Appeal in Kiwisaver minimum wage case dismissed

Tuesday September 24th, 2013

The Court of Appeal has upheld last year’s Employment Court ruling that a rest home breached the law by deducting its employer Kiwisaver contribution from two minimum wage care givers.

In its decision the Employment Court had said the purpose of the Minimum
Wage Act(MWA) was to ensure workers received a base wage for their work to enable them to meet their daily living expenses for themselves and their family.

There was nothing to suggest it built in a component of saving for retirement.

The case,brought against TerraNova Homes & Care Ltd by the Service and Food Workers Union, showed the resthome had been deducting its 26c employer contribution to KiwiSaver from the women’s gross hourly pay, reducing it to $13.24 ( at the time of the court case the minimum hourly rate was $13.50 – it is now $13.75).

The court said because the employer contribution to Kiwisaver went to an outside provider rather than directly to the employee, the contribution did not constitute payment for work performed under the Act.

The gross wage, therefore, had to amount to the minimum wage plus the employer’s two percent contribution.

Terranova appealed against this ruling on three grounds, claiming

• the court erred in concluding the compulsory contributions were not wages
• the court erred in rejecting the argument that section 6 of the Minimum Wage Act could not limit Parliament’s authority to enact later contrary legislation
• the relevant provisions of the MWA and the AKASA read together entitled Terranova to make the decisions.

In its rejection of these arguments the Court of Appeal said it agreed with the Employment Court that the MWA was ‘’designed to impose a floor below which employers and employees cannot go’’ and that it was directed at preventing the exploitation of workers.

In a statement on the outcome of the case, TerraNova said it had acted quickly to advise
all of the relatively small group of its staff affected by the decision that
their pay-rates were being raised immediately to address this and that the
correction will be back-dated.

TerraNova chief executive and owner Terry Bell said: “This is a good decision though it does add just that little bit more financial pressure on us as a provider operating within the government-funded Aged Residential Care sector”.

He said given that most employees could be expected to join Kiwisaver, this ruling clarified the basic cost of employing a worker on the minimum wage of $13.75 per hour was in fact $14.17 per hour.
Elspeth McLean

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