Unjustified Dismissal Of An Employee After 17 Months Of Sick Leave
Exploitation Of Vulnerable Employee
A recent decision of the Employment Relations Authority (ERA) [2025] NZERA 646 3064332 highlights the serious consequences for employers who exploit vulnerable workers or fail to properly honour employment agreements. The case involved a Turkish national employed at a Dunedin café who successfully recovered more than $43,000 in unpaid wages, after years of systematic underpayment and unfair bargaining linked to his immigration status.
The worker, who had been employed by the café since 2007, regularly worked around 53 hours per week between 2013 and 2017. His employment agreements clearly stated that any hours worked beyond 40 each week would be paid at his ordinary rate. Despite this, he was consistently paid only for 40 hours, resulting in significant underpayment over several years.
Compounding the issue, the worker’s pay rate was unilaterally reduced on more than one occasion — for example, from $20.50 per hour to $18 — at times coinciding with his need for an employment agreement to support immigration or residency applications. The ERA found there was no evidence the worker understood or genuinely agreed to these changes, due in part to his limited English proficiency and literacy. This made him particularly vulnerable to exploitation and placed him in a position of unequal bargaining power.
ERA Determination & Payment To Employee
The ERA determined that the employer had breached employment standards by failing to pay for the additional hours worked and by reducing the employee’s hourly rate without genuine agreement. It further held that the pay changes amounted to unfair bargaining under the Employment Relations Act, given the worker’s vulnerabilities and the employer’s failure to ensure he understood the implications of the changes.
While the original employing company had since ceased trading, the ERA found that its two directors — each holding a 50% shareholding and continuing involvement in the business — were personally liable for the arrears. The Authority noted that directors can be held personally responsible where they were aware of, and contributed to, employment breaches by the company.
The ERA ordered payment of $43,152 in unpaid wages, including holiday pay and public holidays, calculated on the basis of the worker’s regular 53-hour working week. The two directors were held jointly and severally liable for the arrears, together with three years’ interest. In addition, the employer company was ordered to pay $6,000 in compensation for unfair bargaining.
Although the worker also claimed unjustified dismissal after his employment ended on the grounds of medical incapacity, the ERA found that the employer had followed a fair and reasonable process in managing his extended absence. Accordingly, the dismissal was held to be justified.
This decision underscores the obligations on employers to ensure compliance with minimum employment standards, especially when dealing with workers who may face language barriers or immigration-related vulnerabilities. Employers must take care to provide clear, comprehensible information about any proposed changes to employment terms and ensure that genuine, informed consent is obtained.
The case also serves as a reminder that directors cannot rely on the corporate structure to shield them from personal liability where they are complicit in systemic breaches of employment law.
Further Info On Exploitation Of Employees
The Ministry of Business, Innovation & Employment (MBIE) has published general research about exploitation of migrant workers in NZ.
Need Help with an Employment Dispute?
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Contact us at info@employmentlaw.co.nz or call +64 21 242 3200, Monday to Friday 8:30am–5:00pm, or visit us at 350 Jackson Street, Petone, Wellington.
