The Employment Court has ordered an employer to pay a friend who was found to be an employee back pay and holiday pay.

The employer allowed the friend to work for the business on an informal basis. The man did not have an employment agreement, and did not ask to be paid in return for his services, but did expect some form of reward.

The casual arrangement carried on for several years until the relationship between the employer and friend deteriorated.

The employer ended the arrangement, and the man claimed he should have been paid for his work.

The Court held that the friend was in fact an employee of the employer. The man had done work that other employees would have carried out if he had not.

This meant that despite the initial intention that the man was just helping out the business, although for some form of eventual reward, the employer now owed him all the minimum entitlements of an employee.

The employer breached minimum wage laws, the requirement to pay holiday pay, and failed to provide an employment agreement.

The Court ordered the employer to pay the employee $96,852 in wage arrears, $7,748 in holiday pay, and imposed a $20,000 penalty, $10,000 of which was to be paid to the employee.

It is important for businesses to understand when a person is employed by them, even where no employment agreement has been provided. Operating on the basis that a friend is simply helping out without remuneration may result in expensive back-pay and penalties.

If there are concerns about the informal nature of an arrangement in your business, it pays to speak with a professional experienced in the area.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-priced Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

Alan Knowsley