26 November 2019
The recent news that McDonald’s Corporation has agreed to pay back thousands of current and former employees up to 10 years’ worth of miscalculated leave is obviously a good news story to those who were affected. While the law requires employers to keep pay records for six years and with back pay claims only sustainable for that length of time, McDonald's has decided to exceed the legal requirements and adopt an approach which could result in millions of dollars paid.
Why McDonald's has made the decision to go back 10 years instead of 14 or even adopt the six years required under law remains unclear. The flow on affect for other businesses who may also owe back pay for holiday’s is also unknown. However, considering Unite Union’s disappointment with MBIE for permitting other companies to limit their exposure to six years, the question remains; could this possibly herald the beginning of yet another change to employment law for employers?
The current law found in sections 130 and 224 of the Employment Relations Act 2000 says employers must keep employment records for six years. Since coming into force almost 20 years ago, the way businesses keep records have changed. Where employers once kept a paper trail, they now more often than not rely on digital forms to meet their obligations. Data takes up less room and the surplus of un-used second-hand file cabinets is evidence of that. Though even now this is not always the case.
Not too long ago the OSEA Legal Team successfully assisted an employer with a holiday pay claim not unlike what McDonald's is facing. The small family run company did not have a computer network where all their data was stored. Instead they took a hands-on approach to record keeping, duly keeping pays and other important employment related information in notebooks. The boxes of hard information stacked across the tabletop looked quite impressive that autumnal afternoon and were instrumental as we worked through the employee’s concerns to achieve a positive outcome. Considering the load of materials fronted on the day, I think we were all glad only six, and not 10 or 14 years of information was needed to sort the concern raised.
Section 4B of the Employment Relations Act 2000 sets out the employer’s general obligation to keep records, which are then detailed in section 69OB. According to section 130 wages and time records must be kept in written form; or in a form or in a manner that allows the information in the record to be easily accessed and converted into written form. Financial documents that must be kept include wages and time records, and holiday and leave records. The failure to keep records may lead to a penalty imposed on the employer by the Employment Relations Authority.
Whether the approach taken by the McDonald’s Corporation will be adopted by other large employers or whether the time required under law will be extended by Parliament is unknown. The concern of course for smaller businesses is whether the steps taken by large multinational corporations will or should influence the situation on the ground across provincial New Zealand.
There appears to be almost universal agreement the method of calculating leave payments is the first issue that government should address and thereby assist employers to meet their obligations. If you have any questions around holidays and pays the legal team at the OSEA can help.
David Browne | Senior Solicitor/Legal Team Manager
David Browne | Senior Solicitor/Legal Team Manager | 03 456 1812 | 021 225 6938 | email@example.com
Adam Siwerski | Solicitor | 03 456 1809 | 021 756 809 | firstname.lastname@example.org
Stu Adamson | Solicitor | 021 197 4603 | email@example.com