ARTICLE
16 March 2024

Am I an employer? When is unpaid work legal in New Zealand?

L
LegalVision

Contributor

LegalVision, a commercial law firm founded in 2012, combines legal expertise, technology, and operational skills to revolutionize legal services in Australia, New Zealand, and the UK. Beginning as an online legal documents business, LegalVision transitioned to an incorporated legal practice in 2014, and in 2019 introduced a membership model offering unlimited access to lawyers. Expanding internationally in 2021 and 2022, LegalVision aims to provide cost-effective, quality legal services to businesses globally.
There is a fine line between legal volunteers, unpaid interns, work trials and illegal employment.
New Zealand Employment and HR
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As an employer, it is important to know when unpaid work is legal and when it may just be considered volunteering. This will help you decide whether your workers classify as employees and, therefore, whether you owe them certain rights. Generally, a worker is likely an employee if they expect to be paid. This article clarifies the circumstances in which unpaid work is legal in New Zealand.

Who Classifies as a Volunteer?

A volunteer is an individual who offers their time and skill to your business and does not expect any payment for doing so. Since volunteers are not employees, you should not be paying them for their work. Consequently, it is important that you make clear to your volunteers from the outset that they will not receive payment or any other non-monetary benefit, such as free lunches.

If you engage volunteers, you need to understand what benefits may constitute a payment under the law. Benefits that do not equal payment include:

  • reimbursements for expenses, and
  • a koha or small token of appreciation.

What Are Unpaid Internships?

Internships are a great way for you to introduce students and recent graduates to your business. If you have an unpaid intern at your business, they must be a volunteer for their work to be legal.

While unpaid interns and volunteers are not considered employees, you still owe them certain obligations under employment law, health and safety law and human rights law. Notably, interns are at a greater risk of exploitation as there is no specific definition for an internship under the law. Accordingly, be diligent when complying with your duties.

If you want to hire an intern, your business should ensure that:

  • any internships will not cause an economic benefit for your business;
  • the work an intern completes is not that which an employee would normally do; and
  • the primary focus of any internship should be providing new skills and experiences for the intern.

What Are Unpaid Work Trials?

In some industries like hospitality, unpaid pre-employment trials are common. However, an unpaid trial will, in most cases, be deemed unlawful, especially if you have gained a commercial benefit from it.

Some ways you could be gaining a commercial benefit include the employee:

  • performing work that the business needed to undertake; or
  • wearing a required work uniform.

If a person presents themselves as an employee, they might expect to receive some form of benefit for their work. Accordingly, the courts may determine that the person was an employee during their unpaid work trial, not simply a volunteer.

If you want to trial a potential employee's skills, it would be wise to pay them for the time you are trialling them. Another option is to opt for the 90-day trial period if the employee is new. In this case, the:

  • employment agreement must specify the 90-day trial period;
  • offer of employment letter must specify a start date;
  • employee must sign the employment agreement before they start the trial;
  • employee must receive a notice of termination for the trial period within 90 days of starting work; and
  • employee must have had time to seek independent legal advice before agreeing to the trial.

If you opt for an unpaid work trial, you should ensure that the worker is:

  • only performing a small number of skills;
  • on trial for a short period of time; and
  • aware that their trial is unpaid before they agree to undertake the position.

Generally, your business should treat work trials with caution. Where any disputes arise, a court will first look at the:

  • real nature of the relationship; and
  • employer's conduct.

Key Takeaways

There is a fine line between when legal volunteers, unpaid interns and work trials cross into the realm of illegal employment. If you want a volunteer for a specific role, you must ensure that they are not performing the work that another employee would be getting paid for. Generally, work trials are generally unlawful and should not be used. Additionally, interns should gain new skills and experiences, rather than engage in revenue-generating or commercial activities.

ARTICLE
16 March 2024

Am I an employer? When is unpaid work legal in New Zealand?

New Zealand Employment and HR

Contributor

LegalVision, a commercial law firm founded in 2012, combines legal expertise, technology, and operational skills to revolutionize legal services in Australia, New Zealand, and the UK. Beginning as an online legal documents business, LegalVision transitioned to an incorporated legal practice in 2014, and in 2019 introduced a membership model offering unlimited access to lawyers. Expanding internationally in 2021 and 2022, LegalVision aims to provide cost-effective, quality legal services to businesses globally.
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