The statutory management order on Idea Services will not affect Otago clients or their carers, Otago area manager Daniel Barnett says.
Yesterday, Commerce Minister Simon Power put IHC subsidiaries Idea Services and Timata Hou under statutory management at IHC's request, because of their potential multimillion-dollar liability in the wake of the order to pay workers for sleep shifts.
Mr Barnett said the future shape of Idea Services was uncertain until the pay issue was resolved.
The statutory management order caused consternation among staff yesterday.
Many were unsure exactly what it meant and were asking questions, he said.
Otago had about 30 homes with overnight staff.
The companies, both registered charities funded by the health and social development ministries, sought the move, saying they could not afford the potential $176 million liability of paying overnight staff and wanted to ensure they could continue to operate until an appeal was heard.
The Service and Food Workers Union says the problem is the Government underfunding services.
Labour Party leader Phil Goff agreed funding needed to increase now the court had made its decision and, if in government, he would do that.
Idea cares for almost 5000 people, of whom 3000 are in residential care.
Timata Hou, a residential rehabilitation service, cares for 67 people.
Last July, a benchmark Employment Court ruling found against IHC, which had opposed paying for sleep-over hours.
Instead of a shift allowance of about $30, staff should get at least the minimum hourly wage.
The Court of Appeal will hear an appeal on October 28.
IHC New Zealand chief executive Ralph Jones said the problem was wider than his organisation.
"All service providers will be considering whether they can continue to operate, in the face of such a huge liability," he said.
The Health Ministry said that last year it funded $378 million of community residential disability contracts.
Sleepovers were estimated to cost between $400 million and $500 million in five years of back pay for all providers.
There are about 100 caring for 7000 people.
The ruling was estimated to increase the cost of these services by an extra $60 million to $70 million per year.
Service and Food Workers Union national secretary John Ryall said it was time the Government fronted up and took responsibility for the situation.
Health Minister Tony Ryall said the sleepover court case had "very significant implications" for the whole economy.
While the back pay liability was on the provider, the Government wanted to maintain quality services.
"How that is to happen will be assessed once the court process is completed," he said.
He questioned how Mr Goff would pay for his commitment.
"They are promising $500 million back pay plus another potential $80 million per year in ongoing costs. Someone is going to have to explain where the extra money is coming from."
