This week the Employment Court handed down a landmark decision relating to three former members of the Gloriavale Christian community. While this case might seem extreme or unusual it is a timely reminder for employers to consider who is working for them, and whether they have the right agreements in place.
Who is an employee?
The short answer is that an employee is a person who has agreed to be employed to work for some form of payment under a contract of service (an employment agreement). More about this later.
In the case of the Gloriavale three, the court ruled that the “chores” they undertook between the age of 6 and 14 were regular in nature and directly contributed to the commercial operations of the business. Gloriavale was obliged to pay and treat them as employees.
What about workers who aren’t employees?
So far so good, but what about other people who might work in a business, such as volunteers, prospective employees doing a work trial, people doing work experience or interns?
Generally speaking, there are two considerations:
- Does the person get paid? (Reimbursement of expenses or a gift of koha can be ok.)
- Does the business receive an economic benefit from the work done? If a person is doing work integral to the business, which it benefits from commercially, and which an employee would normally be expected to do, then they may still be considered an employee.
Employers should therefore think carefully about the work the person is going to be doing, to make sure it is not work integral to the business, work which an employee would normally do, or work which creates an economic benefit to the employer.
Before any non-employee starts, the employer should also make clear in writing before they start work what the nature of the arrangement is, its duration, and the fact that there will be no payment. The person should be asked to confirm their agreement to the arrangement.
What kind of employee?
Employees tend to fall into one of three categories:
- Permanent employees (whether full time or part time)
- Fixed term employees, whose employment will end on a specified date, on the occurrence of a specified event or on the conclusion of a specified project (for example seasonal workers or a person employed to cover maternity leave).
- Casual employees (who are offered employment from time to time with no guaranteed hours of work)
Each of these arrangements should be documented specifically to ensure the arrangement is clearly agreed and meets the requirements of the Employment Relations Act 2000. This includes setting out the basis for the working relationship and dealing with matters such as pay and leave.
Employers are required by law to have written employment agreements for every employee, and penalties can be imposed if an employer does not do so. As the Gloriavale case shows, failing to get the basics right from the start can be costly.