Employees will be able to go to the Police and report their employer if they are not being paid money and other legal entitlements that they are owed, which may lead to criminal prosecutions being pursued by Police against employers.
What Do Employers Need to Know?
The Crimes (Theft by Employer) Amendment Bill led by Labour MP Camilla Belich, has inserted a new section 220AA into the Crimes Act 1961. This Bill passed its third reading in Parliament on Wednesday, 13th March 2025, and it is set to become law the day after it receives Royal Assent.
The new section provides that an employer’s "intentional failure" to pay to an employee any money owed in relation to the employment is theft.
Where an employer commits theft in such circumstances, then they will be liable to:
- If the employer is an individual, the maximum penalty is 1 year’s imprisonment, a fine of $5,000, or both.
- In any other case, the maximum penalty is a fine of $30,000.
What is Employee Wage Theft?
There are several ways an employer can potentially commit ‘wage theft’, including intentionally:
- Underpaying, or not paying an employee's wages
- Failing to pay employee minimum code legal entitlements, i.e. the Holidays Act 2003, Minimum Wage Act 1983, or for certain breaches of the Wages Protection Act 1983
- Withholding the employee's holiday pay where it is unlawful to do so
- Unlawfully deducting money from an employee’s pay
- Failing to pay the employee's KiwiSaver contributions.
‘Intentional Failure to Pay’
A key feature of the new law concerns intentional vs unintentional failure to pay, so administrative errors or unintentional mistakes by employers that result in non-compliance should not be subject to the new criminal offence. However, this will ultimately be a matter for Police to decide.
That said, it can be reasonably anticipated the Police will likely not pursue criminal charges due to the resource required, unless the circumstances genuinely warrant it. Namely, an intentional failure to pay an employee money that amounts to unlawful theft by an employer, i.e. worker exploitation scenarios.
The new law is intended to address deliberate wage theft by employers against employees. However, it will require the courts to determine scenarios and claims for further guidance and case law will be key to better understanding the application of the new criminal offence.
Employer Considerations Relating to Deductions
Employers sometimes mistakenly believe that they can make a deduction from an employee’s wages based on a general deductions clause in an employment agreement. While ‘lawful’ deductions here remain possible under the new law - there are a range of legal requirements that must be met before making a ‘lawful’ deduction, including:
- That the deduction has been agreed, or consented to
- Ensuring the deduction is lawful and/or proportionate
- Ensuring the deduction is not unreasonable
- Consulting the employee before making the deduction.
An employee can withdraw their consent to any such deduction simply by providing notice in writing and this precludes an employer from making a deduction (even if it’s lawful).
Employer Concerns About the New Law
Businesses and employer groups, including Employers Assistance’s position is that the legislation is not necessary. There are already a range of legislative compliance measures, tools and options for dealing with the issue of ‘employer wage theft’, e.g. minimum code employment standards, which involve things like:
- Penalty orders
- Stand down orders (preventing hiring of migrant employees on work visas)
- Banning orders (preventing people involved in breaches from being an officer, including a director of an employer, or involved in the employing of employees), etc.
Concerns from employers about this new law is that it may create further division and harm to employment relationships – particularly in the context of often contentious employment disputes where sometimes legal claims hinge on whether a deduction an employer made was ‘lawful’ and/or ‘reasonable’.
A common situation here involves where an employee fails to work their contractual period of notice under their employment agreement and the various considerations that apply to determining whether a deduction in such circumstances is lawful. For example - has any actual, or quantifiable financial loss been incurred by the employer to warrant a deduction from the employees’ wages? If not, a deduction in such circumstances is unlawful based on case law principles.
Practically, employers can also anticipate that this new law may be used as a strategic bargaining chip by employee advocates and lawyers in terms of positioning personal grievance claims that involve disputed deductions issues.