The Crimes (Theft by Employer) Amendment Bill passed its third reading in Parliament last week and has now received royal assent, introducing a new section into the Crimes Act.
This means it will now be a criminal offence for an employer to intentionally fail to pay an employee money they are legally owed unless they have a reasonable excuse for this failure.
This Bill was initially introduced in 2023 by former Labour MP Ibrahim Omer as a private member's bill. Omer, who arrived in New Zealand as a refugee from war-torn Eritrea, personally experienced wage theft while working on a farm.
Member of Parliament Camilla Belich, who took over as sponsor of the Bill said “this is a tough-on-crime Bill that will protect NZ workers from exploitation and introduce accountability for bad faith actors”.
This amendment follows an international trend as legislation criminalising wage-theft by employers has been adopted in similar jurisdictions including California, Norway and Australia.
Previously in New Zealand, wage theft was treated as a civil matter, whereas theft by an employee is often treated as a crime.
Civil wage claims have typically been difficult for employees to initiate and also time-consuming and expensive. This law change enables employees to report employers to the police, making the process more accessible and efficient for those with valid claims.
Individuals convicted of this crime may face up to one year of imprisonment, a fine of up to $5,000, or both. In certain cases, the fine could amount to $30,000.
However, for an employer to be found guilty under the amendment they must "intentionally fail" to pay an employee "without reasonable excuse".
Whilst this could include legitimate disputes about money owed or delayed payments, there are a number of common scenarios that may not fit neatly within the amendment, and which could be the cause of future disputes.
For instance, employers are required to pay employees their final wages, including any outstanding wages, holiday pay, and other entitlements upon termination of employment.
What if an employer intentionally fails to pay these statutory entitlements because they believe they are not required to or think they have already fulfilled their legal duties? Should a misinterpretation of the law by the employer constitute a reasonable excuse, even if it is at the employee's expense?
Another common scenario may be an employer withholding the final payment of wages in circumstances where an employee has not complied with their own contractual obligations. For example, where an employee has refused to return company property following termination of employment, an employer may seek to withhold their final pay until the property is returned.
Even though it is not lawful to withhold an employee's final pay, there may be a question as to whether this is nonetheless a reasonable excuse for doing so.
While the mischief the amendment seeks to address is significant, the wording is potentially loose and may allow for different interpretations.
Similar concerns have been expressed by the New Zealand Law Society, which highlighted not only the legal issues arising out of the new law but also the practical challenges.
These challenges include litigation costs, the fact that money recovered from fines will be transferred to the Crown, and the connection between the offence, insolvency law, and the legal responsibilities imposed on directors.
Despite these challenges, this amendment must be viewed as a step in the right direction. It is a change which supports the fundamental cornerstone of an employment relationship, the work-wages bargain.
Not only will it penalise employers for intentionally failing to pay wages owed to employees, but it will also reduce the exploitation of vulnerable workers in New Zealand.
In 2018 alone, 20,000 migrant workers were exploited in our country.
Audits performed by Australia's Fair Work Ombudsman estimated that between $850 million to $1.15 billion in wages are stolen annually from exploited employees in Australia. This suggests that the true cost of wage theft on our shores is likely to be significant.
These statistics are troubling for a country that has historically taken pride in being a fair and egalitarian society. Therefore, any change that reduces the exploitation of some of society’s most vulnerable should be viewed positively.
The New Zealand Council of Trade Unions has welcomed the law change with President Richard Wagstaff recently saying “theft is theft. It’s past time that the legal system recognises that “theft by employer” is every bit as serious and criminal as any other type of theft”.
Given the potentially serious penalties contained in the amendment, those bad faith actors can now be held to account.
Originally published in The Post
