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Paying anything but a fair wage is ripping workers off

Date: 29/03/2017

Disneyland is often referred to as the “Happiest Place on Earth”. However, that has not necessarily been the case in recent times for a number of its Florida-based actors who dress up as well-known characters and parade around the park.

Disney has recently been ordered by the United States Department of Labour to pay 16,339 of its workers a total of $3.8 million. This is primarily due to it deducting the cost of costumes and uniforms the employees are required to wear to perform their roles from their wages. In many cases this resulted in the employees being paid below the federal minimum wage of $7.25 per hour.

The Company was also in the firing line for failing to adequately compensate its employees for the time they were required to spend performing “pre-shift” duties, and failing to maintain adequate time and payroll records.

The obligations that Disney has breached are all equally applicable to employers in New Zealand.

For starters, employers here must maintain comprehensive records which evidences compliance with minimum entitlements such as holiday pay, sick leave and payment of the minimum wage. These records need to be held for at least six years.

Deductions from an employee’s wages are also tightly regulated and will only be lawful where they are not unreasonable, where the employer has consulted with the employee regarding the specific deduction, and where the employee has given written consent.

What will constitute an unreasonable deduction is yet to be clearly determined given this is a new legal requirement. It was introduced in 2015 as part of the Government’s most recent labour law reforms.

The message from Parliament is that the prohibition is intended to prevent employers from seeking to deduct costs incurred as a result of the actions of a third party. The most obvious example of this is the proverbial ‘dine and dash’.

However, it is not hard to imagine that deducting the costs of a costume or uniform that the employer requires the employee to wear in order to perform their role will be captured by this prohibition. This is likely to be regarded as an unreasonable deduction in New Zealand regardless of whether or not it reduces an employee’s pay below the minimum wage.

Turning to the minimum wage, which is currently set at $15.75 per hour, this minimum is strictly protected by the Courts. Consequently, deductions that employers could ordinarily make will only be lawful in very limited circumstances where they bring an employee’s pay below the statutory baseline.

For example, the law permits an employer to deduct compulsory employer contributions to KiwiSaver from an employee’s wages where there is an express written agreement that this occur. However, the Court of Appeal has made clear that where such an arrangement results in an employee being paid less than the minimum wage, it will be unlawful.

These are obligations that Employers need to take seriously particularly in light of the increased powers recently given to Labour Inspectors to ensure compliance with the minimum standards. Where employers fall foul of these standards, the penalties can be significant and in certain extreme scenarios, individuals can be prohibited from being employers or being an officer of an employer.

In the past, some rogue employers may have got away with breaching the minimum standards legislation, largely because the people they exploit don’t have the money or ability to pursue claims against them. More recently the light has been shone on employers of this nature, particularly in the food and restaurant sector.

The combination of some high profile wins for employees, and the new minimum standards laws, have increased awareness of the issue. Now it is up to employers to do the right thing. Companies that rake it in, as Disney no doubt does, should pay their employees fairly. Ripping them off is frankly a disgrace.