Two companies that care for disabled people asked to be put under statutory management because they could not afford the potential $176 million liability of a court-ordered requirement to pay workers for the time they are asleep at their care houses.
Commerce Minister Simon Power this morning announced that the Government had put Idea Services and Timata Hou, wholly-owned subsidiaries of IHC New Zealand and registered charities funded by the health and social development ministries, into statutory management.
Idea cares for almost 3000 people.
Last July a benchmark Employment Court ruling found against IHC on paying for sleep-over hours.
Under the ruling, staff staying overnight at the IHC’s houses are entitled to get at least $12.50 per hour for their 10-hour shifts. Staff currently receive a shift allowance of $34 per night. IHC has about 250,000 of the sleep-over shifts per year.
The Court of Appeal will hear an appeal on October 28.
In a statement IHC New Zealand chief executive Ralph Jones said the companies had no choice, given the potential $176m liability faced by the two companies.
\”While Idea Services is currently in the spotlight, all service providers will be considering whether they can continue to operate in the face of such a huge liability for back pay and ongoing costs.\”
Health Ministry acting director-general Andrew Bridgman said statutory management was a pragmatic solution.
\”The Employment Court ruling has placed Idea Services in a financially untenable position of significant back pay and interest,\” he said.
In 2009 the Ministry funded $378m of community residential disability contracts. Sleepovers were estimated to cost between $400 and $500m in back pay across all providers – there are about 100 – over the previous five years.
\”In addition, the ruling would increase the cost of these services by an extra $60 to $70m per year – an increase of between 16 per cent and 19 per cent which would make most of these services unaffordable in their current form.\”
He said if the decision was upheld the ministry would need to work with partners to find a long-term solution for the about 7000 residents.
Mr Power said IHC itself was not affected and there was no suggestion of wrongdoing.
\”Rather, statutory management is simply intended to preserve the provision of services by the companies pending the resolution of the litigation and subsequent negotiations.\”
In the interim the statutory management would prevent the companies from folding suddenly and leaving those in its care homeless.
\”The Securities Commission recommended this course of action in the public interest to preserve the continuity of services provided by the companies and to enable the affairs of the companies to be dealt with in a more orderly and expeditious way,\” Mr Power said.
Sir John Anderson was appointed statutory manager along with a committee to advise him made up of: the chief executive of IHC and the two companies, Ralph Jones, IHC national president and a director of Idea Services, Donald Thompson, and IHC National Vice-President and a director of Idea Services, Shelley Payne.
– NZPA
Reference: http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10678270