the pump or the employer can deduct from wages whichever is agreed between the employer and the employee.

The Authority found that the “drive-offs” policy represented an unlawful employment premium. This is a notable finding as most decisions regarding premiums have related to employees needing to make payments at the outset of their employment to the employer in exchange for the job. The set of circumstances, in this case, did not immediately stand out as a typical premium. However, the Authority found it be a premium given that the drive-offs policy formed part of the employment agreement to be accepted at the outset of employment and it was indicated that non-compliance with it might result in the employee’s dismissal. The Authority observed that employment premiums are indicative of the imbalance of power inherent in the employment relationship.

The Authority ordered the employer to pay a penalty of $10,000 in respect of the premium which was in breach of s 12A of the Act. A penalty of $3,000 was also imposed upon the sole director and joint shareholder as a person involved in the breach in respect the breach of s 12A as well as being involved in other separate legislative breaches.

In light of this determination, employers should assess the risk of any deduction provision being regarded as unreasonable or a potential premium for employment before placing it into an employment agreement or enforcing it.

See A Labour Inspector of the Ministry of Business Innovation and Employment v Mittal & Son Ltd [2019] NZERA 406

Compensation awards on the rise

The Ministry of Business Innovation and Employment compiles data on the amounts of compensation awarded by the Employment Relations Authority for successful grievance claims. The figures for the first half of this year shows an increase in the typical amounts ordered in compensation for hurt, humiliation and injury to feelings.

The period from January to June 2019 involved a large number of claims with compensation awarded at the highest level. The Ministry reports that 11 out of 68 claims (16%) were awarded over $25,000 in the 2019 first half whilst there were only 3 out of 74 (4%) claims reaching this level in the same period last year.

The compensation reports are compiled on a six-monthly basis.