Cases of interest: May 2020

A summary of interesting or topical employment cases.

Leota v Parcel Express Ltd [2020] NZEmpC 61

Employment Court – courier driver – employee or contractor – English as a second language – declaration – jurisdiction

The Employment Court declared that Mr Leota, who worked for the courier company Parcel Express Ltd, was an employee throughout his time working there, and not an independent contractor. The judgment only decided what Mr Leota’s employment status was, and does not find that all courier drivers in New Zealand are employees (see paragraph 4).

Mr Leota had connected with the company through his church. The company told him that he would need to buy his own van, pay $2000 to get company signwriting on the van, and pay a $2,000 bond. He was told he would be his own boss and would need to sign a contract. Mr Leota spoke English as a second language and the Court found that it was likely that he was neither provided a copy of the contract, nor a chance to read and seek advice on it, before being asked to sign, and had no real understanding of what his status was when working for the company (see paras 16–18).

The Court found that despite being described as being his own boss, he exercised no real autonomy over his work with the company (see para 50). The company provided evidence that he had opportunity to learn about managing taxes and take time off as he pleased, but the Court found this was factually not the case since the company restricted his days off to 20 days per year and required him to find replacement workers (see para 52). It also found that the fact that independent contracting is an industry standard practice in the courier industry was not conclusive.  Additionally, Mr Leota, being a vulnerable worker with English as a second language, would probably not have known about this industry standard practice (see para 59).

The evidence suggested to the Court that Mr Leota had not been running his own business and was solely in the business of Parcel Express (see para 71). Factors pointing towards this finding included the following:

  • Mr Leota was not free to grow his supposed business, because his working hours were all spent doing work Parcel Express provided. The company retained customer lists and goodwill when he left. Mr Leota was required to refer any potential customers to the company’s sales manager (see para 61).
  • Mr Leota never earned more than his guaranteed daily rate. The way that the relationship operated, it was unrealistic for him to be able to increase his earnings (see paras 63–66).
  • The fact that Mr Leota owned his own van was found to be at best a factor pointing neither towards him being an employee or a contractor (see para 69).
  • Mr Leota was required to provide personal service. He was required to find substitute drivers when he took leave and the company had to approve the substitute, which the Court found was for the purposes of protecting its own business (see para 70).

The Court concluded that Mr Leota was an employee of the company and not a contractor, finding the documentation stating that he was a contractor to be less relevant than evidence about the actual work relationship (see para 72).

Leota v Parcel Express Ltd [2020] NZEmpC 61 [PDF 464KB] (external link)

Southern Taxis Ltd v Labour Inspector [2020] NZEmpC 63

Employment Court – Employee status – Whether taxi drivers were employees or contractors - Director’s liability to pay employees outstanding entitlements

Southern Taxis Ltd operated a taxi business.  It ceased operating in 2016.   The company employed dispatchers as employees.  It engaged owner-drivers as contractors.  The workers who drove taxis belonging to the company in exchange for 40% of the fares were considered “commission drivers”.  The three questions before the Employment Court (Court) were:

  • Were the commission drivers employees?
  • If so, what arrears were owed by the company to those persons?
  • Should the directors be personally liable for those payments, given the financial circumstances of the company?

The Court found that the commission drivers were employees and not contractors (see para 124).  The employers had deducted PAYE from their wages in response to communication from Inland Revenue and there was no evidence the employees were in business on their own account (see paras 105–106); the employees maintained logbooks showing their hours of work, they were required to wear stipulated clothing and their working arrangements were proscribed (see paras 91–93).

The Court accepted the Labour Inspector’s calculation of the outstanding monies.  The drivers were owed $79,867.78 in minimum wage arrears, holiday pay, rest break entitlements and unlawful deductions (see para 145).

The Court found that the directors of the company could not be held personally liable for the arrears due to their genuine, though mistaken, belief the commission drivers were not employees.  There was no evidence that they knew the commission drivers were employees and knowingly breached their employment standards (see paras 171–172).  The evidence before the Court was that the company would be unable to pay the arrears (see para 150).

Southern taxis Ltd v Labour Inspector [2020] NZEmpC 63 [PDF 520KB] (external link)

Max Pennington Motors Ltd v Labour Inspector, Ministry of Business, Innovation and Employment [2020] NZEmpC 64

Employment Court – Calculation of remuneration for Public Holidays – Holidays Act 2003 – Relevant Daily Pay – Average Daily Pay

The salespeople employees received a base salary as well as a monthly commission based on the number of vehicles they sold.  The workplace did not open on public holidays.  The employer calculated the employees’ public holiday (not worked) pay on their Relevant Daily Pay (RDP).  However, it calculated the employees’ pay on alternative holidays, sick leave and bereavement leave based on their Average Daily Pay (ADP) instead.  The Labour Inspector argued that the company must also pay the employees public holidays based on their ADP.

The Holidays Act 2003 stipulates in s 49 (external link) that when an employee does not work on a public holiday the employer must pay the employee the employee’s RDP (see s 9(1) (external link) ) or ADP (see s 9A (external link) ) for that day.  The ADP would have resulted in greater pay as the average would be based on their income including all of the commission earned.

The Court found that, if accepted, the Labour Inspector’s argument would lead to a perverse result contrary to the express intention of the legislation (see para 23).  The purpose was to make RDP the primary method of calculation, but to give the option of ADP when RDP was too difficult to calculate (see para 22).  The employer had discretion whether to pay RDP or ADP (see para 27).    

The Court noted that cases will need to be considered on their facts (see para 24).  However, in this case the employer was able to pay its employees according to their RDP on public holidays, irrespective of the calculation it used for other types of leave.

Max Pennington Motors Ltd v Labour Inspector, MBIE [PDF 253KB] (external link)

Labour Inspector v Fernando [2020] NZEmpC 66

Employment Court – Directors’ liability to pay employees interest on outstanding entitlements

Two employees were owed outstanding wages and holiday pay by their previous employer.  The employer company had been placed into liquidation and was unable to pay.  The directors accepted they were ‘persons involved’ in the minimum standards breaches under s 142W (external link) of the Employment Relations Act 2000 (Act).  Therefore, they were personally liable to pay the employees.  The Labour Inspector applied to the Court for an order that she could recover interest on the arrears from the directors.

The Employment Relations Authority has jurisdiction to order a party to pay interest on matters involving the recovery of money in accordance with cl 11 of sch 2 (external link) of the Act.  Interest is intended to compensate the other party for the delay in payment.  The parties to this matter disagreed as to whether the directors were liable to pay interest when the company was unable to.

The Court found that the cause of action against Mr and Mrs Fernando arose when they breached the employee’s minimum entitlements, as opposed to when the company went into liquidation (see para 41).  At the time of the breaches, the company had liabilities as the employer, and the directors had “at least contingent liabilities” due to their involvement in the breaches (see para 38).  The Court found this interpretation to be consistent with the purpose of pt 9A (external link) of the Act being to promote effective enforcement of employment standards (see para 41).

The Court ordered the directors to pay the employees interest on the outstanding wages and holiday pay (see para 44).

Labour Inspector v Fernando [2020] NZEmpC 66 [PDF 236KB] (external link)

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