The relationship between the Candidate, you the Client and the Recruitment Agency.
A man accused of immigration fraud was misled by the recruitment company he used and did not personally profit from the deal, his lawyer Philip Mitchell, has told the Wellington District Court today.The 65-year-old business owner, who has name suppression, is on trial in the Wellington District Court this week. The man denies seven charges, including supplying false employment agreements, producing false information and attempting to pervert the course of justice.
Crown prosecutor Ian Murray said the case revolved around the man getting cheap discounted labour, while the recruitment agency collected large fees from its Clients. Mr Mitchell said the directors of the recruitment company admitted involvement in the scam a week ago.
There was no evidence his client received any money from the recruitment company.
Mr Mitchell said his client was an honest businessman, and he urged the jury to keep an open mind. The Crown will call 13 witnesses, and the trial is expected to last for a week.
This court case clearly shows the importance of having an understandable contract in place with any recruitment agency you use. This should include the basic rules of engagement which covers but are not limited to: contract administration and negotiation, all wage costs and wage related payments, ACC costs, PAYE, duration of the employment, the right to retain the candidate, health and safety supply, induction and safety management to name a few (do not be fooled by the “we take care of that line” from the recruitment provider). This case clearly demonstrates the authorities do not accept this view.
It should also include who holds the liability for any incidents involving fraud, motor accidents, loss of product, theft and who actually manages the employment relationship if things go sour.
Using a recruitment agency should always assist your business legally and there should always be an assurance that there is compliance with the Employment Relations Act and all subsequent employment legislation. As in all areas of business there are honest reputable organisations that meet all legislative and moral obligations and those that seek to circumvent these for short term personal gain, ending up in court for a week facing serious charges is costly and can be avoided by ensuring you use a reputable recruitment provider that is part of the RCSA (Recruitment and Consulting Services Association).
Reliance on Trial Period proves costly
The recent decision of the Employment Relations Authority in Hall v Smith Crane & Construction Limited highlights the importance of understanding legal requirements when entering into contracts of employment.
Mr Hall was recruited from England as a senior piling project manager by Smith Crane & Construction Limited (“SCC”) to work in Christchurch. A letter of offer was emailed to him and enclosed with the letter was an Individual Employment Agreement (“IEA”). The IEA contained a 90-day trial period clause. The letter of offer stated;
“Should you find the terms and conditions of the above letter and attached employment contract acceptable please sign one copy and return to our Johns Road office, and keep one copy for your own records”.
Mr Hall signed the letter of offer but not the IEA. He subsequently commenced employment with SCC on 13 January 2014. Mr Hall had been employed for approximately 4 weeks when it was discovered by SCC that he had not signed the IEA. It was presented to him and signed by him on 11 February 2014.
Mr Hall was dismissed from SCC as at 8 April 2014 in reliance on the 90-day trial period provision in the IEA. SCC expressed itself as being dissatisfied with his performance. Mr Hall raised a personal grievance alleging unjustified dismissal. The Authority was required to first consider whether the trial period was valid. If it was, then the Authority had no jurisdiction to hear Mr Hall’s claim of unjustified dismissal.
In its decision the Authority referred to the requirements for a 90-day trial period to be valid, being a requirement for a written provision in an employment agreement and that the employee has not previously been employed by the employer. The Authority recorded;
“These two requirements are intertwined and establish that if an IEA containing a 90 day trial provision has not been signed by both parties before an employee begins their employment there is no effective 90-day trial provision.”
The Authority determined that Mr Hall was an employee of SCC before he signed the IEA containing the written provision for a 90-day trial period. He had commenced employment on 13 January 2014, but did not sign the IEA until 11 February 2014. Therefore the trial period provision was not effective and Mr Hall was able to exercise his right to bring a personal grievance claim alleging unjustified dismissal.
The Authority went on to find that Mr Smith had been unjustifiably dismissed from his employment. SCC had not complied with the basic procedural requirements in dismissing Mr Hall. Mr Hall was not advised of concerns about his performance, and not provided with an opportunity to respond to those concerns or to improve his performance. In the absence of a valid 90-day trial period provision (which would have prevented Mr Hall from raising a grievance for unjustified dismissal), it was held that a fair and reasonable employer could not have acted as SCC did. In respect of the unjustified dismissal, Mr Hall was awarded $31,326.91 as lost remuneration, $7,000.00 for compensation for humiliation, loss of dignity and injury to feelings and $766.75 reimbursement for variation of work visa costs.
With the government taking submissions on the vulnerable workers bill and the impending changes to the health and safety legislation you can expect the spotlight to be on employee, contractor and agency employment relationships.
If you are engaging staff from an agency or engaging a contractor it is paramount to fully understand the rules of engagement and have proof of due diligence around the actual relationship. To merely say “I just pay the bill I am given” or “they are not my employee” will not be a defence in the eyes of the law.
