Contractor or Employee? Getting it wrong can be very costly

The former directors of a Dunedin taxi company have been found personally liable for failing to pay minimum wages and holiday pay. 

The Employment Relations Authority found Ronald Grant and Maureen Grant treated four taxi drivers as contractors when they were, in fact, employees of Southern Taxis in Dunedin.

The decision followed an earlier determination by the authority ordering the company to pay $97,753 in minimum wages and holiday pay to the drivers.

However, the company assets had already been sold and the company no longer had the ability to pay.

The Ministry of Business, Innovation and Employment labour inspectorate Christchurch regional manager Jeanie Borsboom said the Grants knew the difference between contractors and employees and this was a clear case of mislabelling.

“They provided the four drivers with vehicles, payslips, deducted PAYE and treated them differently from other contractor drivers employed by the business,” Borsboom said.

“At the same time, they failed to keep accurate records, pay at least the minimum wage and holiday pay entitlements and made unlawful deductions.”

The couple claimed they didn’t know they were breaching the law.

Borsboom said claiming ignorance could not be used as an excuse for illegal behaviour

“This decision shows that employers cannot claim lack of knowledge in circumstances where they should have turned their minds to potential breaches and that company directors cannot hide behind the corporate veil to reduce their liability.”

The inspectorate was intensifying its focus on unlawful use of contracting to bypass employment regulations. 

“Unfortunately the inspectorate sees evidence of employees being unlawfully treated as contractors across a number of sectors, with examples in labour-on-hire, construction, and with courier, delivery and taxi drivers,” she said.

“Unlawful use of contracting is increasingly a focus area for the Inspectorate.”

Borsboom said there was no excuse for employers to get it wrong or to intentionally attempt to rort the system.


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