Karunanayake v FED

Kenneth Karunanayake, a real estate agent, needed help with marketing and promotions. He placed an ad on the Student Job Search website for a casual assistant, offering commission-only pay for leads and sales. The defendant, a university student, responded and was hired after a brief meeting and trial.

The role involved telemarketing homeowners to generate leads for property appraisals. The defendant received a script, a list of contacts, and was expected to work during set hours. Despite the commission-only arrangement, the Employment Relations Authority found she was an employee and owed minimum entitlements.

The ad specified that the work could be done from home, but set out expected calling hours and provided a script and contact list. Payment was based on successful leads and sales, but the arrangement included an unpaid trial period and regular communication about hours worked. The defendant had previously done similar work and was familiar with telemarketing roles. After the initial meeting and role play, she began calling homeowners as instructed.

The plaintiff argued that the commission-only nature and casual structure meant the defendant was an independent contractor. However, the Authority and Court focused on the actual working relationship, including the level of control, the tools provided, and the expectation of regular hours. Both parties represented themselves throughout the proceedings.

The Employment Court upheld the Authority's determination that the defendant was an employee, not an independent contractor. The Court considered the nature of the working relationship, including the job advertisement, the tasks performed, and the control exercised by the employer.

The Court ordered the plaintiff to pay the defendant $658.80 in wages and holiday pay, plus interest. The defendant's name was suppressed to protect her from adverse effects for enforcing minimum employment standards. The plaintiff's application for name suppression was declined.

The Court noted that the defendant had simply taken proceedings to enforce minimum employment standards, and that it would be contrary to the Act’s objectives for her to face adverse effects for doing so. The public interest was served by explaining the circumstances and outcome, not by publishing the defendant's name. The plaintiff had no issue with his name being published, and there was no basis for suppression in his case.

Neither party was represented by a lawyer, and there was no issue as to costs. The judgment was withheld from the Court’s website for 14 days to allow for any appeals or further applications.

This case shows that employers cannot rely solely on labels or payment methods to define employment relationships. Even if a role is advertised as commission-only or casual, the actual arrangement may still create an employment relationship under New Zealand law.

Employers must ensure all workers who fit the definition of employee receive minimum entitlements. Misclassification can lead to legal action, financial penalties, and reputational risk. Review your hiring practices, contracts, and payment structures regularly.

For example, if you provide scripts, contact lists, set hours, and expect regular reporting, the worker may be an employee. Commission-only pay does not change this. Unpaid trial periods are not allowed, and all work must be paid at least the minimum wage.

Employers should be aware that advertising on platforms like Student Job Search does not exempt them from employment law. The Court will look at the substance of the relationship, not just the form or wording used in ads and contracts.

Employers should take practical steps to avoid misclassification and ensure compliance with employment law. Start by reviewing job ads, contracts, and payment arrangements. If you use commission-only or casual roles, check whether the worker is subject to your direction, uses your tools, or works regular hours.

Keep clear records of hours worked, payments made, and any trial periods. Make sure all trial periods are paid and comply with minimum wage laws. If in doubt, seek advice before hiring or changing arrangements.

Ask yourself:

• Does the worker use your scripts or tools?
• Do you set their hours or require regular reporting?
• Is the work ongoing or structured around your business needs?
• Are you paying only commission, or also wages?

If the answer to any of these is yes, review your arrangements to ensure compliance. Failure to do so can result in legal action and financial penalties.

Key laws include the Employment Relations Act 2000, which sets out definitions of employee and contractor, and the Minimum Wage Act 1983. The Employment Relations Authority and Employment Court interpret these laws based on the facts of each case.

Employers should also be aware of guidance from MBIE and the Employment Court on worker classification and minimum entitlements. Regular updates and case law may affect how roles are classified, so stay informed and review your practices often.

For commission-based or casual roles, check the latest guidance from MBIE and the Employment Court. If you are unsure about classification or entitlements, seek advice before hiring or changing arrangements.