Smith City ordered to pay staff

It seems like not a week goes by without seeing yet another business being called out for their sub-par labour practices.  The Labour Inspectorate has issued a stern warning to businesses which aren’t properly paying staff or abiding by the minimum requirements for employees: Fix it, because “we will be coming knocking”.

The recent ruling against Smiths City,  a large New Zealand retailer, for short paying staff who were expected to come to work before their normal start time for an unpaid  ‘pre-work’ 15 minute meeting, is a warning to all employers.

For at least 15 years, every Smiths City store in the country has held a meeting of sales staff for 15 minutes every morning, covering topics ranging from sales targets to promotions, staff were not paid for these meetings.  As a retailer many staff were on minimum wages and failure to pay workers for these meetings meant Smith’s City were not paying at least the minimum wage for all the hours worked.

Employees need to be paid for all the time that they work. This includes the time an employee spends:

– opening or closing the business
– in training
– in meetings
– at mandatory events outside work hours.

The Employment Relations Authority (ERA) had to assess whether the time spent in the daily meetings was ‘work’ for Smiths City’s sales staff. These meetings, were held at 8.45 am each day, at every Smiths City store before the stores opened each day at 9.00 am.  This morning meeting provided staff information for the day ahead and help them in their work. Smiths City’s practice was not pay those staff who attended.

The three factors the court used in determining whether activity was ‘work’ are

  • the constraints on the employee
  • the responsibilities on the employee
  • the benefit to the employer.

Employees need to be paid for all the time that they work. This includes the time an employee spends:

  • opening or closing the business
  • in training
  • in meetings
  • at mandatory events outside work hours.

It was determined that Smiths City staff who were asked to attend the morning meetings was considered work.  Smiths City could have been up for back payments to all staff who attended these meetings, however the ERA ruled that there was no set rule for these meetings across the branches, and inadequate attendance records, therefore Smith City did not have to back pay for the previous 6 years. Smith City argued against the decision stating employees were not performing work at the meetings and they paid staff commissions which made up for the unpaid meetings.  Smith City also implied that the time for these meetings was offset by the flexible approach the company offered to allow employees time off to attend appointments or if the shop was quiet.

The Labour Inspectorate appealed this ruling in the Employment Court and were successful.

Judge Ingles overturned the original ERA decision and ordered the retailer Smiths City to pay its employees for unpaid pre-work meetings.  Judge Ingles stated the meetings were run on a standardised template provided by the company, and while the meetings had an informal tone, workers were expected to attend, and were admonished – and in some cases issued formal warnings – if they skipped them.  In addition, commissions are not a substitute for the retails obligations to pay the minimum wage and keep adequate time and wage records.

Smith’s City has agreed to pay and pay they will!  Judge Ingles estimates each full-time worker would miss out on approximately $800 per year, because of the meetings and has ordered Smith City to work out how much is owed to their workers and pay it back by 8 August this year.

Since this case has been publicised there have been hundreds of calls from retail employees who say they have experienced similar treatment.  The most common complaint being

It is important to ensure you paying your workers correctly, especially those workers on a minimum wage.

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