In Geenty v GR & TL Burnett Ltd, the Employment Relations Authority allowed an employer to deduct an employee’s debt from wages owed without his consent.
Under sections 4 and 5 of the Wages Protection Act 1983, a debt can only be deducted from an employee’s wages if the employee has agreed in writing, (such as in a clear deductions clause in an employment agreement). This allows the employee to repay any debts in his or her own time at a rate he or she can afford. This statute is the current incarnation of legislation that has been in place for over a century aimed at protecting workers from unfair practices, such as requiring the employee to spend his or her wages in the company store.
If there is no agreement to deduct, the employer has to pay the wages; then pursue any employee debt through the Employment Relations Authority and/or the civil courts.
However, a recent Employment Relations Authority decision, Geenty v GR & TL Burnett Ltd  NZERA Auckland 171 (Member Robinson) has cast doubt on the long established law in this area.
Mr Geenty was owed $1,263.36 in unpaid wages and holiday pay by his employer. But he had been charged and convicted of theft as an employee and ordered to pay $23,682 in reparation to the same employer (he had been summarily dismissed at the time of his arrest).
The employer argued that it had the right to set off Mr Geenty’s debt under cl. 13 of the Set Off Act 1729 and cl. 5 of the Set Off Act 1735 (“the Set Off Statutes”). These clauses provide that, where a defendant to a claim can prove it is owed money by the plaintiff, judgment should only be entered for any amount outstanding after the debt has been set off.
Section 15 of the Wages Protection Act 1983 provides that the Act “shall be read subject to the provisions of any other Act” and the employer argued that a valid set off must be allowed, as the Set Off Statutes overrode s. 4. The employee argued that s. 15 was only intended to apply to statutes that allowed a deduction from wages (for example, tax legislation).
The Authority Member noted the many cases that prohibited a set off against wages, but found that s.15 was clear and meant the Set Off Statutes overrode s. 4. If said that if Parliament had intended s. 15 to be restricted to statutes permitting deductions from wages, it would have said so.
The legal position in this area is now unclear. None of the previous existing cases on the Wages Protection Act appear to have considered the Set Off Statutes. But if employers are allowed to “set off”, it undermines a fundamental protection of the Wages Protection Act 1983. It would be useful to have this issue considered at a higher level, but in the interim, the door is open for an employer with an appetite for risk to argue it can withhold wages if it has a set off.