Businesses use all sorts of arrangements to conduct their affairs, usually to manage tax issues or to operate in different jurisdictions. Usually there is no issue about who the employer is, but this may be difficult to determine in some situations. Dr Michael Johnston found this out to his detriment when his alleged employer used a novel legal defence in employment law.

Dr Johnston moved to New Zealand from the United Kingdom in around 1989 focussing his career on developing software, technical strategy, and developing digital mobile payment solutions in the startup context. Dr Johnston met Chris Jones and started working with him in various companies that he had an interest in. In 2007 Mr Jones started a new company, Youtap Ltd, and Dr Johnston was employed as the chief technical officer.

YMMA was incorporated in Singapore in 2015 to assist Youtap expand into the Asian market. It is wholly owned by Youtap Mobile Money Ltd, a New Zealand-registered company, which itself is wholly owned by Youtap Ltd (also registered in New Zealand). Mr Jones was the chief executive and director of YMMA as well as of Youtap Mobile Money Ltd and Youtap Ltd. Dr Johnston agreed to relocate to Singapore to spearhead the expansion of the Youtap Group through YMMA. Employment arrangements for Dr Johnston were put in place to make this work. He needed to be employed by a Singaporean company to obtain an employment pass (an “E-pass”) so that he could work in Singapore. Dr Johnston also became a director of YMMA because Singapore law requires that at least one director of a company registered in Singapore needs to reside there.

The businesses of Youtap Ltd, YMMA and other Youtap entities were intertwined. Dr Johnston was paid in Singaporean dollars by YMMA into his Singaporean bank account but YMMA would receive the funds from Youtap Ltd (or one of the other New Zealand Youtap entities) because it otherwise would not have had the funds to pay Dr Johnston. But Dr Johnston accrued annual leave in YMMA’s books.

Dr Johnston said that he agreed to being employed by YMMA because he was quite prepared to do whatever was required. He said he continued to assume that he remained employed by Youtap Ltd because “nothing really changed”.

Mr Jones did not agree. While he agreed that Dr Johnston retained the responsibility of being the Youtap Group’s chief technical officer and that he was still part of the Youtap Group senior management team, Mr Jones said that the focus of Dr Johnston’s work was growing YMMA’s business in the wider Asian market.

Dr Johnston’s employment was terminated by letter dated 8 February 2022. He was given one month’s notice in accordance with his YMMA employment agreement. The termination was based on YMMA’s understanding of Singaporean employment law.

Although Dr Johnston made a claim in Singapore against YMMA in May 2022 he engaged lawyers in New Zealand who claimed that Dr Johnston was unjustifiably dismissed under New Zealand law as he was in reality employed by the New Zealand company Youtap Ltd. This argument was accepted in a preliminary decision of the Employment Relations Authority. Dr Johnston was held to be an employee of the New Zealand company Youtap Ltd.

Youtap Ltd appealed to the Employment Court. Youtap Ltd argued that when Dr Johnston commenced work for YMMA in Singapore there was a change to the identity of his employer by the legal concept of “novation”.

In a novation, an original party to a contract is replaced by a new party, with all the rights and obligations of the original party being transferred to the new party and the original party ceasing to be a party to the contract. In considering whether there has been a novation the Court needs to decide whether it has been agreed that a new contract is to be substituted for the old and the obligations of the party under the old agreement are to be discharged. Agreement to a novation may be inferred from conduct and does not need to be expressly agreed.

The Employment Court accepted that the change in employer from Youtap Ltd in New Zealand to YMMA in Singapore was mutually beneficial to both parties. The Youtap Group wished to have a senior person resident and working from Singapore to provide service to key customers and access the markets nearby. The Court concluded that while Youtap Ltd did not appear to have been particularly concerned about which entity employed Dr Johnston both parties understood that Dr Johnston needed to be employed by a Singaporean-based employer to get the E-pass enabling him to work in Singapore. Being domiciled in Singapore and employed by a Singaporean company also gave Dr Johnston significant tax advantages.

Judge Holden concluded that there was a novation in 2015 when Dr Johnston started work in Singapore. This meant that Dr Johnston was not employed by the New Zealand company.

