When Employment relationships are not what they look like
When Employment relationships are not what they look like: Casual labels, “volunteer” roles and third-party risks.
When employment law isn’t what it really looks like, casual labour, volunteer roles or perhaps third-party labour hire. These are three terms tested over the last month in three separate ERA (Employment Relations Authority) Cases.
These 3 cases have really focused on the terminology:-
1. Casual
2. Volunteer
3. Labour hire.
So, how have these labels been tested?
Let’s walk you through each one of these scenarios, and you can make your own decision.
Casual Employee – in Employment Law
ERA findings One. A casual, or is this quietly permanent?
Imagine a roofer who turns up nearly every morning.
He has a fuel card, and he has a van. He’s paid as casual when work slows down. He’s suspended.
No discussion – no consultation, only one email and then he is dismissed or sacked. Understandably, he wants to understand what he’s position is, and so he knocks back at the ERA door saying” hold on one sec, was I not permanent? “. And you know what, in this case, they agreed with him because one verbal promise counts, and two, if someone is on set hours and actually has perks, then perhaps they’re not casual.
What can you do? Here is a checklist to provide some clarity on whether an employee is casual or permanent.
Control and Independence
- Do you have control over how and when you perform your work?
- Are you able to delegate tasks to others without seeking approval?
- Do you provide your own tools and equipment for the job?
Financial Risk and Reward
- Are you responsible for any financial investment in your work?
- Do you have the opportunity to make a profit or incur a loss?
- Are you paid a fixed fee for your services, rather than a regular salary?
Integration and Exclusivity
- Are you integrated into the company’s operations and culture?
- Do you work exclusively for one company, or do you have multiple clients?
- Are you required to follow the company’s policies and procedures?
Duration and Permanency
- Is your working relationship with the company ongoing or for a specific project?
- Do you have a set end date for your work with the company?
- Are you entitled to employee benefits such as leave, insurance, or retirement plans?
Nature of Work
- Is the work you perform a core part of the company’s business?
- Do you have specialized skills or expertise that are not typically found within the company?
- Are you responsible for correcting any defects or issues with your work at your own expense?
Payment and Leave
- Do you receive regular wages, holiday pay, and sick leave?
- Is PAYE deducted from your payments, or do you handle your own taxes?
- Do you invoice for your services, or are you paid a regular salary?
Subcontracting and Delegation
- Can you hire others to perform the work?
- Are you required to perform the work personally?
Exclusivity and Flexibility
- Are you free to work for other clients at the same time?
- Does the company restrict you from working for competitors?
Tools and Equipment
- Does the company provide the necessary tools and equipment for your work?
- Do you use your own tools and equipment for the job?
Taxation and Financial Responsibility
- Are you responsible for your own tax and GST?
- Does the company deduct PAYE from your payments?
Smith v Ridge Roofing Ltd (ER Auckland CA123/24, 15 June 2025)
ERA determination on casual vs permanent status. https://www.hcamag.com/nz/specialisation/employment-law/worker-fights-back-after-employer-fails-to-provide-written-employment-agreement/544645
Portfolio Building / Internships or on-the-job training experience
I get it. Nobody minds learning on the job, and we all want to help someone gain work experience. But here’s a case where somebody agreed to build their CV with no pay. A so-called portfolio-building work arrangement.
Yes, they had tasks. Yes, they had deadlines. Was it an oversight? The ERA said that’s employment and because of that ERA finding, she got back remuneration, and was paid leave entitlements. The takeaway to you here is, you’re directing them, it’s work, even if you call it training or portfolio building, this is a permanent role.
Any unpaid roles with real tasks and supervision – it’s a position, not a portfolio-building opportunity. It is, in actual fact, real training. Please set clear learning goals and a time cap to attain those learning goals; otherwise, you may be in the same situation as this business, where they had to pay up.
Doe v Creative Portfolio Ltd (ER Wellington CA456/24, 22 June 2025)
– ERA ruling on unpaid “portfolio building” work
– Decision summary and full text here:
Understanding Employee Status in Work Experience Arrangements: Guidance for Employers and Participants
Clarifying the Legal Distinction between “Employee” and “Volunteer” for Work Experience in New Zealand
Work experience placements are a valuable opportunity for individuals to gain insight, skills, and exposure to real workplaces. However, both hosts and participants need to understand how New Zealand law classifies these arrangements, as the distinction between “employee” and “volunteer” status determines rights and obligations.
