Landmark Decision: Unlawful deductions for minimum wage employees
In Soapi v Pick Hawke’s Bay Incorporated [2025] NZEmpC 208, the Employment Court determined that employers are not permitted to make deductions outside of section 7 of the Minimum Wage Act 1983 (MWA) from an employee’s wages if doing so results in the employee receiving less than the minimum wage for hours they worked.
Ms Soapi, Mr Lau and Mrs Lau were citizens of the Solomon Islands and they worked for a not-for-profit organisation that participated in the Recognised Seasonal Employer (RSE) scheme that allows accredited New Zealand employers to employ workers from specified Pacific Island nations for work in the horticulture and viticulture industries.
Prior to employing the plaintiffs and part of the RSE scheme, the defendant submitted a copy of its Individual Employment Agreement (IEA) template and deductions form to Immigration New Zealand (INZ).
INZ allowed the defendant to make deductions from any employees pay where there was “written consent” by the employee, the deductions were for a specified purpose, the amount was no greater than what would be deducted for an NZ citizen or residence class visa holder, and the employee has been informed that the deduction could be withdrawn at any time. The IEA stated that deductions would only be made where INZ’s instructions were complied with.
The defendant made weekly deductions from the plaintiffs including for accommodation, damage to lodgings, immunisations, food expenses, overpayment of wages, wage advances, health insurance and Personal Protective Equipment (PPE) and flights.
The Court found that the defendant made various unlawful deductions, including deductions:
- For PPE, which was held to be in breach of Health and Safety legislation.
- Not approved by INZ.
- For accommodation costs as the cash value was not fixed in the employment agreement and deductions exceeded the permitted five per cent for lodgings.
- For the costs of the accommodation where the deduction form did not explain the basis for the calculations and accommodation costs related to a 12-month period, while only working seasons of seven or less months.
The Court ordered the following sums and interest to be paid to the plaintiffs (being the amount of the underpayments less 5% of that for accommodation):
- $6,076.54 for Ms Soapi;
- $9,815.83 for Mr Lau; and
- $19,056.23 for Ms Lau.
The matter of penalties was adjourned for a later date and costs were reserved.
Key takeaways:
- Deductions from pay, at source, should not be made where it would result in the employee earning below the minimum wage, even if the employee consents to the deduction.
- Employers will need to find other work arounds, such as invoicing employees for costs owed by employees to employers.
- Deductions need to be specific, reasonable and made with the worker’s consent and for migrant workers must be submitted to Immigration NZ for approval.
- Employment agreements must fixed the value of accommodation, or otherwise not exceed 5% of an employee’s minimum rates of pay.
- Employers should get legal advice if for any reason, they need to make deductions from an employee’s pay.
Feel free to contact us for an audit of your employment agreements and deduction forms to ensure you are lawfully making deductions.
