K3 Insights

On 14 March 2025, New Zealand employment law saw a significant change with the introduction of the new offence of “Theft by Employer” under the Crimes Act 1961 (Act). This reform, brought about by the Crimes (Theft by Employer) Amendment Act 2025, added a new provision, section 220AA, to the Act.

Under the new law, it is a criminal offence for an employer to deliberately withhold wages or other entitlements. Put simply, if an employer intentionally fails to pay what is legally owed, without a legitimate excuse, they may now face criminal prosecution.

This article outlines why the law was introduced, what it means in practice for both employers and employees, and the key uncertainties that courts may need to resolve.

 
Why This Law Was Introduced

It was introduced to prevent employers from deliberately retaining money that belongs to their employees and to ensure workers are paid in full and on time.

Previously, non-payment of wages was largely treated as a civil matter — essentially a debt claim — because unpaid wages were classified as a “right to payment” rather than property already belonging to the employee. As a result, enforcement was often slow and relatively weak.

Section 220AA of the Act changes that by treating intentional non-payment as theft. The law now aligns wage theft with other serious property crimes. Therefore, withholding pay is no longer just a workplace dispute — it is a crime.

 
What It Means in Practice

For employees, the law creates an additional layer of protection. Unpaid wages, holiday pay, or other entitlements can now be pursued not only through the Employment Relations Authority (ERA) but also through police-led criminal prosecution.

For employers, the stakes have risen sharply. This is no longer about simply paying arrears or facing an ERA order. A conviction brings the weight of the criminal law, including the possibility of a criminal record and serious penalties under the Act.

 
Key Issues and Grey Areas

Although the intent is clear, several aspects of this law raise practical questions:

1. Who Qualifies as an Employee

Employment status is determined under the Employment Relations Act 2000. In more complex working arrangements, such as those involving gig workers or contractors, it may fall to the Authority or the Court to determine whether an individual is in fact an employee and therefore entitled to the protections of section 220AA.

2. What Counts as a “Reasonable Excuse”

Employers could avoid liability if they had a legitimate reason for non-payment. But the boundaries are unclear. For instance, if a business in insolvency pays secured creditors before wages, does this qualify? The statute has not yet been tested to determine this, so there are uncertainties.

3. Jurisdictional Overlap

Section 220AA straddles both criminal and employment law. While the Employment Relations Authority and the Employment Court typically handle employment disputes, the High Court and District Court have jurisdiction over criminal matters. This intersection can create uncertainty as to the appropriate forum for enforcement.

4. Practical Prospects of Prosecution

Even where liability for non-payment is clear, the practical prospects of prosecution remain uncertain. The threshold for pursuing criminal charges is not well defined, and it is difficult to predict whether the courts would favour prosecution when penalties are already available under the Employment Relations Act.
 
Final Thoughts

Section 220AA of the Act marks a significant evolution in wage protection law. Employers who deliberately withhold pay without a valid reason now face not just civil remedies but also criminal liability.

However, the law leaves important questions unanswered, such as the scope of “reasonable excuse”, the definition of “employee”, jurisdictional issues, and the practical reality of prosecuting under this legislation.

It has been less than a year since the legislation became enforceable, and judicial commentary on this provision remains limited. An early reference appeared in Singh v Chand [2025] NZEmpC 163. In that case, the Court imposed a fine of $13,000 on Mr Chand for repeated and deliberate non-compliance with compliance orders issued by the ERA in relation to unpaid wages and holiday pay. The underlying issue was that Mr Chand owed Mr Singh $13,000 in salary and accrued holiday pay under a settlement agreement, which he persistently failed to pay. While the central focus of the case lay elsewhere, the Court nonetheless referred to s 220AA of the Act, emphasising the seriousness of failing to meet minimum employment entitlements (such as wages and holiday pay). Importantly, the Court recognised that such failures may, in certain circumstances, amount to a criminal offence under s 220AA.

One notable point from this case is that, although prosecution under s 220AA was available as an option, it was not pursued. This outcome highlights the practical reality of prosecution under the Act and raises important questions about the threshold that must be met before such action is taken. Although the Court’s discussion of s 220AA was only at a surface level, this decision signals its growing relevance. It is likely that, over time, further cases will invoke s 220AA, which will help clarify its scope and resolve current uncertainties through both litigation and legislative development.

It appears, at least for now, that the legislation provides the illusion of an added layer of employee protection rather than delivering meaningful security. Accordingly, employees are advised to remain cautious and attentive to developments in the prosecution of employers for withholding unpaid wages.

As for employers, the takeaway is simple: review payroll systems, clarify payment obligations, and seek legal advice where in doubt. From now on, failing to pay your employees’ wages is unlawful under the Act and attracts significantly greater accountability.