The concept of novation is an unusual argument in employment law in New Zealand. In theory it provides another useful tool in the toolbox to determine the “real nature of the employment relationship” – the usual legal test used for determining whether or not there is an employment relationship.  Read more...

The on-going government agenda of removing employment protections for workers continues with the latest being the move to significantly raise barriers for women to obtain pay equity for work that has been historically undervalued. The changes have been described by the opposition and unions as “a war on women”.

The Prime Minister when making the announcement said that the changes could save the government "billions of dollars”, but he has tried to backtrack on this message and is now saying that his government is committed to pay equity, collective bargaining, equal pay and pay parity. His words simply do not stack up!

Discrimination still continues in its many guises in New Zealand. A recent decision of the Human Rights Review Tribunal has upheld a complaint that a worker was discriminated against due to her pregnancy. Zelinda Doria worked full time for Diamond Laser Medispa Taupo Limited (Diamond Laser) as a beauty therapist for 11 months before she found out she was pregnant with her first child. Fifteen days after finding out she was pregnant, and seven weeks into her pregnancy, Ms Doria was told to immediately commence her primary carer leave early (maternity leave). Ms Doria claimed that this was discrimination on the basis of her sex (pregnancy) or on the basis of a “disability”. The claim was against the company, but also personally against the Manager and a director of Diamond Laser.

All of the defendants maintained that they were entitled to put her on early leave under the Parental Leave and Employment Protection Act.

Like many women, Ms Doria initially suffered morning sickness. She told her Manager and friend, Ms Blakeney-Williams, of her pregnancy. In the two weeks after finding out she was pregnant, Ms Doria was sent home early from work by the Manager on two days, she started late on two days and took six days of sick leave. Ms Doria saw her doctor twice during this time but did not suffer from any more morning sickness after these absences. Regardless of this, the Manager emailed Ms Doria to discuss her “parental leave and employment situation”. A meeting was organised, but quickly deteriorated and ended. Ms Doria was required to leave the premises. Diamond Laser’s employment advocate responded shortly after this saying “that given the comments and medical information shared, Zelinda will not be working until further notice”. A follow up letter was sent requiring Ms Doria to start her maternity leave the next day.

Ms Doria, through her mother, requested that the requirement to go on leave be cancelled, and that a work-related risk assessment be conducted by an independent professional in order to find a temporary solution. These requests were rejected. Ms Doria’s midwife also provided a letter to Diamond Laser stating her opinion that Ms Doria was “fit and healthy and completely capable of performing her duties”.

Ms Doria was ineligible for paid parental leave as her employer had directed her to go on maternity leave more than 6 months before her baby’s due date. She attempted to obtain alternative work, but as she was still an employee of Diamond Laser she found this difficult. Ms Doria also struggled to obtain income support from WINZ due to her still being employed by Diamond Laser.

The Human Rights Review Tribunal concluded that Diamond Laser’s actions could not be justified. It said the right to require a pregnant employee to go on maternity leave earlier than they wish is a significant exercise of an employers’ powers. It noted that it can have far-reaching consequences such as removing eligibility for paid parental leave. The Tribunal concluded that exercising this provision in the absence of any consultation with Ms Doria and without any independent medical and health and safety information was not justified.

Ms Doria’s evidence was that she felt “traumatised”. She described feeling “intimidated, stressed and insulted” and explained to the Tribunal that she was “worried that the stress would make me lose my baby”. Also the sudden change in her financial position was “just so stressful”. She described a pregnancy where she was so worried about financial matters and felt that losing her job took everything away. Due to the inability to access paid parental leave, she gave evidence about having to put her baby into care at a very young age and feeling she was not present for her baby when she needed to be.

The decision of the Tribunal is notable. Firstly, when considering the nature and consequences of the discrimination, the impact it had on Ms Doria and the disregard for the legalised protection from discrimination during pregnancy the Tribunal awarded Ms Doria $75,000.00 as compensation for her humiliation and injury to feelings and the loss of dignity she suffered - one of the highest awards of compensation ever in New Zealand. Secondly, the Tribunal held all the defendants liable - the company, the Manager and the director.

