If they work like employees, and look like employees, they must be employees, right?

In light of the current Gloriavale litigation in the Employment Court, in which a number of former Gloriavale residents allege that they were employees rather than volunteers, it is interesting to consider what makes an employee in the legal sense.  The types, locations, and arrangements around ‘work’ are constantly changing.  So what makes an employment relationship?  And how do we distinguish that from other types of relationships?

Section 6, Employment Relations Act 2000

The starting point is the definition of “employee” in the Employment Relations Act 2000 (ERA). 

This definition states that an employee “means any person of any age employed by an employer to do any work for hire or reward under a contract of service”.  It expressly includes homeworkers (persons employed to work in a domestic environment), and persons intending to work (those that have been offered and accepted employment but have not yet commenced work).  It expressly excludes “volunteers” (more about them in a moment) and “film production workers”, which terms are exhaustively defined. 

In addition, the definition provides that in making a determination as to whether someone is employed by another person, the court or Employment Relations Authority “must determine the real nature of the relationship between them”.  In doing so, it  must consider all relevant matters (including the intention of the parties) and is not to treat as determinative any statement by the persons that describes the nature of their relationship.  In other words, the label that the parties place on the relationship is relevant, but will not necessarily be the final word on the matter. 

To further complicate matters, relationships can morph or shift over time; what genuinely started as an agreement to volunteer or a genuine independent contractor agreement, might shift over time into a situation where the real nature of the relationship is one of employment. 

Why is it important?

Employees have a number of rights and protections (as well as obligations) that participants in other relationships do not have.  Minimum code legislation (for example the Minimum Wage Act, Holidays Act, Parental Leave and Employment Protection Act, Wages Protection Act) apply to employees only.  The ERA provides protections in relation to matters such as good faith, dismissal, harassment, discrimination, and mechanisms for resolving disputes that are not afforded to non-employees.  There will also be tax consequences (potentially for both parties).

While there are sometimes good reasons why a person might not want to be an employee, more frequently, the person is seeking to be declared an employee to gain the benefits of entitlements like minimum wage or holidays, or the protections of the personal grievance procedures.

What other relationships might potentially be employment? 

 There are a wide range of relationships that could potentially be employment. 

Frequently, the issue arises in relation to the distinction between independent contractors and employees – we have written about recent cases involving builders, couriers, and uber drivers in New Zealand and the UK.. 

We have also seen cases (like the Gloriavale litigation and a person who managed a campground in return for accommodation) where the court needed to consider whether the ‘worker’ was a volunteer, working without expectation of reward or actual reward.  The applicants in the Gloriavale case allege that they were not, in the true sense, volunteers, and that while they were not always remunerated for the work that they did, they should have been.  Part of their argument is that Gloriavale entities were running commercial operations, in which the residents (including children) worked, allegedly for long hours in sometimes difficult conditions.  They also allege breaches of other minimum standards, such as holidays and obligations to provide a safe work environment.  We will keep you posted on the outcome of this case, currently being heard in the Employment Court.

Other situations where a declaration of employment has been sought include:

  • Shareholders working in a business
  • Directors working in a business
  • Spouses/partners working together
  • Trainees/interns/work experience students
  • Owner-drivers
  • Family business arrangements

Other cases, notably family carer situations, and labour hire/temp agencies have needed to consider both the nature of the relationship (is this employment?) and if it is employment, the identity of the employer (the end user or the agency?). 

Finally, there can be a question about what constitutes ‘work’ within an employment relationship – including cases relating to ‘sleepovers’ (in care situations), ‘donning and doffing’ (before and after a shift of work) and staff meetings.    

What does this mean for you?

The simple point is that work arrangements are not always simple!

It is important to think carefully about whether the relationship has been correctly categorised, and if you are meeting all the relevant obligations.  The law in this area is constantly evolving, so it is worth checking in to make sure that arrangements reflect the current legal tests, and that the contractual position describes what is actually happening in practice.

We advise on these issues frequently.  If you need to check in or check up on whether those contractors or interns are really employees, we can help.  Please get in touch with our Employment Law Team or your usual contact at Hesketh Henry.


Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.

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Contact the expert team at Hesketh Henry.
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

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