Owners of a Dunedin taxi company face personal liability for $80,000 due four drivers held to be employees, not independent contractors. A test case before the Court of Appeal ruled business owners are personally liable where they knew factually that a supposed contractor could be viewed as an employee even if the owners did not know the precise legal rules defining what is an employment relationship.
Southern Taxis Ltd stopped trading in 2016, short of funds needed to pay an Employment Relations Tribunal order it pay $80,000 to four drivers for unpaid holiday pay and to make good wages less than the minimum wage. The Tribunal ruled these drivers were employees, not independent contractors. Southern Taxi owners Ronald and Maureen Grant said the drivers were hired as independent contractors. The four drivers had worked on commission: forty per cent of fares.
It is administratively tidier for businesses to hire in contractors rather than take on staff; minimum wage rules, holiday pay, sick leave and rest break requirements are not obligations of any business that hires contractors.
If a business does not pay employee entitlements, labour law holds owners personally liable to make good payments if they were ‘knowingly concerned in’ breaches of employment legislation. The Grants said they genuinely believed the working relationship between the company and its drivers meant the drivers were independent contractors, not employees. The drivers thought they were employees. Drivers worked to a roster fixed by Southern Taxis. They were not registered for GST. Southern owned the vehicles and met all running costs. Drivers could not sub-contract their rostered work to anyone else.
The Court of Appeal was asked to rule in what circumstances would a business owner be ‘knowingly concerned’ in any breach, and hence personally liable. Knowledge of the essential facts is sufficient, the Court ruled. It is immaterial whether the owner had any knowledge of the relevant law as it applies to these primary facts.
The case was referred back to the Employment Court to determine whether the Grants personally did have knowledge of the ‘essential facts’ causing their drivers to be viewed as employees.
Labour Inspector v. Southern Taxis Ltd & Grant – Court of Appeal (20.12.21)
22.023