ERA probes personal-professional overlap in worker's employment status dispute
The Employment Relations Authority (ERA) recently dealt with a case involving a worker who claimed to be an employee of a small family-owned engineering business specialising in hydroponic systems.
The worker argued he had been unjustifiably dismissed, disadvantaged, and unpaid for his work over a period of about ten months. He asserted that he had performed various duties for the company, including sales and marketing, manual labour, and client-facing tasks.
This case sheds light on the challenges of determining employment status, especially when business relationships and personal connections intersect. The outcome hinged on the interpretation of the parties' agreement and the practical realities of their working relationship.
Project-based or full-time employee?
The worker said he worked for the engineering firm from December 2021 to October 2022, for 15 to 25 hours per week. He claimed he started working for the company after the manager asked him to call all Christchurch community gardens to market their products.
The employer, however, denied ever employing the worker. They said their relationship was primarily based on a specific hydroponics project, called the Lincoln project. The employer argued that the worker had confused the work he did for this project with what he now claimed was employment with the company.
The worker and the employer also had a social relationship due to their shared cultural heritage. The ERA noted that it made it harder to distinguish between personal favours, business networking, and alleged employment duties.
Examining the agreement
The ERA looked at the agreements between the parties. The only formal agreement was a General Service Agreement (GSA) for the Lincoln project. This agreement said the company was acting as a contractor to the worker and another individual, not as an employer.
The GSA stated: "In providing the Services under this Agreement it is expressly agreed that [the employer] is acting as an independent contractor and not as an employee to the 'Project'."
The worker said that apart from the Lincoln project, he had agreed to work for the company as an employee or independent contractor doing sales and marketing.
He claimed that on 13 February 2022, he asked the manager for an employment agreement, which the manager said he would provide but never did. The employer denied this, saying the worker had asked about selling products for commission but ultimately declined to do so.
Looking at the practical relationship
The ERA examined the worker's claims about the work he did for the company. The worker provided a spreadsheet detailing the dates, details, and hours of work he said he performed for the company.
Many of the activities described by the worker were found to be related to the Lincoln project. For instance, the worker said he worked on the project every weekend from January 2022, from 9 am to 6 pm every Saturday and Sunday, as well as sporadically during the week.
Other tasks, such as attending networking events and researching produce prices, were seen as activities the worker did voluntarily for his own benefit or for the Lincoln project, rather than work directed by the company.
The ERA also heard from a client of the company who remembered the worker being introduced as someone interested in getting into the hydroponics business, not as an employee. The client said: "[The worker] was introduced as someone who wanted to become involved in the hydroponics business."
ERA applies common law tests
The ERA used common law tests to assess the worker's status. These tests look at control, integration, and the fundamental nature of the relationship.
For control, the ERA found that the worker had a lot of freedom in how he met his obligations under the GSA and in choosing when to do other activities related to learning about hydroponics.
For integration, while the worker used some company systems, this was similar to how other clients were treated and didn't indicate he was an employee.
The fundamental test suggested the worker was running his own business, particularly with the Lincoln project and his efforts to explore other business opportunities.
The ERA's decision
Based on the evidence and legal tests, the ERA decided that the worker was not an employee of the company. The Authority said:
"[The worker] performed work for the Lincoln project as a part owner and stood to benefit from his investment if the project made money when [goods] were eventually sold. The GSA supports that conclusion and was how the relationship operated in practice. [The worker] was in business on his own account."
The ERA also stated:
"I have concluded [the worker] was not an employee of [the employer] under the [relevant test.] I cannot assist [the worker] any further."
