Does the Minimum Wage Act 1983 Act apply to employees in receipt of a salary?, by Eugene Duhovnikoff BA/LLB

In short, the answer is that it does in certain cases. In Law v Board of Trustees of Woodford House[1] Chief Judge Colganheld held[2]:


The MW Act exists to provide minimum essential terms and conditions of employment and to avoid the exploitation of employees with little or no bargaining power. It should be interpreted accordingly and not so artificially that it could easily be rendered impotent. The MW Act can hardly be said to create a bonanza of riches for employees covered by it. Those who should justifiably expect its protection should not be turned away from it by the technicality of an employer’s choice of an annual salary as the method of remuneration payment.
Courts must also interpret legislation as applying to circumstances as they arise or have developed since the legislation was enacted even where the legislation is antiquated. As the Full Court noted in its judgment in Idea Services Ltd v. Dickson although the MW Act was enacted in 1983, this largely replicated its 1945 predecessor.
The words “wages” and “salary” are different descriptions of essentially the same thing, that is remuneration paid to employees for work performed. That a “salary” can also describe the remuneration of others who are not employees (for example office holders) does not mean that an employee’s remuneration must be categorised exclusively as wages alone, or specifically as either wages or salary.
Remuneration practices have changed significantly, especially since 1945 but also since 1983. Fewer employees have their remuneration determined by collective instruments than in those earlier times and, therefore, fewer employees are paid on an hourly or daily basis. A greater proportion of the workforce is now remunerated by annual salaries even although these are actually paid on a monthly, fortnightly or sometimes weekly basis in equal amounts. The legislation should apply to such changes if its provisions will bear such changes.


Furthermore the Chief Judge held that[3]:


"I conclude that an employee in receipt of a salary (or of remuneration so expressed) is not thereby excluded from coverage and falls under the category of “in all other cases” in the rates specified in the statutory Minimum Wage Orders as discussed at [48] earlier in this judgment. That is because such employees cannot be described as being “paid by the hour” or by piecework or “paid by the day”. Salaried employees are not excluded from coverage by the MW Act because of the description of their remuneration as being on an annual basis."

Under this circumstances we encourage the employers to receive competent legal advice when hiring new employees and making decisions on their remuneration.



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[1] [2014] NZEmpC 25.

[2]Ibid at paras 54-55. [3] Ibid at para 71.

Reeves/Duhovnikoff & Associates Ltd. 2017