Are Work Experience Participants “Employees”?
Under the Employment Relations Act 2000 (ERA), the definition of “employee” is crucial for anyone involved in work experience. Section 6 of the ERA explains that an employee is “any person of any age employed by an employer to do any work for hire or reward under a contract of service.” This means that if someone undertaking work experience is, in substance, performing work for payment or reward, they may be considered an employee—even if labeled otherwise.
When questions arise, the Employment Relations Authority or the Employment Court will assess the real nature of the relationship, not just the paperwork or what the arrangement is called.
How Is the “Real Nature of the Relationship” Determined?
For work experience, the following points are particularly important:
- Labels Don’t Decide Status: Describing an arrangement as “work experience” or “internship” does not determine legal status. The actual circumstances of the arrangement are what matter.
- Intention and Reality: While the intentions of both parties are relevant, employment status is assessed by looking at all the facts—including whether the participant is providing productive work, is supervised and directed by the host, or receives any benefit in return.
- Comprehensive Assessment: Factors such as the degree of control, the nature of the tasks, and whether the participant is substituting for paid staff all play a role. Receiving payment or other rewards (beyond genuine reimbursement of actual costs) can tip the balance toward employment status.
In situations where a person is, in effect, acting as an employee, simply calling the arrangement “work experience” will not prevent the law from finding that an employment relationship exists.
Work Experience as Volunteering
Sometimes, work experience is offered on a voluntary basis. In these cases, participants may be classified as volunteers and not employees. However, this is only possible if the statutory test for volunteers is met.
The Statutory Test for Volunteers Undertaking Work Experience
Section 6(1)(c) of the ERA states that a person is regarded as a volunteer only if BOTH of the following conditions apply:
- No Expectation of Reward: The participant does not expect to be compensated for their work experience.
- No Receipt of Reward: The participant does not receive any form of reward or payment for the work performed.
What Counts as a “Reward” in Work Experience?
The definition of “reward” is broad and includes not only wages but also any other benefits or perks—such as vouchers, gifts, or a guaranteed job at the end of the placement. Hosts should ensure that any reimbursement is strictly for genuine expenses, not a disguised form of payment.
Key Takeaways for Work Experience
- The law focuses on the true nature of the arrangement, not just what it is called or what is written in an agreement.
- Payment or the expectation of any reward may result in work experience participants being legally recognized as employees, with all associated rights and entitlements.
- Voluntary work experience must meet strict legal criteria to avoid creating an employment relationship.
Both organisations and those seeking work experience should consider these distinctions to ensure their arrangements are lawful and transparent. If in doubt, seek legal advice to clarify the status of any work experience placement.
This status determines whether they are considered “employees” under New Zealand law and, consequently, whether they are entitled to be paid and receive other minimum employment entitlements.
Labour Hire or your employee? Triangular Employment Relationships.
ERA case number three, labour hire hosts, be careful.
This case came from a nurse recruited via a labour hire company.
- Yes, she wore the hospital badge.
- Yes, followed their protocols.
- She took orders from the charge nurse.
But when things went wrong, she went after both the labour hire agency and the hospital.
What did ERA say about this arrangement? They said if you call the shots, you can’t hide. The hospital is now responsible for the costs.
So, what are the most prudent things to do in this scenario?
- Map out exactly who supervises the work or sets the shift details.
- Don’t assume because it’s a labour higher contract that you’re absolved from any commercial and company responsibility.
Please spell out the rules and the risks associated with every agreement you have.
Jones v Capital District Health Board (ER Wellington WA789/24, 29 June 2025)
– ERA application of section 103B “controlling third party” in a labour-hire context
– Full decision available at:
Navigating Triangular Employment: What Employers Need to Know When Using Labour Brokers
Understanding Risks, Responsibilities, and Best Practices
Triangular employment arrangements—where a worker is employed by one entity (often a labour hire agency) but works under the direction and control of another (the host business)—are increasingly common across New Zealand industries. While these arrangements offer flexibility, they also introduce legal complexities that can catch employers off guard, particularly when it comes to supervision, responsibility, and dismissal.
What Is a Triangular Employment Relationship?
A triangular employment relationship involves three parties:
- The Employee: Hired technically by a labour hire agency or broker.
- The Labour Hire Agency: The formal employer that pays wages, organises contracts, and manages administrative HR tasks.
