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Unpaid Work Trials & the Minimum Wage

Published 01 Oct 2014

Some Employers take on a person on the basis of an unpaid work trial to determine suitability and wish to treat the person as a volunteer.

However, later the Employee could assert that they are entitled to be paid at minimum wage under the Minimum Wage Act 1983.

In McIvor v Saad [2014] NZERA Auckland 203, Mr Saad operated a pita bread bakery, Middle Eastern Supermarket and kebab takeaway shop in Onehunga. When approached by Mr McIvor, Mr Saad said that there were currently no jobs available. However, Mr Saad said that he would pay Mr McIvor $65 a day which was for food and petrol but that this payment was not wages. Mr McIvor started work packing pita bread into bags but as Mr McIvor could not keep up, McIvor began as a baker’s assistant mixing the dough for pita bread. It was the view of the Authority that this work contributed to the business.

In this light, it was held that the relationship was a trial work period which was one of a fixed term employment agreement. However under s 66 of the Employment Relations Act 2000, employers cannot use fixed term employment agreements for the purpose of establishing an employee’s suitability for permanent employment. As the fixed term employment agreement was unlawful, the employee was entitled to treat the fixed term as ineffective. The appropriate method for a work related trial was a 90 Day Trial Period in an ongoing employment relationship.

At a subsequent meeting between the parties, Mr McIvor said that he wanted to be put on the books as a fulltime 40 hour a week worker. Mr Saad offered Mr McIvor 30 hours a week at minimum wage. This was not acceptable to Mr McIvor who refused the offer and handed Mr Saad a letter of resignation. He subsequently claimed constructive dismissal. However, in the circumstances Mr McIvor decided he was unhappy with the terms of the “trial” and the job offer and decided to resign.

Even though the claim of constructive dismissal was not made out, Mr McIvor was entitled to be paid for his 260 hours of work at minimum wage under the Minimum Wage Act 1983.

The lesson for Employers is that unpaid work trials are a problem under the Employment Relations Act 2000. One way is to have a condition of the employment relationship being an unpaid work trial. However, this is problematic as it is likely that any consideration – even a salad – may invoke the Minimum Wage Act 1983 where the employment relationship is said to have commenced.

The process for properly engaging Volunteers is detailed in EAL's new ebook on Volunteers - this has all the necessary documents in order to show the Employment Relations Authority and the Employment Court that there is a volunteer relationship. Without written documentation in this day and age of employment disputes, there is a real risk that  unpaid Volunteer work will give rise to payments required under Minimum Wage Act 1983. With clear documentation, such a dispute can be easily avoided.

The Volunteers ebook is available for purchasing by non-members here, or members will find it in the Dashboard Library of the Employers Toolbox Online.