Hiring friends or family can be costly

Hiring friends or family can result in a successful employment relationship for some. However, sometimes a close relationship can become strained due to the employer-employee relationship.

A recent ruling by the Employment Court details how an almost 50-year friendship ended after an employment disagreement. 

In 2009, Mr George Cowan started driving trucks for Kidd Partnership, the business of his long-term friend Mr Charles Kidd. Mr Kidd provided Mr Cowan free accommodation, and in 2010, gave him a section of land valued at $80,000.

Over the next few years, Mr Cowan continued to do various tasks for Kidd Partnership, including construction, maintenance and farm work, which he did not receive any payment for.

In 2016, the relationship began to sour and Mr Cowan made a claim for unpaid wages. The relationship worsened and Mr Cowan stopped working for Kidd Partnership. Mr Cowan then raised a personal grievance for unjustifiable dismissal. 

In response to the grievance, Mr Kidd claimed that Mr Cowan was not an employee but a friend, while Mr Cowan believed he was a permanent employee. The Employment Court ruled that most of Mr Cowan’s work for the Kidd Partnership was that of a casual employee; he should have been paid for his work, but he was not unjustifiably dismissed.

The Court ordered that Kidd Partnership owe Mr Cowan $104,600.85 for unpaid wages and that both Mr Kidd and his son must pay a total penalty of $20,000 – half of which is to be paid to the Crown.

Mr Kidd requested that the value of the land that he gave to Mr Cowan be deducted from the wages, as he saw the land as payment for the work Mr Cowan had performed and would perform. The Court ruled that the value of the property could not be taken in to account as payment for Mr Cowan’s work. 

At the heart of the matter, as is often the case with employment disputes, is a breakdown in communication. It’s important to remember that employers and employees should, even if they are a friend or family member, communicate clearly with each other so each party understands what is expected of them and what their work arrangements are.

This includes having the correct employment agreement and keeping accurate records. Having written documentation makes things clearer for both employees and employers, and can reduce the chance of a dispute. 

If you are thinking about having friends or family help with your business, it’s worth considering the employment implications of the arrangement. The situation can become an employment relationship and could turn out to be costly.

Business owners must act carefully and follow proper processes when hiring staff, regardless of their relationship with the person. 

Cases of interest – July 2020

Preventing relationship problems

Keeping accurate records

Employment agreements