If people are working for a company (now called a PCBU Person Conducting a Business or Undertaking) there is a legal and moral obligation to ensure their safety and compliance with employment law. Every employee (an employee under the ERA Act is a person who is employed by an employer to do any work for hire or reward under an employment agreement) must be paid their minimum entitlements.
If the employee is in fact a contractor then greater management of the process is required. Contractor management needs to have firm policies in place that cover things like, insurance obligations (do they have public liability insurance), supply and replacement of tools, equipment, safety equipment, permits to work, disputes process, right to contract out the role. For example, in a standard employment contract an employee must undertake to do the duties personally, however a contractor is permitted to contract out their duties (that means anyone can undertake those duties, they do not have to do it personally) then where does the responsibility lay for the PCBU in regard to health, safety and liability?
At Shamrock Recruitment we have a quality management system and robust process in place that ensures compliance with all legal aspects and as such we provide evidence at the start of the relationship that allows a PCBU to be assured the person working for them is “our employee” and as such cannot contract out of their obligation.
If you’re using a recruitment agency for temporary or short term staffing please ensure that you know if they are contactors or employees of the recruitment agency. An honest recruitment agency will have no issue in giving you a copy of all the necessary paperwork that proves the candidates are being paid their entitlements (holiday pay, public holidays, sick pay, ACC levies, PAYE and provision of safety equipment) and this is not just a copy of pay slip. Pay slips will not show if the employee is being exploited and if they have to pay their own entitlements when they are not valid contractors.
Good risk management practices would dictate that PCBU’s as the end users of recruitment agencies should be in a position to have all the facts relating to the employment of all and any staff on their sites. In the event of a dishonest agency misrepresenting the employment relationship (hoping to make a higher margin by appearing to charge less), a contractor who is not up to standard (a person who is absent from work) or an accident or incident that causes injury (serious harm), damage or a product recall (quality breach) will be vital if there is any liability, media involvement or charges laid in court.
Self Employed Contractor or Employee?
In the last two months the Employment Relations Authority (“Authority”) has considered a number of claims by individuals purportedly engaged as contractors who subsequently challenged that status and sought a ruling from the Authority that their status was one of employment. If the relationship is determined to be one of employment, then obligations in relation to pay, holiday leave, sick leave, PAYE and other entitlements of employment arise.
In the recent decision of Lundh and Alpha Construction Limited, the Authority was asked to determine whether Mr Lundh was engaged as a contractor or employed as an employee of Alpha Construction Limited. There was no written contract between the parties. If it was determined that Mr Lundh was an employee then he would be entitled to holiday pay under the Holidays Act 2003.
The tests applied to determine whether an individual is an employee or an independent contractor are the control test, the integration test and the fundamental or economic reality test. The starting point is always to examine the terms and conditions of any contract between the parties and how it has operated in practice. However the terms of the contract are not determinative.
The Authority first considered the control test and examined the extent to which the activities of Mr Lundh were controlled by the company. Mr Lundh gave evidence that Alpha Construction had contracted him out to other companies such as Fletchers and Leigh Construction. He was required to report on those building sites at the times directed by the client (Fletchers and Leigh Construction) and to finish work when everyone else on site finished. He was not free to decide when he started and finished and he was not free to decline work. Because of his experience as a carpenter Mr Lundh did not require a great deal of direction. As such the Authority considered that the control test did not greatly assist in deciding whether Mr Lundh was an employee or a contractor.
The integration test examined the extent to which Mr Lundh was integrated into the company’s business. Mr Lundh’s evidence was that he was not treated any differently to other workers who were employees of the company. Mr Lundh used his own tools like all carpenters, and also borrowed tools from the company. The Authority considered that the integration test did not appear to be strongly determinative of Mr Lundh’s status one way or the other. It acknowledged that the fact that he used his own tools was not of great assistance as it was commonplace for employed carpenters and tradesmen to use their own tools.
The third test applied was the fundamental or economic reality test. This test examined the extent to which Mr Lundh took on financial risk himself in providing his services to the company. The evidence was clear that Mr Lundh took no financial risk. He did not submit invoices, but rather submitted timesheets like other workers and was paid for his time. As he was not taking on any economic risk in the provision of his services, the Authority determined that in applying the fundamental test Mr Lundh was an employee rather than a contractor. The Authority determined that looking at the arrangement as a whole, the real nature of the relationship was one of employment. Having determined that he was an employee, the company became liable to pay holiday pay. Due to the short period of his employment, the holiday pay for which the company was liable was not substantial. If the relationship had been on foot for a longer period the company would have faced significant liability for holiday pay.
It is very important that parties turn their mind to the correct nature of the relationship at the commencement of any engagement of a contractor or employment of an employee. The financial consequences for a company of not correctly documenting the real nature of the relationship between the parties can be significant.
