New law means employers face risk of criminal prosecution for intentional wage theft

The Crimes (Theft by Employer) Amendment Bill has now passed royal assent, becoming an enforceable provision of the Crimes Act 1961.

This means that, under section 220AA of the Crimes Act 1961 (Crimes Act), it is now an offence for employers to intentionally fail to pay money owed to an employee under an employment agreement or statutory law (for example, under the Holidays Act 2003, the Minimum Wage Act 1983 and the Wages Protection Act 1983), without reasonable excuse.

This new law aims to penalise employers that owe wages to employees and intentionally do not pay them. It is also targeted at addressing and potentially minimising the exploitation of vulnerable workers in New Zealand.

Critically, employees are now provided with the option of advising the police if they are not paid money owed by their employers. This change provides clear direction to employees that they have the right to be paid what they are due and in circumstances where they are not, criminal prosecution may result. Of further benefit to employees, is the fact that the law is not solely restricted to wages, it also covers salaries and other monetary entitlements that may exist within an employment relationship.

In light of wage theft becoming criminalised, employers should familiarise themselves with the current legal test and its elements, to reduce the risk of facing prosecution.

The test for liability under section 220AA of the Crimes Act is twofold. For an employer to be found liable they (1) must have intentionally failed to pay wages owed, and (2) must not have a “reasonable excuse”.

This suggests that liability is unlikely to arise where the failure to pay wages owed is unintentional and a defence may amount where a reasonable excuse can be proven. However, how a “reasonable excuse” is to be interpreted, remains to be seen.

If an employer is found guilty of intentional wage theft, strict penalties will apply, including:

• for individuals, up to one year’s imprisonment, a fine of $5000, or both; and
• in any other case, a maximum penalty of a $30,000 fine.

What does this mean for employers?

This Bill has amended the Crimes Act to clarify that not paying an employee their wages is theft. Accordingly, employers now face risk of criminal prosecution and associated penalties for failing to pay employees any money owed. This includes the unlawful withholding of wages, salaries and other monetary entitlements.

While this does not impose an additional obligation on employers, it serves as a reminder to exercise extra caution and ensure that employees are remunerated in accordance with their employment agreement and statutory law.

Moving forward, Employers should consider reviewing, and if necessary, updating any relevant policies or wage deductions processes used within their organisations; this will assist to minimise any risk of criminal prosecution.

If you have any questions about how your organisation may be impacted by this change, feel free to reach out to our national employment team.

Kathryn Evans – Senior Associate, Wynn Williams Employment Team

Ella Coggan – Law Clerk, Wynn Williams Employment Team