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Since 2011, Labour Inspectors have been able to issue what is known as an “enforceable undertaking” to an employer in order to force them to rectify breaches in employment legislation.  This tool was introduced as an alternative option to litigation and was considered a proactive option to get employers to address issues under related employment legislation instead of seeking remedies for employees through the Courts.

The use of this tool was recently extended to certain health and safety breaches under the Health and Safety at Work Act 2015.

Enforceable undertakings are being utilised more by Government bodies and we consider this is likely to continue.  They are just one of the tools in the Labour Inspectorate and WorkSafe’s toolbox, which can be used as an alternative to prosecution.

What is an enforceable undertaking?
An enforceable undertaking is a legally binding document between the employer and relevant Government body.  The agreement is entered into by the parties on a voluntary basis.  The purpose of the document is to outline, in writing, what the employer will do to rectify the breach/es of the relevant legislation as well as to prevent a similar breach from occurring in the future.  Breaches may relate to the Employment Relations Act 2000, Minimum Wage Act 1983, Holidays Act 2003, Wage Protection Act 1983, Parental Leave and Employment Protection Act 1987, or the Health and Safety at Work Act 2015 (HSWA).

When could an enforceable undertaking be used?
Labour Inspectors can agree to an enforceable undertaking with the employer whereby the employer agrees to:

Rectify any breach of minimum standards;
Pay money owed to an employee; or
Take any other action that the Labour Inspector determines is appropriate.
WorkSafe may also agree to an enforceable undertaking with a person or PCBU relating to the HSWA or associated regulations.  An enforceable undertaking in this instance may be negotiated between the parties, with exceptions such as for an offence of reckless conduct in respect of any duty.

Enforceable undertakings will also specify timeframes for compliance with what is agreed.

What are the benefits?
The primary benefit of using an enforceable undertaking is to avoid protracted litigation for both parties to resolve breaches in the legislation.  However, it is not a ‘get out of jail free’ card, nor it is necessarily a more cost effective option for employers, as the employer still has to rectify breaches usually through financial means as well as giving assurances that the issue will not occur in the future.

Another benefit is the opportunity to have some involvement by the parties in negotiating the terms of the enforceable undertaking, rather than having a decision imposed.

Also, for breaches in employment legislation, unlike with prosecution, the company/person name is not typically published.  Unfortunately, this is not the case if parties are entering an enforceable undertaking under the HSWA, as the actual undertaking is published on the WorkSafe website, so members of the public can review what has been agreed.  An example of the first enforceable undertaking agreed to by Worksafe in April this year can be found here.

What are the consequences for breaching an enforceable undertaking?
Breach of an enforceable undertaking is likely to result in penalties.  In the employment context, the Employment Relations Authority can order a penalty up to $10,000 for an individual and $20,000 for a company.  Under the HSWA, non-compliance can incur penalties of up to $50,000 for individuals and up to $250,000 for a company.

Summary
An enforceable undertaking is a great option for in certain circumstances, however it is important for an individual or company to carefully consider their options before agreeing to these, and seek advice.

Should this be necessary, our team can assist.

Disclaimer: We remind you that while this article provides commentary on employment law and health and safety topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek legal advice from your lawyer for any questions specific to your workplace.
July 2017