Sham company fails to protect dodgy employer…

The Employment Relations Authority has found an employer liable for failing to pay the minimum wage, failing to pay holiday pay, failing to keep and produce wage and time records and failing to keep and produce holiday leave records.  The employer was also found to have not provided employees with compliant employment agreements.

The employer advertised and took on overseas workers who were in the country on working visas.  After they had carried out several weeks work he then failed to pay them anything for the work done.

To try and avoid personal liability the employer had set up a sham company with another overseas worker as its sole director and shareholder, but that person was being controlled by the employer and the employer was held in reality to be the employer, not the sham company.

Because the employer did not disclose he was acting for a company which was to be the employer he was held to be personally liable.

Even if he had disclosed that it was a company which was the employer, a defaulting director who takes on liabilities, with no intention that they be paid by the company, can also be held to be personally liable.

In addition to ordering the employer to pay the unpaid wages and holiday pay the ERA has also said that it will penalise the employer for his behaviour.  The employer can be fined up to $20,000 for each breach in relation to each employee, so the potential fine in this case is over $100,000.  It will be interesting to see what penalties the ERA imposes on this employer who set out to deliberately scam employees out of their wages.



Alan Knowsley
Employment Lawyer
Wellington