Employer ordered to pay $32,290 after failure to pay employee correctly...

The Employment Relations Authority has ordered an employer to pay more than $32,000 after they failed to pay the employee his annual leave and public holiday entitlements. The employee brought the complaint claiming to be just that, an employee, not an independent contractor as alleged by the employer.

The employee started working for the employer for a “contractor rate” of $20 per hour and was informed that as he was a contractor, he would have to take care of his own tax and ACC levy obligations. After leaving the job a year later the employee raised a complaint with the labour inspector.

When determining whether a worker is an employee or a contractor the Authority must look at all contextual factors.

The Authority stated that the employee:

• had no prior work experience and did not know the difference between the obligations of an employee and the obligations of a contractor.
• had no control over any of the work he did,
• had no ability to profit from doing the job,
• carried no risk of loss for doing the job poorly,
• was made to wear clothing branded with the employer’s logo.

Due to these factors the Authority decided that the worker had no ability to work on his own account, and was therefore an employee of the employer and not an independent contractor.

The Authority ordered the employer to pay $3,590 as compensation for unpaid annual leave, $1,700 as compensation for unpaid public holidays, $22,500 in penalties, and $4,500 in costs.

Having to pay these monies unexpectedly, and spend considerable time preparing a defence to a claim, would place a strain on most businesses, and is yet another reminder to employers why it’s so important to get the issue of employee or contractor right from the outset.

If there is confusion around the rights of an employee it pays to seek advice from a professional with experience in the area.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price 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 & Matthew Binnie