Contractor or employee?

The thorny issue of whether a worker is a contractor or an employee should not actually be that thorny; we simply need to "focus on the real nature of the working relationship not just the label the parties are calling it” (Employment New Zealand, 2023). 

If an employer is controlling what work, the method of the work, and the hours that the worker delivers, then the more likely it is that the person is an employee (Employment New Zealand, 2023). A contractor has greater freedom to: choose who to work for and where and when they work (Employment New Zealand, 2023). Contractors sit outside employment law, not receiving the same rights: meeting their own tax and ACC obligations; and no holiday, sick leave, or bereavement leave (Menzies, 2021).

For example, the New Zealand building industry is currently growing in a time of tight employment (MBIE, 2023). It seems that building companies are recruiting school leavers, not as employees, but as self-employed contractors. The 2021 case of Barry v CI Builders Limited proved that the 'contractors' were in fact employees, as the 'contractors' "Worked only for CI Builders; Worked 40 hours per week; Was told where to work and when, [...] had no flexibility; Could not subcontract; Had tax deducted from [their] pay; and Did not supply [their] own tools" (Johnstone, 2022). These workers were employees, in all but name.

Further, when considering the case of "LSG Sky Chefs New Zealand, [...] workers [were] seeking a declaration that they were not contractors, but employees", as they "did not advertise their services, employ others, hold business assets, issue invoices or keep records. They could not delegate their work to anyone else, they enjoyed no scope for other business activities and they were exposed to no risk (and conversely no potential benefit) in terms of loss and profit" (Dosen & Graham, 2018, p. 14). They too were effectively employees. 

It seems likely that without good legal frameworks and the resources to test a 'contract for service' as opposed to a 'contract of service', workers can be exploited by predatory employer practices. Employers have the power in the employment relationship, rarely employees (Budd, 2004).

We need to be watchful in our career practice, and refer clients on who are being exploited.

Sam

References:

Budd, J. W. (2004). Employment with a Human Face: Balancing Efficiency, Equity, and Voice. Cornell University Press.

Dosen, I., & Graham, M. (2018). Labour Rights in the Gig Economy: an explainer (Research Note 7). Research & Inquiries Unit, Parliamentary Library & Information Service [Parliament of Victoria]. https://base.socioeco.org/docs/2018_7_labour_rights_in_the_gig_economy_rn.pdf

Employment New Zealand. (2023). Contractor versus employee. https://www.employment.govt.nz/starting-employment/who-is-an-employee/difference-between-a-self-employed-contractor-and-an-employee/

Johnston, M. (2022, September 6). Do you have independent contractors and do you work in the construction industry. McVeagh Fleming Ltd. https://www.mcveaghfleming.co.nz/articles/do-you-have-independent-contractors-and-do-you-work-in-the-construction-industr

Labour Inspectorate. (2016). Employee vs Contractor: Know the Difference. Ministry for Business, Innovation & Employment. https://www.otago.ac.nz/humanresources/otago666833.pdf

Menzies, G. (2021, July 13). 10 Key differences between a contractor and an employee…. Rainey Collins Lawyers. https://www.employeradvice.co.nz/employer-advice/articles/contractors-v-employees/article2-13-07-2021

MBIE. (2023). Working in Construction. Ministry for Business, Innovation & Employment. https://www.live-work.immigration.govt.nz/resources/working-in-construction