“Theft is theft”

Jack Rainbow, Associate at Dundas Street Employment Lawyers, outlines the new Crimes (Theft by Employer) Amendment Bill.

New Zealand has officially criminalised wage theft, as the Crimes (Theft by Employer) Amendment Bill passed its third reading in Parliament and has now received Royal assent, inserting a new provision, section 220A, into the Crimes Act 1961.

Under this new section, it is now a criminal offence for an employer to intentionally fail to pay money owed to an employee under an employment agreement or statutory law without a reasonable excuse.

This law change redefines wage theft as a criminal offence rather than a purely civil matter, bringing New Zealand into line with other jurisdictions such as Australia, California and Norway. Previously, unpaid wage claims were difficult for employees to pursue, because they had to do so through the civil system, which was often expensive and slow.

Background To The Bill

The Bill was initially introduced in 2023 by former Labour MP Ibrahim Omer, who, drawing on personal experience, had suffered wage theft in employment upon arriving in New Zealand as a refugee. The Bill was later taken up by Labour MP Camilla Belich, who described the law as a “tough-on-crime Bill that will protect New Zealand workers from exploitation and introduce accountability for bad faith actors”.

The amendment is intended to help reduce the exploitation of vulnerable workers and to underscore the seriousness of the work–wages bargain, a foundational element of every employment relationship. In 2018 alone, 20,000 migrant workers were exploited in New Zealand, and, while we do not have firm data on the loss that entails, audits by Australia’s Fair Work Ombudsman estimate that up to $1.15 billion in wages are stolen each year from Australian employees, suggesting New Zealand’s figures are likely to be significant.

Legal Test

The legal test for prosecution under the new provision is two-fold:

• first, the employer must have intentionally failed to pay wages or entitlements

• second, the failure to pay must have been done so “without a reasonable excuse”.

This test means honest mistakes or ‘reasonable’ misunderstandings are unlikely to result in liability. But the term ‘reasonable excuse’ is inherently ambiguous and will be open to interpretation.

The new Bill will undoubtedly act as a deterrent to stop employers from unlawfully withholding pay to employees, out of fear of criminal consequences, thereby reducing the exploitation of workers in New Zealand.

In time, the courts and regulatory bodies may ultimately provide clarification as cases are brought under the legislation.

Potential Problems

One of the primary concerns is that employers may inadvertently fall foul of the legislation based on genuine errors or mistaken belief. The broad nature of the ‘reasonable excuse’ exemption means that, in the absence of any case law on the issue, it is not clear what reasons, which lead to payment of wages being withheld, will satisfy the reasonable excuse definition.

Any number of issues may arise that result in the intentional failure to pay wages or entitlements, for example, when an employer held a genuine, but mistaken, belief that it was not required to make the payment to an employee.

It is not uncommon for employers to believe they have the right to withhold paying an employee their final pay in circumstances where the employee has not performed some contractual obligation, for example, where an employee has not returned company property on their final day.

Implications

Although the law does not impose new wage obligations – employers have always been legally obliged to pay wages that are lawfully owed to an employee – it reframes existing duties with the added risk of criminal sanctions. The penalties for employers found guilty are significant. Individuals may face up to one year of imprisonment, a $5,000 fine, or both. In the case of companies or other entities, fines may reach up to $30,000.

Importantly, employees are now empowered to report wage theft directly to the Police, rather than being forced to pursue it through the Employment Relations Authority. This change should, in theory, increase access to justice, particularly for those most vulnerable to exploitation.

In light of this, employers are strongly advised to review their payroll systems and internal policies, audit employment agreements, and ensure that any wage deductions or delays are legally justified. Informal or poorly documented arrangements carry added risk under this new regime.

While concerns remain, including about the ambiguity of the phrase ‘reasonable excuse’, potential litigation costs in pursuing any claims, and practical enforcement of these provisions, this amendment has been broadly welcomed. Ultimately, the reform is seen as a positive step forward in strengthening employment rights and reducing worker exploitation.

As the New Zealand Council of Trade Unions President Richard Wagstaff put it, “Theft is theft. It’s past time that the legal system recognises that ‘theft by employer’ is every bit as serious and criminal as any other type of theft.”

Jack Rainbow, Te Arawa (Tapuika), Ngāti Tūwharetoa, is an Associate at Dundas Street Employment Lawyers. Jack has strong experience in industrial relations, dispute resolution and providing highlevel, strategic advice. He partners closely with his clients, providing advice and assistance from start to finish on a range of complex matters.