In June this year the Employment Relations Authority considered the case of Choi v Hagfish NZ Limited which involved determining whether or not an individual was an employee or a contractor in circumstances where no contract of any form had ever been signed.
The case involved approximately three months’ work repairing a fishing vessel owned by Hagfish.
The worker had been previously retired and came out of retirement to complete the work. There was an agreement of an amount to be paid each week and for accommodation and travel expenses to be met.
The work was completed and payments were made to the worker’s bank account. The worker believed that PAYE would be paid by the employer on the understanding he was always to be an employee. No invoices were ever rendered for the work and the worker was not GST registered. He had not been working for any other organisation or holding himself out as a contractor prior to the work commencing.
The Employment Court considered the various tests for determining whether or not someone was an employee or a contractor and noted that ultimately the approach required to be taken by the Court was to gain an overall impression of the underlying and true nature of the relationship between the parties.
The Court found that the relationship between the parties was ultimately an employment relationship. There was nothing in the nature of the work or the relationship that suggested that it would ordinarily be of a contracting nature.
The lesson for employers is that where adhoc or one off services are arranged, it is very important to clarify the nature of the services and the status of the contracting parties before the work starts. If that is not done, there is real risk of a finding of an employment relationship when that may never have been intended. Similarly, a failure to document a relationship at all will not assist an employer avoid payment of wages or other amounts owing by suggesting that no employment relationship was formed.