Directors of a Company that goes into liquidation or receivership may have a potential personal liability for payment of wages or holiday pay if the Company is unable to pay. Section 234 of the Employment Relations Act gives the ERA the power to order a Director to personally pay outstanding wages or holiday pay where the Director has instructed or authorised the default in payment.
Recently the Labour Inspectors office has been taking a stronger line on Directors where wages have not been paid by a Company that has gone into liquidation or receivership.
The ERA has made it clear that where there is evidence a Director has been complicit in any direction or action that has authorised the failure to make the payment of the wages due to the employee, then the Director has liability to make that payment personally.
While this provision has not received much attention in the past in the current economic climate the Labour Inspector is making more use of this power and Directors should be cautious in a liquidation or receivership situation when dealing with unpaid wages.
We strongly recommend that in such circumstances you take legal advice. We are able to provide assistance in this area to employers.
If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:
Paul Farry
pfarry@farry.co.nz
09 379 0055 or 03 477 8870
The information contained in this publication is intended as a guide only. It does not constitute legal advice and should not be relied upon as such. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain.