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As a business owner, it is difficult trying to navigate the complex New Zealand employment law framework. This task can quickly drag you away from focusing on your core business. However, employment law issues and disputes can result in financial and reputational damage to your business, which is more significant than the cost of taking steps to prevent them. Developing a good relationship with an employment lawyer can be the best way to strike a balance. This article lists five things to discuss with your employment lawyer in New Zealand. 

What Do Employment Lawyers Do?

Employment law encompasses various processes in your business, such as resource-hiring, your staff’s conduct and promotion, workplace grievances and employment termination. An employment lawyer has specialist knowledge to help you with a wide range of issues, including:

  • distinguish between your independent contractors and employees;
  • draft employment agreements, handbooks and policies for your team;
  • manage employment disputes;
  • mitigate labour rights risks in your supply chain; 
  • draft health and safety policies and procedures;
  • provide in-house HR services; and
  • manage labour-hire matters.

1. Your Employment Lawyer Can Help You Distinguish Between Independent Contractors And Employees

Hiring contractors can have many advantages for your business, including reducing your payroll annual expenditure. However, you cannot label a worker as a contractor when they are not, as ultimately the nature of your working relationship is subject to many factors determined by law. Distinguishing between employees and contractors can be difficult, but it is essential to get it right to avoid employment problems and fines.

Employment New Zealand provides some legal tests to help you differentiate an employee from a contractor, including:

  • the intention test, 
  • the control vs independence test, 
  • the integration test; and 
  • the fundamental (economic reality) test. 

You need to apply all of these tests to your specific situation to make a decision. Your lawyer can provide you with employment law advice to help you distinguish between employees and contractors to ensure you are compliant with the legislation and the minimum employment standards. They can also provide legal representation in the event of a dispute.

2. What Are the Key Terms to Include in Your Agreements?

Whether you are engaging an employee or an independent contractor, you should ask them to sign a written agreement. This legal document defines your relationship with them and shapes how your workers fit within your business. Having written agreements in place provides you with a safety net to discuss rights and duties with your workers, and it protects you in the event of a dispute.

An employment agreement sets out the relationship between your business and your employees, as well as rights and obligations for both parties. Certain terms are essential to an employment agreement, such as:

  • payment terms;
  • working hours;
  • leave entitlements; and
  • termination.

An independent contractor is not entitled to the same rights as employees. They can decide how they work; they use their own tools and pay their own tax. Therefore, some of the key terms in their contract include: 

  • key milestones and deliverables of the project;
  • hours of work; and 
  • payment terms. 

Instead of drafting an independent contractor agreement, you could instead choose to sign your contractor’s own service agreement. However, this could be less advantageous for your business so you should seek legal advice. 

You can ask your employment lawyer to review your legal agreements with your employees and contractors, to ensure you are not making some of these common mistakes:

  • hiring contractors who are actually employees;
  • using a casual employment agreement for part-time workers;
  • using a fixed-term employment agreement in place of a trial period;
  • failing to comply with minimum employment entitlements in your agreements;
  • failing to comply with your employees’ basic rights;
  • if you use templates, failing to tailor your agreements to each employee, as you can accidentally omit a mandatory clause;
  • using unclear terms and provisions that do not match the reality of the job; or
  • including policies and procedures in your agreements that are not contractually relevant.

3. Are You Underpaying Your Employees?

Regardless of your business size, you should take proactive steps to audit your employment records to ensure ongoing compliance with employment laws. In addition to the stress to both your business and employees, an underpayment scandal can also be very damaging to your reputation.

Most underpayment cases in New Zealand have occurred as a result of employers misinterpreting the legislation, applying incorrect salary entitlements or outsourcing to incompetent payroll companies. However, you may face more severe consequences if you are found guilty of wage theft. This is when you deliberately underpay your employees, hold back their holiday pay or expect them to work overtime without pay. 

How to Minimise the Risk of Non-Compliance

You can underpay employees even when you have a plan in place. Therefore, it is essential to carry out ongoing checks to minimise the risk of non-compliance. These should include:

  • ensure you are correctly applying employees’ minimum entitlements;
  • if you pay an annual salary to your staff, ensure you comply with New Zealand wages and pay requirements and that you have the right contracts in place;
  • conduct regular audits to ensure compliance with New Zealand wages and pay legislation; 
  • ensure you are correctly applying “ordinary weekly pay” and “average weekly pay”;
  • implement processes to identify and report any non-compliance with employee minimum pays entitlements and your obligations; and 
  • allow your staff to use a whistle-blower line to report to management any concerns.

