21 April 2024

Treating employees as contractors proves costly for taxi company owners

The Employment Relations Authority (ERA) has determined that former Dunedin taxi company directors be personally liable for nearly $100,000 owed to four former taxi drivers for unlawfully treating them as contractors.

Former company directors, Ronald and Maureen Grant, claimed they didn’t know they were breaching the law when they failed to provide four taxi drivers with the correct employment entitlements. The ERA member, however, discounted this as ‘wilful blindness.’

An earlier ERA determination ordered Southern Taxis Ltd to pay $97,753.05 in minimum wages and holiday pay arrears to four drivers who were effectively found to be employees of the business. The company previously held Southern District Health Board and Dunedin Airport contracts for taxi services. However, company assets have been sold and Southern Taxis no longer has the ability to pay. 

Labour Inspectorate Regional Manager, Jeanie Borsboom says Mr and Ms Grant 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. 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 Grants could have avoided the cost of defending and appealing legal action taken by the Labour Inspectorate by seeking advice early on about how to treat all of their drivers in accordance with the law,” Ms Borsboom says.

“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 next steps will be for the ERA to determine whether Southern Taxis Ltd and the Grants are liable for penalties.

“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. 

“Unlawful use of contracting is increasingly a focus area for the Inspectorate. Where breaches are identified the Inspectorate will be holding employers to account and seeking penalties for all of the shortcomings in minimum employment standards—including all leave entitlements—regardless of what remuneration the employer has paid under the contract.

“There are just no excuses for employers to get this wrong or, worse, intentionally rort employees of their rights,” says Ms Borsboom

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