The Employment Relations Authority has fined an employer after it treated one of its employees as a contractor.

Following the resulting disagreement, the employee refused to return to work and raised a personal grievance for unjust constructive dismissal. This resulted in fines for unpaid KiwiSaver, holiday pay, sick pay, hurt and humiliation, and a general penalty. This totalled over $19,700.

The young man met the employer as a connection through his father, and was taken on as a general labourer. During this time the employee began an apprenticeship under the employer.

After 10 months, the employee’s father contacted the employer demanding payslips, and an employment agreement, as one had never been provided to the employee.

After the employer agreed to provide the documents and failed to follow through, the employee refused to return to work and engaged a solicitor.

The Authority applied a test in order to determine whether an individual is a contractor or employee. This test comprises consideration as to the parties’ intentions, degree of employer control over the individual, and who pays the taxes during the work engagement.

The ultimate decision was that the employee was not a contractor, and by breaching their employment agreement terms by paying incorrectly, and failing to provide payslips or formal employment agreement, the dismissal was considered constructive and unjustified.

It is important when entering an employment arrangement to understand what capacity an individual is employing, or being employed, in.

Awareness around the different rights and obligations between contractors and employees are also vital. Individuals experienced in employment should be consulted to avoid ambiguity and potentially costly mistakes.

Alan Knowsley
Employment Lawyer