Mixing the perfect cocktail: Good employment practices and alcohol licensing

Recent legislative changes to the Employment Relations Act 2000 (Act) have increased the penalties payable by employers for breaches of minimum standards.  Pecuniary penalties are now set at up to $50,000 per breach by an individual employer and up to $100,000 per breach by a body corporate employer.  There are also additional sanctions such as “banning orders” which can prohibit people in breach from becoming employers. It is therefore more important than ever for employers to meet the Act’s minimum standards.

Since 2012, there have been more than 60 investigations into liquor retail businesses by the Labour Inspector.  (see ^.  Simon Lord “Liquor Franchisee’s Employment Breaches Raise Questions” (17 June 2019) Franchise New Zealand) 

Recent examples:

Labour Inspector v Shalini Ltd [2019] NZERA 334

Shalini Limited operated three bottle stores and a dairy in Auckland. The Labour Inspector found that Shalini had acted in breached of the Minimum Wages Act 1983 and the Holidays Act 2003 and  successfully applied to the Employment Relations Authority for penalties.  Shalini was ordered to pay $100,000 in penalties for breaching the relevant minimum standards and $96,542.34 to seven migrant workers in minimum wage and holiday pay arrears.

The material investigation which gave rise to this proceeding was conducted by the Inspector in 2017 following receipt of a complaint from one of  Shalini’s employees. In 2016, Shalini was issued an Improvement Notice which it had failed to comply with.

In fixing the penalty against Shalini the Employment Relations Authority confirmed that the nature and extent of the breach, whether the breach was intentional, inadvertent, or negligent, the nature and extent of any loss or gain; and deterrence were all relevant factors in assessing the penalties to be paid.

Labour Inspector v Daleson Investment Ltd [2019] NZEmpC 12 (11 February 2019)

Daleson  Investment ran a bottle store and traded under the name of Thirsty Liquor. The Inspector carried out an investigation into complaints that Daleson had underpaid a number of workers, in breach of the applicable minimum standards requirements. The investigation found that six employees had been underpaid minimum wages and holiday pay, and that other breaches had occurred in relation to statutory record-keeping and documentation requirements.

The Authority upheld the claim for lost wages, ordering the company to pay $12,542.52 plus interest at 5% but only awarded a total of $220 in penalties against the company.  The Inspector challenged this determination.  As a result, the Court had to decide on the penalties  Daleson had to pay.

The Inspector alleged that the Authority erred in law by imposing a penalty that was “disproportionately small, inadequate and inappropriate” and did not take into account the relevant legislative provisions.

The Court found that Daleson had failed to:

1. pay two employees the minimum wage under the Minimum Wages Act 1983;
2. pay four employees holiday pay under the Holidays Act 2003;
3. pay public holiday pay to four employees under the Holidays Act 2003; and
4. provide one employee a written employment agreement.

The Court held that the breaches were plainly intentional and that was not taken into consideration by the Authority.  Further, it did not seem that the Authority had taken into account the financial detriment to the affected employees and conversely the benefit for Daleson in keeping the money its employees should have received.

Daleson paid the amounts it was found liable to pay before the penalty-setting decision, and in the opinion of the Court, this was what drove the Authority from its starting point of a $220,000 penalty down to the ultimate figure of $220.  However, the Court believed there was a need to “bring home to [Daleson] the employment standards it is required to meet as an employer” and that “it should be made plain that minimum entitlements are non-negotiable.”

The Inspector had sought a penalty of $40,000.  The Court imposed that $40,000 penalty, as requested by the Inspector, but noted that a higher penalty could have been sought by the Inspector and the $40,000 penalty sought was “generous”.  The Inspector may be more inclined to impose penalties higher than $40,000 in future based on the Court’s comments in this case.

Overall, these cases confirm that all employers must comply with the minimum employment standards and that those standards are “non-negotiable”. Employers that fail to meet the minimum standards can face significant penalties, which are payable in addition to any compensation payable to their employees.

What are the Act’s minimum standards?

The Act sets out a range of minimum rights that all employers must provide to all of their employees.  All employees must receive:

1. a written employment contract;
2. at least the minimum wage;.
3. four week’s paid annual holiday per year;
4. eleven public holidays per year;
5. payment of time and a half for working on public holidays;
6. five days’ paid sick leave per year after first 6 months;
7. three days’ paid bereavement leave for certain family members;
8. ten days’ paid domestic violence leave per year, if they have 6 months’ of continuous employment or meet the ‘hours worked test’;
9. parental leave;
10. payment of wages; and
11. rest and meal breaks that meet legal requirements (from 6 May 2019, employees have the right to set rest and meal breaks subject to some restrictions, for example an eight-hour work day must have at least two 10-minute paid rest breaks and one 30-minute unpaid meal break.

Furthermore, employers must keep accurate employment records and must get their employee’s written consent before they can take money from their employees’ wages.

Employers are legally required to provide these minimum rights to their employees even if:

1. the rights are not included in the employee’s employment agreement; or
2. the employment agreement tries to trade some rights off against each other; or
3. the employment agreement tries to make the employee get less than these minimums; or
4. there is no employment agreement (although employers are required to give one to their employees).

Systems, staff and training requirements in alcohol licensing

The issue of staff, systems and training is also of relevance for the licensees. Some requirements may not be included on a licence but must nevertheless be adhered to.

It is against the law for a licensee or their staff to sell alcohol to anyone who is intoxicated, to allow a person to become intoxicated, or to serve alcohol to anyone under the age of 18 years. There are heavy penalties for these offences.

It is not enough to have one or two people holding a manager’s certificate and a licensee holding an alcohol licence: appropriate systems and regular staff training are also essential to ensure your alcohol sale and supply activities operate within the law.

There is no mandatory staff training requirement for staff (or even licensees if they don’t hold manager’s certificates).  This means that any staff training and/or ongoing training occurs at the discretion of individual managers or licensees.

Regardless of the lack of a mandatory requirement for staff training and refresher training, it is important that managers, licensees and their staff ‘know the law’.  Did you know that 80% of the businesses that fail Police CPO fail due to the untrained staff that make the sale? As the licensee and/or manager – that impacts directly on you.

It is an expectation that ALL staff receive training in host responsibility practices and general compliance with the Sale and Supply of Alcohol Act 2012. Ongoing training can include topics such as – conditions of your licence; your host responsibility practices; and the intoxication assessment guidelines, which can be discussed and signed off as being received, read and understood.

You can have your own in-house training packages to suit your business needs and all staff must complete/attend training on a regular basis.  Staff training package can include training plan as well as policies and procedures to comply with employment standards.

If you are an alcohol retailer and want to discuss how you can develop your in-house staff training package or need assistance with staff training, please contact one of our alcohol licensing team.  We will be happy to assist you.

This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.