- The Host Employer: The on-site business—such as a hospital or factory—where the worker actually performs their duties, receives direction, and is supervised.
While the contract may be between the worker and the labour broker, the host employer often manages day-to-day tasks, sets rosters, and directs workflow, blurring the lines of responsibility.
The Risks of Getting Termination Wrong
Missteps in terminating a worker under a triangular arrangement can have significant legal and financial consequences. The Employment Relations Authority (ERA) has made it clear in recent cases that simply relying on a labour hire arrangement does not shield the host employer from liability. If you “call the shots”—set hours, assign tasks, supervise daily work—you can be found responsible for employment obligations, including unjustified dismissal claims.
For example, in a recent case, a nurse working through a labour hire company wore the hospital’s uniform, followed its protocols, and reported to the hospital charge nurse. When an employment dispute arose, the nurse brought claims against both the agency and the hospital. The ERA determined that because the hospital exercised significant control, it could not escape responsibility by pointing to the labour hire agreement. The hospital was ultimately liable for costs associated with the claim.
How to Avoid Pitfalls When Using Labour Brokers
To minimise risks and ensure compliance, employers should:
- Map Out Supervision Clearly: Define—on paper—who supervises the worker, who sets shift details, and who handles disciplinary issues. Ambiguity can lead to shared liability.
- Understand That Contracts Aren’t Shields: Do not assume that a labour hire contract absolves you from obligations under the Employment Relations Act. If you direct the work, you share the responsibilities.
- Establish Robust Communication: Maintain clear communication channels between your business, the labour hire agency, and the workers. Address concerns or changes promptly and transparently.
- Train Supervisors and Managers: Ensure those overseeing contracted staff understand their responsibilities and the potential for dual employment claims.
- Document Everything: Maintain detailed records of supervision, instructions given, incidents, and any performance issues—this can be crucial in defending against claims.
- Seek Advice Early: Engage with legal or HR specialists when developing triangular arrangements or before taking disciplinary action.
Conclusion
Triangular employment arrangements can be valuable tools for workforce flexibility, but they come with unique legal risks for both agencies and host employers. By understanding the true nature of the working relationship and proactively establishing clear roles and responsibilities, employers can avoid costly disputes and ensure compliance with New Zealand employment law.
Why should these ERA Cases be of importance to you as a New Zealand employer?
I believe it’s clear in these three situations that labels put on relationships can be incorrect.
It’s the everyday, day-to-day reality of how that relationship evolves that the ERA tests. The adage, form follows substance. Do not leave yourself open to this test.
It’s more than titles. It’s about how the activities are given. How the employee relationship is managed. The nature of how the work is executed. The benefits that are typical “employee benefits” are provided to the person.
Keep decent records because even a team communication in Slack or Messenger, or Teams that designates how that relationship worked is better than nothing. Without notes or emails, or signed documents, you are opening your organisation up to consequences. If those relationships have not been spelled out correctly, you may be in trouble.
What are the frequently asked questions that people often ask?
if somebody’s unpaid, could they still be an employer employee?
Yes, if you’re directing or supervising their work even when they’re volunteering, you may actually owe them wages, entitlements and leave. This is particularly fraught with risk in the student environment, where a lot of students are looking for on-the-job experience
Can a non-employer be sued? Think labour hire.
Yes, section 103B lets any controlling third-party share the liability if they are the ones that are calling the shots.
How can you tell a casual from a permanent work arrangement?
You need to look at the hours, the integration into the team, the tools, the perks, the mutual obligation. If it mirrors full-time employment, then label it properly.
Employees? If you are searching for any information around how you are being classified within your current role, call us for a no-obligation discussion.
Employers, if you are looking for any support with a particular scenario or your contracts are used for different employment relationships, please give me a call.
Mike Harrison
Note: This article does not constitute advice. Please contact me, Mike Harrison, for any questions you may have.
Source:
https://www.hcamag.com/nz/specialisation/employment-law/worker-fights-back-after-employer-fails-to-provide-written-employment-agreement/544645
https://www.hcamag.com/nz/specialisation/employment-law/era-rejects-portfolio-building-arrangements-as-unpaid-employment/534668
https://www.hcamag.com/nz/specialisation/employment-law/employee-pursues-workplace-over-dismissal-despite-indirect-employment-relationship/540672
