Taxi drivers owed nearly $100,000 after sham contracting investigation

On: 8 August 2018

An employment determination has found a former taxi company in clear breach of minimum employment rights, by treating employees as contractors to save money.

The Employment Relations Authority (ERA) has determined Dunedin’s Southern Taxis owes four former drivers nearly $100,000 in arrears in minimum wages and holiday pay.

Southern Taxis has also been ordered to pay interest on this lost pay, and the ERA will now assess what other penalties and costs will be imposed, including whether or not the Directors of Southern Taxis should be personally liable.

“This is clear evidence of sham contracting being practiced by employers who knowingly breached the law at the expense of these drivers. At best, the drivers received minimum wage no more than 15 per cent of the time they were employed, and received no holidays or leave,” says Labour Inspectorate National Manager Stu Lumsden.

“This should send a strong message that employers need to be very clear about the difference between contractors and employees – you can’t remove minimum employment standards if, in essence, you’re treating staff in any way as employees.

“What’s more, the company also had contractor drivers, and admitted to the Labour Inspectors that it knew the difference between contractors and employees. Instead, the company referred to the four drivers as ‘commission agents’. There is no such term under employment law in New Zealand. You are either a contractor or an employee.

“It is important to be very clear from the outset about whether workers are an employee or in business for themselves. The characteristics of each involve a set of four criteria which are clearly explained to define the difference, on the Employment NZ website.

The Determination found Southern Taxis’ treated the four workers as employees in all four criteria:
“Contractors by law have control over their own terms and conditions. It was clear these drivers had no such control while working for Southern Taxis.”

The ERA also determined it could not be said the drivers were operating autonomous businesses and there was evidence that showed the drivers were ‘part and parcel’ of Southern Taxis.

Additionally the company also acted as an employer by deducting PAYE payments and issued the drivers with payslips.

“It comes down to the actual work arrangement. It’s not just something that one of the parties can decide.”

Sham contracting is of growing concern to the Labour Inspectorate. Recently, there has been extensive media coverage of the situation of some courier drivers and others are pursuing legal action through court.

“If there is still any doubt, contact the Employment  New Zealand Service Centre on 0800 20 90 20 because there is no excuses for employers to get this wrong.

“Simply put if employment is disguised as contracting, it’s sham contracting and the Labour Inspectorate will take enforcement action and seek penalties,” says Mr Lumsden.

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