If you think you might have employment issues in this area, you should get legal advice from an employment lawyer. They can assist you in: 

  • reviewing your employment practices to ensure they are compliant;
  • auditing your employment practices and documents to ensure that you are compliant; and
  • offering practical advice to resolve any issues they find.

4. Your Employment Lawyer Can Help You Mitigate Labour Rights Risks in Your Supply Chain

As a result of increasing legal requirements and expectations from consumers, customers, employees and stakeholders, you need to develop systems and processes to identify and mitigate labour rights issues in your business and supply chain. Some of the key reasons why you want to manage these risks include:

  • if your business operates in Australia or supplies to an Australian company, you need to comply with Australian anti-slavery legislation (by reporting on the steps you are taking to manage the risks of slavery in your supply chain); 
  • if you want to protect your brand and meet customers’ expectations, you need to ensure your supply chain complies with sustainability, social and human rights criteria; 
  • if you export to a country with trade regulations that prohibit the production of goods using forced labour, their public authorities can seize your goods; and
  • your investors’ relationships can suffer damage by allegations of forced labour and trafficking, which can endanger your accessibility to public funds. 

Your employment lawyer can help you put steps into place to identify and manage labour rights risks in your business and supply chain, including: 

  • creating a policy or code of conduct for your own business;
  • mapping your supply chain;
  • seeking a commitment to a supplier code of conduct or ethical sourcing policy; and 
  • conducting a risk assessment. 

5. Your Employment Lawyer Can Help You Stay Compliant With Health and Safety Laws

If you run a business in New Zealand, including as a sole trader, you are responsible for the health and safety of your workers, as well as customers, visitors and the general public, if they can be put at risk by your work. If you fail to comply with the New Zealand health and safety legislation, you could face court-imposed penalties and hefty infringement fees. 

An employment lawyer can help you audit your current policies and procedures to ensure you are compliant with the legislation, as well as drafting effective practices for:

  • providing and maintaining a safe work environment, plant and structures, systems of work and adequate facilities for the welfare of workers at work; 
  • using, handling and storing plant, substances and structures safely;
  • providing information and training to protect people from risks to health and safety arising from your work; and 
  • monitoring the health of workers and the conditions at the workplace to prevent illness or injury to workers arising from your work.

Key Takeaways 

As an employer, you have several responsibilities towards your employees and contractors, defined by your employment agreement or workplace policies. Some of these responsibilities stem from the legislation, such as the employee minimum rights. It is essential to understand your obligations, use the right legal documents and have adequate policies in place. These steps can protect your business from employment disputes, financially draining liabilities or reputational damage. If your resources are low, it can be difficult to find the time to navigate the complex New Zealand employment legislation. Therefore, you should invest in a good relationship with an employment lawyer to assist you in meeting your obligations and mitigating risks for your business. 

If you need legal advice on employment matters such as drafting employment agreements or distinguishing between employees and contractors, LegalVision’s employment lawyers can help. Call 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What are the different types of employment status in New Zealand?

An employee is a person who agrees with you to work in exchange for payment under a contract of service. Some types of employees include permanent, fixed-term, casual, seasonal, employees on probationary and trial periods and employees in a triangular employment situation. An independent contractor is not an employee.

What employment rights do employees have in New Zealand?

As an employer, you are required by New Zealand law to act in good faith when dealing with your employees. You must also comply with your employees’ minimum rights, such as respecting public holidays, annual, parental, sick and bereavement leave, and paying them at least the minimum wage. You also need to make sure that your employees are safe at work and not unlawfully discriminated against, bullied or harassed.

What is the difference between an employee and a contractor?

Independent contractors can decide how they work; they use their own tools and pay their own tax. As an employer, you pay your employees a salary or wage for their time and deduct their tax. Employees have employment agreements with your business, while contractors are free to work for anyone. Employment New Zealand provides some legal tests you can apply to your situation to help you differentiate an employer from a contractor. If you are not sure, you should seek legal advice.

What must be in an employment agreement NZ?

An employment agreement sets out the employment relationship between your business and your employees, as well as rights and obligations for both parties. Certain terms are essential to an employment agreement, such as payment terms, working hours, leave entitlements and termination.

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