Legal Matters

last updated 28/04/2019

MBIE reminder on personal liability for employment law breaches

last updated 28/04/2019


29 April 2019 – The Labour Inspectorate has reminded individuals, including business directors, senior managers and legal or business advisors, that they can be held personally responsible even if they are unofficially connected to a business that breaches minimum employment standards.

The reminder follows a recent Employment Relations Authority (ERA) determination that found three individuals were personally involved in employment law breaches at two non-franchised Christchurch restaurants, and ordered them to repay more than $40,000 in arrears.

Labour Inspectorate Regional Manager David Milne says the case was taken to the ERA after Indian Heaven Ltd failed to comply with an Improvement Notice issued to them by the Inspectorate in 2017, directing them to implement compliant business systems and repay arrears.

‘The employer failed a whole raft of basic legal requirements such as providing employment agreements, maintaining accurate wage and time records, and paying  minimum wage, holiday pay and leave entitlements to seven workers at two Christchurch restaurants. Instead of rectifying their practices, they denied responsibility and continued to operate as they had before. Later they sold their business,’ says Mr Milne.

The ERA found Najima Noori, Sayed Noori and their daughter, Fatima Noori, personally responsible for the breaches. According to a report on Stuff, during proceedings the restaurateurs chastised former employees for having the audacity to ‘give evidence in the face of its generosity as an employer’.

Najima Noori was the director and joint shareholder of Indian Heaven, responsible for hiring employees and setting their terms and conditions. Joint shareholder, Sayed Noori, ran the day-to-day operations of the business.

Fatima Noori managed the ‘backroom functions’, including rosters, hours of work and payroll systems.  Although not a director, nor a shareholder, she was found to have considerable influence over management and administration of the restaurants, and was found liable along with her parents.

They were given 28 days to repay $41,688.56 in arrears to the workers.

‘From 2016, the Employment Relations Act enables persons other than the employer to be held accountable if they’re knowingly involved in breaching employment standards,’ says Mr Milne.

‘This determination sends a clear message that those responsible for making business decisions cannot avoid responsibility for denying employees their basic rights.

‘Whether they on-sell their business, or declare insolvency, they will be held to account.’

Although the company in question in this case had nothing to do with franchising, the MBIE’s statement is a valuable reminder for franchisors and franchisees of the need to stay on top of possible issues arising from the complexity of employment law – something which has been a focus of the Franchise Association’s educational efforts in recent years.

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