The Employment Relations Authority has ordered an employer to pay an employee 6341 hours of unpaid wages at the minimum wage rate as well as 8% for holiday pay after the ERA found there was an employment relationship between two friends.

The employee’s claim for unjustified dismissal was not upheld, the ERA decided that the direction from the company that the employee should stop working until the dispute over unpaid wages was resolved, did not amount to a dismissal.

The ERA also awarded penalties against the employer of $20,000 for failing to maintain proper wage and time records, no provision of an employment agreement, and failure to comply with the Holidays Act and the Minimum Wage Act. This sum was paid straight to the employee.

This relationship was unique because there was no agreed employment contract, hours of work or remuneration. Rather, it began from a kind act of providing lodging for a friend following a breakdown in the friend’s marriage. The employer believed that free lodging was sufficient compensation for the work performed.

Employers must be aware that even if there is no intention to create an employment relationship, it can be formed inadvertently. Once formed, the employer must comply with all the legal requirements.

Under New Zealand law, all employers must keep written employment agreements, and accurate time and wage records for all employees. They must also comply with annual leave and holiday payments, and pay at the rate of at least the current minimum wage.

Alan Knowsley
Employment Lawyer