Harmans Lawyers
13 July 2021

Personal Grievances and Personal Liability under the Employment Relations Act 2000

All Articles & News, Employment Law

When an employee raises a personal grievance, their claim will usually be against their employer, rather than individual persons involved in the breach.  However, this is not always the case.

The Employment Relations Act 2000 (“the Act”) provides employees with an avenue to recover wages, or other money payable to them, from an individual who is not their employer, in circumstances where the employer is unable to pay the arrears.  In addition, a person involved in a breach (who is not the employer) can be liable to a penalty under the Act in circumstances where the Act provides for a penalty (for example, a penalty may be imposed under the Act for a breach of good faith).

While an application for a penalty under section 142X must be made by a Labour Inspector, an employee is entitled to bring claims against the individual under sections 142W and 142Y of the Act.

Section 142W provides that a person who aids, abets, counsels, conspires, procures or induces (in short, someone who assists or encourages) the breach, or has directly or indirectly, knowingly been concerned in or a party to the breach, may be deemed to be “a person involved in a breach.”  If the employer is an entity, such as a company, then only an officer of the entity may be found liable.

Two recent cases provide examples of situations where an employee has sought to rely on the above provisions, with differing outcomes. They are:

– Bryant v Infinite Building Solutions Ltd and Burns – In this case the employer company was held liable for unjustifiable dismissal of the employee.  As a result of the company being put in liquidation and unable to pay the awards made against it, the company director was held personally liable for the breach.  The Employment Relations Authority (“ERA”) found on the evidence that he was a person involved in the breach, namely not paying the employee’s contracted hours.  The director was consequently required to pay the employee’s unpaid statutory holidays, unpaid holiday pay and unpaid wages.

– Tolson v Potter – In contrast, here the employee’s claim against the company’s sole director was dismissed by both the ERA and the Employment Court.  The Court found that the director did not prepare the wage payments, the error in payments was due to an uncorrected default setting in the accounting system of the business and neither the director nor the accounts manager (whom the director was able to reasonably rely on) were aware of the possible errors until the employee brought the issue to their attention.  The Court stated that “proof of intentional purposeful action is required” for a person to be found to have been involved in a breach of standards.

Given the potential for personal liability under the Act, it is crucial that officers of entities who employ staff, particularly directors of companies, are aware of these provisions and the potential for personal liability even if they operate their business through a company.  We strongly recommend that they seek specialist advice if claims are brought against them personally.

If you would like further advice or information, please don’t hesitate to contact one of our team at Harmans Lawyers.

The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.