Are you an em­ployee or a con­trac­tor?

The Hutt News - - FRONT PAGE -

In many in­dus­tries the use of in­de­pen­dent con­trac­tors in­stead of or as well as em­ploy­ees is com­mon, for ex­am­ple as couri­ers, for pizza de­liv­er­ies, or in real es­tate.

Em­ploy­ees have pro­tec­tions un­der the em­ploy­ment laws such as hol­i­day and sick pay, min­i­mum wages, per­sonal griev­ance pro­ce­dures, etc. Con­trac­tors do not have those pro­tec­tions and must en­force their con­trac­tual ar­range­ments through the nor­mal courts.

How­ever, it is of­ten not easy to tell whether a worker is an em­ployee or a con­trac­tor. The Em­ploy­ment Re­la­tions Au­thor­ity or Em­ploy­ment Court can de­cide that some­one called an in­de­pen­dent con­trac­tor is, in re­al­ity, an em­ployee and there­fore en­ti­tled to all of the pro­tec­tions given to em­ploy­ees.

In one ex­treme case an em­ployer wanted the worker who had started out as an in­de­pen­dent con­trac­tor to be an em­ployee and of­fered an em­ploy­ment agree­ment, but the worker re­fused and in­sisted on be­ing a con­trac­tor. When the re­la­tion­ship ended un­der the con­tract the ‘‘con­trac­tor’’ then claimed they were re­ally an em­ployee. The Em­ploy­ment Court held that they were an em­ployee and they had been un­jus­ti­fi­ably dis­missed, so it pays to get the sta­tus right.

The main test of whether some­one is an em­ployee or con­trac­tor, is whether they are re­ally in busi­ness for them­selves. Do they pro­vide their own equip­ment, do they hire their own staff, are they tak­ing the fi­nan­cial risk of be­ing in busi­ness, do they de­cide how and when to do the work, can they profit from run­ning the busi­ness in the man­ner that they think best?

It is also im­por­tant to see whether they can have other ‘‘cus­tomers’’. If a worker con­tracts with mul­ti­ple cus­tomers then they are go­ing to be a real con­trac­tor. If they work only for the one ‘‘cus­tomer’’ and re­ally have lit­tle or no con­trol over how or when they do the work they are likely to be an em­ployee.

The per­son who mows your lawn once aweek is likely to be a con­trac­tor. They are free to do the work how they want and to have mul­ti­ple other cus­tomers.

How­ever, it would be pos­si­ble to have a part time em­ployee whose job was just to mow the lawn. They might also be em­ployed by oth­ers so some­times the dis­tinc­tion is not easy.

The ap­pear­ance of be­ing in busi­ness is not enough.

Just be­cause the worker ren­ders an in­voice, pays their own tax and ACC levies and op­er­ates through a com­pany is not enough to con­clu­sively make them a con­trac­tor, but with­out those fac­tors they are likely to be eas­ily found to be an em­ployee.

If in re­al­ity the worker should be an em­ployee, it is un­wise to try to clas­sify them as con­trac­tors to avoid the re­spon­si­bil­i­ties em­ploy­ers have to em­ploy­ees.

Get­ting it wrong means an em­ployer will be up for per­sonal griev­ances and un­jus­ti­fied dis­missals, as well as penal­ties for not pro­vid­ing em­ploy­ment agree­ments, not pay­ing min­i­mum wages, not record­ing hours worked and hol­i­day en­ti­tle­ments etc, so the down­side can be hor­ren­dous and very ex­pen­sive.

Column courtesy of RAINEY COLLINSLAWYERS phone 0800 733 484 www.rain­ey­collins.co.nz

If you have a le­gal in­quiry you would like dis­cussed in this column please email Alan on aknowsley@rain­ey­collins.co.nz

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