Exercising the power to suspend
In a recent case in the Employment Relations Authority an employee who was threatening, used abusive language and yelled and screamed at her employer was found to have been unjustifiably disadvantaged in her employment and to have been unjustifiably dismissed.
The employee, Jane O’Connor was employed by Dry Dock Company Ltd, owners of a café in Tauranga. Ms O’Connor worked at the café from July 2013. In September 2013 a new oven was installed. Unfortunately it overloaded the power circuits blowing the café fuses. During the week of 11 November 2013 the café suffered power cuts and was unable to serve customers. On 18 November 2013 there were further power problems. Around 8am the employer spoke to staff advising that the new oven was not to be used. Ms O’Connor disputes that this instruction was given. In breach of the direction, Ms O’Connor used the oven for baking. When the director for the employer discovered the oven was being used, she spoke with Ms O’Connor. The Authority Member found that during the course of this discussion Ms O’Connor used abusive language. On 19 November 2013 a meeting between the employer and Ms O’Connor again became hostile and Ms O’Connor left work. On 20 November 2013 a further dispute occurred.
The Authority determined that Ms O’Connor had screamed and yelled at the employer and had been swearing. It found that this behavior was threatening. The employee was advised by letter on 20 November 2013 that she was suspended immediately on full pay while the employer undertook an investigation. Suspension was permitted under the terms of the employment agreement, which provided that after discussing a proposal of suspension with the employee and considering the employee’s view, the employer may suspend the employee on pay while an investigation into any misconduct is carried out.
The Authority held that a decision to suspend could be reasonable (even without discussing it first with the employee) if it had been made immediately after the 20 November incident, when there was an imminent danger. By the time the employee was advised at 8pm that night that she was suspended that imminent danger had passed. In these circumstances a reasonable employer should have provided Ms O’Connor with particulars of the concerns giving rise to the proposal to suspend, the opportunity to comment, and considered her responses prior to the suspension occurring. That did not occur and the Authority determined that Ms O’Connor was unfairly disadvantaged by the employer’s decision to suspend her.
The termination of employment for serious misconduct was also held to be unjustified. The Authority found there had been threatening behavior that was not simply a one off event but had been reoccurring over a three day period. The Authority determined that while the employee had engaged in threatening conduct which could amount to serious misconduct and justify dismissal, the employer’s failure to follow a proper process rendered the dismissal unjustified. There was a lack of enquiry into and therefore consideration of the employee’s responses. The defects in procedure were not minor and resulted in unfairness to the employee.
The employee sought lost wages of $6,688.50 together with an award for compensation. The Authority determined that there was insufficient evidence led by the employee regarding lost remuneration and therefore no award was made. Had proper evidence been led the employee may well have received an award for lost wages. The employer was ordered to pay the employee a minimal sum of $1,000 for humiliation and distress. Given the contributory conduct by the employee the award was reduced by 50%.
The importance of having a very robust process.
A worker who was fired after his job was restructured into a different role has won compensation. Murray McGrannachan was awarded five months’ lost income and $8,000 in compensation after the Employment Relations Authority (ERA) found that he had been unjustifiably dismissed last May.
McGrannachan was working as a branch manager at CRT in Winton in 2010 when his role was restructured and he became a technical field officer, a role in which he was expected to make 10 sales calls to farmers each day and sell $1 million worth of products each year.
CRT merged with Farmlands at the start of last year and the company told the authority that McGrannachan’s dismissal was justified for poor performance. It said that he had been clearly told that the company wasn’t happy with his performance and he needed to improve. He was also given training.
In the ERA decision, authority member Helen Doyle found that the company had spoken to McGrannachan about his performance several times since late 2012.
There was also concern about the number of times he went home during work hours, or to his wife’s work – information which came from the GPS system in his work vehicle. During the meetings about his performance, McGrannachan said his lack of confidence was hindering his ability to make cold calls.
Doyle found that McGrannachan’s actions had contributed to his dismissal, but she was not satisfied that he was given a clear formal warning during the disciplinary meetings that his employment would be in jeopardy if he did not improve.
Doyle said that the investigation into his performance, and the result, breached his employment agreement and alternatives such as moving him into a different position had not been considered.
“Objectively assessed, the investigation and decision making process was not what a fair and reasonable employer could have done in all the circumstances. A fair and reasonable employer could have given Mr McGrannachan a written warning or a final written warning,” she said in her decision.
We ask younger people when do they plan to do their OE, we ask about buying a house, we ask about what rugby team you support, we ask about the plans for the future, we ask who wants coffee (as we head down Willis Street to the many cafes). Why should we not ask this as a general question (taking discrimination out of the picture) as it’s the most important part of a person’s life. Good employers accept woman have children, including all the good, bad and unplanned things that come with it. There are various articles about the impending doom of the skilled work force due to declining birth rates we should be encouraging women to have children not be concerned about asking the question of when they will have them.
Phone: 0508 SHAMROCK or 0508 7426 7625
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