Legislation that provides minimum protections for workers are so important. So are protections to uphold values most New Zealanders would agree with; equal rights, equal pay – and meaningful means to uphold these values. Shame on this government for raising barriers for women to obtain pay equity for work that has been historically undervalued, but in some of our most valued occupations - Plunket nurses, community midwives, hospice nurses and health care assistants, primary care nurses, nurses in residential care. Read more...

New Zealand’s stretched health system is expected to come under further pressure as more than 5000 senior doctors have threatened to take part in an unprecedented strike for 24 hours tomorrow after several months of pay negotiations between the doctor’s union, the Association of Salaried Medical Specialists (ASMS), and Te Whatu Ora Health NZ stalled.

Workers do not take strike action likely. They know that they will not be paid for the time off striking. They also know that it can cause a lot of disruption, which may in turn affect any sympathy the public may have for their cause. But is it their last cry for help?

In Britain, a strike by council bin workers in Birmingham is set to continue after the latest pay offer by the city council was "overwhelmingly" rejected. The dispute is around the council's decision to remove Waste Recycling and Collection Officer (WRCO) roles. The union argues that the council is doing away with important health and safety roles and that about 170 affected workers are facing losing up to £8,000 annually due to the decision, with hundreds more losing out on the prospect of pay progression. The council argues that a "fair and reasonable offer" has been made and that every employee affected by the removal of the WRCO role could take an equivalent graded role in the council, LGV Driver training or voluntary redundancy packages.

Strike action began with union members staging one-day walkouts in January after the council’s announcement. Strike action escalated on 11 March when more than 300 union members began an all-out strike. The strike remains in place as the stand-off continues and as it continues bin bags and rubbish have been piling high in Birmingham streets.

In New Zealand the senior doctors are seeking a 12 percent pay increase; Te Whatu Ora has responded with an offer of between 1 and 1.5 percent. Stats NZ is reporting that the  cost of living for the average New Zealand household increased 3.0 percent in the 12 months to the December 2024 quarter. The rate of inflation has risen to 2.5 percent from 2.2 percent and Stats NZ also reports that the consumer price index rose 0.9 percent in the three months ended March, the biggest quarterly increase since the September quarter of 2023 when the cost of living crisis was peaking.

Health Minister Simeon Brown has struck out and accused the senior doctors of using patients as "bargaining chips" as part of their negotiating tactics. He said the union was putting "politics ahead of patients" and that the strike action will increase waitlists. The Minister also tried to “shame” the senior doctors by claiming that they are well paid, with an average salary of $343,500.

Sarah Dalton, the Executive Director of ASMS, said "patients are a sacrificial lamb to our under-staffed health service every single day," and that "if Te Whatu Ora invested in the doctors and other health workers we needed, we wouldn't be having to take this action. She reports that "we are wildly short-staffed and the employer is not putting in proper retention and recruitment strategies in place to retain the doctors we need." It is understood that average senior doctor vacancy rates are approximately 12 percent, although some hospitals have vacancy rates as high as 45 percent.

The union also challenged claims by the Health Minister that senior doctors were being paid an average salary of $343,500. It says the average salary for senior doctors was closer to $240,000 a year. The union claims that senior doctors at the top end of the salary scale in New Zealand are being paid less than their counterparts at the bottom end of the New South Wales scale. "We are bleeding people to Australia" Sarah Dalton says.

Labour leader Chris Hipkins says "hurling mud" at senior doctors ahead of industrial action is not helpful. He says "the sort of inflammatory language we've seen from Simeon Brown is more likely to guarantee further strikes, more likely to see more of our doctors leaving the country and moving to countries that will pay them better, and that's not going to be good for New Zealand patients."

But all is not well elsewhere, across the ditch the NSW public hospital system is also experiencing strikes. Despite being warned by the Industrial Relations Commission, more than 3500 doctors took part in a three-day strike across the state last week. It comes after the ultimate protest took place in NSW this year when hundreds of psychiatrists resigned over pay and conditions in what the Royal Australian and New Zealand College of Psychiatrists called a system on the verge of collapse.

Whether workers are council bin workers or highly skilled medical professionals, it does speak volumes when they take industrial action. The council bin workers probably cannot afford to not get paid while they fight for their jobs for weeks on end. Doctors can probably afford to lose a few days pay to protest over being properly remunerated, but it is in the context of being in an overworked health work force that is unlikely to see any meaningful change for many years. Read more...

