Employee v Contractor Status Disputes – A New Law But Old Problems?

As per the ACT-National coalition agreement and very shortly after the recent Court of Appeal's decision in respect of the employment status of four Uber drivers (and the potential effect of having 'opened the floodgates'), the Government has announced its plan to amend the Employment Relations Act 2000 by introducing a new legislative test that aims to prevent workers from challenging their status as an independent contractor and claiming that they are employees.

Under the planned new test, a worker will be a contractor (and not an employee), and will not be able to challenge this status, if:

• There is a written contract for service in place (i.e., a written agreement that specifies that the worker is an independent contractor); and
• The worker is free to work for other businesses, including competing businesses, and the organisation does not restrict the worker from doing so; and
• The worker can choose their own days and hours of work or is permitted to sub-contract the work (i.e., the business cannot require the worker to be available to work on specific times or days, or for a minimum number of hours); and
• The business has not terminated the contract if the worker did not accept a new task or engagement.

All four requirements must be satisfied in order to attract the 'finality' of the classification of the worker as an independent contractor. Failing that, the currently applicable test that examines the parties' intentions, control, integration and economic reality to determine the "real nature" of the parties' relationship, will continue to apply – in which case, the parties will be back at square one. MBIE has provided a diagram that illustrates the proposed new mechanism.

The planned changes aim to minimise the difficulties and uncertainties that are often experienced in practice and associated with the current test, and to thereby mitigate the risk of long and expensive disputes. Whether this will be the case – we will have to wait and see.

At first glance, the proposed test, whilst new, may come with some of the same old challenges that parties typically experience in status disputes. The particular facts of the parties' arrangements are usually in dispute and either test involves a highly fact-specific inquiry. With regard to the proposed new test, particularly the last two bullet points seem likely to attract opposing accounts, and as a result, the dispute between the parties may simply be moved from trying to establish the "real nature" of the relationship to whether the four requirements of the new test are satisfied.  What remains is a dispute and this will likely take time and come at a cost, and this may raise the question what benefit is actually gained from the proposed amendment. We anticipate further details and debate in this space.

The intended changes are planned for 2025 and we will keep you informed as further details, including a Bill, emerge. If you have any questions about the current law or would like more information about the proposed new law, please reach out to our Employment Law team at McVeagh Fleming.

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Michael Witt

Email: mwitt@mcveaghfleming.co.nz

DDI: 093797611

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Gus Hardie Boys

Email: ghardieboys@mcveaghfleming.co.nz

DDI: 09 306 6737