5 common legal pitfalls to avoid when you're hiring
Thinking about your responsibilities when it comes to the law and HR can be daunting.

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 Rainey Collins, to explain 5 HR legal dangers employers should avoid.

  1. 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 the employer’s propriety interests, which they gained access to during their employment, to cause a loss of business to the employer,” Badenhorst says.

    “Examples of proprietary interest you 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.

    “This is because the law protects an employee’s right to earn a living and their right to pursue a career in their chosen field,” she says. “If a restraint of trade prevents this, then it’s unlikely to be enforceable.”
  2. Using independent contractor agreements to avoid employment obligations
    Contractors are not provided with the same legal protections and rights as employees. 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.”
  3. 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, in order to avoid becoming stuck with someone who is not performing satisfactorily or in the event that 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.”
  4. 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 vulnerability if there is ever a dispute. If an employee, or a regulatory body like Work Safe, Immigration New Zealand, or the Wage Inspector ever formally requests records, you must be able to provide them.”

    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 still follow a fair process and keep a written record of what happened, so that any claims to the contrary can be refuted.”
  5. 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 disputes,” Badenhorst says. “These can be costly and time consuming to resolve, not to mention damaging to the employment relationship.”

    It’s also important you are aware of any employment law changes and you regularly update agreements as required.

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.