A recent Employment Court decision confirms the importance of documenting whether the working relationship is one of employee or contractor. It also demonstrates that the coalition Government’s proposed changes to these laws will not necessarily make it easier to clarify whether a worker is an employee or a contractor. Workplace Relations and Safety Minister Brooke van Velden, last year when she outlined changes to the law, said it would "maintain the status quo that contractors who have explicitly signed up for a contracting arrangement cannot challenge their employment status in the Employment Court".

In the case, Craig Brown claimed that he was employed as Chief Financial Officer of The Clinician Holdings Ltd (TCHL) when the company no longer required his services.

TCHL first started contracting Mr Brown’s services through his consultancy company Surestart Consulting Ltd. Surestart had a regular stable of clients and its fee revenue averaged about $350,000 each year. Surestart also engaged a sub-contractor to assist with servicing Surestart’s clients, including TCHL. This arrangement was confirmed in writing with TCHL in an independent contractor agreement.

In late 2021 TCHL wanted Mr Brown to become its full-time CFO at a lower hourly rate than the rate he currently charged though his company Surestart. After a series of communications between Mr Brown and the CEO of TCHL (Ron Tenebaum) a verbal agreement was reached that Mr Brown would work for TCHL on a full-time basis from 1 June 2022. Mr Tenebaum and Mr Brown also discussed him owning shares in TCHL to complement his remuneration. This new arrangement was never documented, despite repeated references to this in emails.

From May 2022 Mr Brown began informing Surestart’s clients of his decision to move to new full-time employment at TCHL and that he would no longer be able to provide CFO services to them. And when the new arrangement started from 1 June 2022 Mr Brown was paid an hourly rate based on a salary of $200,000 (although still through invoices) and was able to take paid annual holidays and sick leave. There were also further discussions over the ensuing weeks regarding an offer of shares to Mr Brown.

In January 2023 TCHL made alternative arrangements with another CFO provider. Mr Tenenbaum then met with Mr Brown on 1 March 2023 to advise him that TCHL would be terminating their agreement at the end of the month. 

TCHL and Mr Brown agreed that Mr Brown would work for THCL on a full-time basis from 1 June 2022. However, they disputed the nature of the working relationship; Mr Brown contending he was an employee, with TCHL asserting that the independent contractor arrangement continued with Surestart with Mr Brown continuing as an independent contractor but on a full-time basis.

Judge King found that there was a clear break from the original contracting arrangement. From 1 June 2022 Mr Brown started his full-time role on new terms. The Judge referred to the original independent contractor agreement which had a typical clause providing that any variations to the agreement had to be in writing. She said that an oral variation would be a clear breach of that clause.

Having concluded that there was a new verbal agreement, the Judge then proceeded to apply the applicable common law tests (the control, the integration and the fundamental tests) to decide if Mr Brown was an employee or not. She also applied the new two stage approach set out in the latest Uber case judgment in the Court of Appeal on the employee/contractor issue. The Judge concluded that all those tests indicated that Mr Brown was in an employment relationship.

When the Employment Court determined in the Uber case in 2022 that the drivers of Uber workers were employees the Chief Judge commented that “employment status is the gate through which a worker must pass before they can access a suite of legislative minimum employment entitlements, such as the minimum wage, minimum hours of work, rest and meal breaks, holidays, parental leave, domestic violence leave, bereavement leave and the ability to pursue a personal grievance.” Contractors enjoy no such protections.

The use of contractors has been a common tool to drive down costs. In this case it has backfired badly. The agreement to work longer hours and the agreement to reduce the hourly rate all supported a new verbal agreement that was not documented in writing as required by the contractor agreement.

Fortunately for Mr Brown, either as an employee or contractor, he was earning a good hourly rate of $150 for his full-time work (but down from $300ph for his part-time work). Many workers do not enjoy that type of bargaining power.

The Workplace Relations and Safety Minister Brooke van Velden’s proposed changes to employee/contractor laws, she says, will make it easier to clarify whether a worker is an employee or a contractor. Judges and lawyers love to have agreements that are set out clearly in writing. Unfortunately, in practice this is not often the case. It seems unlikely that the proposed law changes are likely provide any more certainty. Read more...