But gaining a clear understanding of what’s legal and what’s expected of you as an employer can help to make it less intimidating and help you to avoid common potential legal pitfalls.
We asked Jaenine Badenhorst, an associate lawyer with Dyhrberg Drayton Employment Law, to explain 5 HR legal dangers employers should avoid.
- Adding broad restraint clauses
A restraint clause in an employment agreement normally applies when a company wants to protect their interests when an employee leaves the business.
“These clauses typically aim to prevent employees from using a past employer’s propriety interests for their own, or another employer’s, benefit,” Badenhorst says.
“Examples of proprietary interest employers may want to protect include trade secrets, customer lists, a continuing business relationship or budget forecasts.”
The restraint of trade clause must protect an employer from more than just competition though, Badenhorst explains. There must be some proprietary interest, she says.
Badenhorst says: “If a restraint of trade clause is unreasonable (for instance too long or too broad, then it could potentially be unenforceable.”
- Using independent contractor agreements to avoid employment obligations
Contractors are not provided with the same legal protections and rights as employees (for instance employees have a statutory right to paid holidays and they are owed a duty of good faith). Sometimes business owners can try to avoid the rights and protections that people have by recording in an agreement that their worker is a contractor, rather than an employee.
Badenhorst warns that a court will look at the genuine nature of the relationship to determine what rules should apply, rather than relying on what’s recorded in an agreement.
“Getting this wrong can result in an employer being forced to compensate an employee who was incorrectly treated as a contractor,” she says. “Therefore, it’s very important for you to correctly record your intentions and the real nature of the relationship.”
- Using casual employees to avoid protections given to permanent employees
A casual employee doesn’t have any right to guaranteed hours of work (although they can also decline work offered to them).
“Some employers try to hire their workers as casual employees, to avoid committing to an employee (in case they are a poor performer, or work dries up),” Badenhorst says.
“Treating a permanent employee as a casual employee can result in you being forced to compensate the person who was incorrectly treated as a casual employee. It’s very important to make sure an employee is truly casual and that the agreement correctly sets out the parties’ rights and obligations to each other.”
- Inconsistent and undocumented processes
It’s a legal requirement for employers to keep accurate and detailed records of hours worked, wages paid, and leave accrued, taken or paid out. “Some employers fail to keep accurate records,” Badenhorst says.
“This is not only against the law, but can also result in the employee’s word being taken over your own, if there is ever a dispute. If an employee, or a regulatory body like Work Safe, Immigration New Zealand, or the Labour Inspector ever formally requests records, you must provide them, or you could face penalties.”
As an employer, you should keep accurate and detailed records of workplace rules and processes, plus any disciplinary or performance issues and how these have been resolved, Badenhorst adds.
“Even if informal steps are taken, you should follow a fair process and keep a written record of what happened, so any claims made against you can be defended.”
- Relying on unwritten or out of date employment agreements
As an employer, you are required to have a written record of the terms and conditions of your employees’ employment.
“The absence of a written agreement can result in uncertainty for both employers and employees, which can cause confusion and disputes,” Badenhorst says. “These can be costly and time consuming to resolve, not to mention damaging to the employment relationship.” You could also face penalties for not complying with the law.
It’s also important you are aware of any employment law changes and you regularly update agreements as required. Any changes in the work arrangement should also be recorded in writing, so there is no room for confusion or dispute.
Being aware of the common HR pitfalls and how to avoid them can help you ensure that you’re operating within the correct legal frameworks. If you have questions about what’s legal and what’s not, get in touch with Employment New Zealand or speak to a specialist employment lawyer.
Information provided in this article is general only and it does not constitute legal advice and should not be relied upon as such. SEEK provides no warranty as to its accuracy, reliability or completeness. Before taking any course of action related to this article you should make your own inquiries and seek independent advice (including the appropriate legal advice) on whether it is suitable for your circumstances.