The Employment Court has recently issued another warning to employers who seek to label workers as contractors to avoid their employment obligations.
In a judgment issued earlier this month, the Court ruled that a builder who had been engaged as an “independent contractor” was, in reality, an employee.
This is the third in a string of significant cases which extend the boundaries of what might be regarded as an employment relationship. This trend recognises the evolution of working arrangements and the need to protect vulnerable groups of workers who may have little bargaining power when these contracts are negotiated.
These factors were key to the Court’s findings in this most recent case in which Ross Barry sued CJ Builders Limited claiming he was an employee.
Barry worked for the building company for around three years. There was no dispute that at the time he entered into the relationship, the parties intended to structure it as an independent contractor arrangement. However he claimed that the true nature of the relationship did not accord with that label, and that in reality he was treated as if he was an employee.
The Court looked at the degree of control exercised by the company over Barry. It found that whilst he was a relatively experienced construction worker, he was nonetheless closely supervised and directed. In practical terms he was told what to do, where, and when, and had little flexibility. He was expected to turn up each day and work a full day, and to advise the site manager if he wanted to leave early or take a day off.
Barry was also found to be part and parcel of, or integrated into, the business and to a person looking on, there was nothing that differentiated him from the employees at the site.
Another important part of the test as to whether a worker is an independent contractor or an employee, is whether they are entitled to work for other businesses at the same time. On this point the Court found that there was no express prohibition on Barry doing so, but in reality this would have been impracticable given that he worked an average of 40 hours a week for CJ Builders. Further, he was not able to subcontract or delegate his work, the company expected him personally to perform it.
Evidence was given in the case by Maurice Davies, the General Secretary of the Amalgamated Workers Union, which is the largest construction sector union in New Zealand. He said that it was increasingly common for construction businesses, particularly smaller ones, to engage less skilled and specialised workers on an hourly basis, ostensibly as contractors. Davies said this had the effect of shielding such businesses from the liabilities and obligations associated with employing staff.
In finding that Barry was an employee the Court said that the independent contractor model is not an alternative which enables hirers to assess the suitability of a worker for employment. The Chief Judge said that whilst each case must be decided on its facts, and in other cases a worker in the construction industry could be an independent contractor, in this instance the real nature of the relationship was that of employer – employee.
This case builds on the Court’s earlier rulings that a courier driver and four taxi drivers were employees notwithstanding they were engaged on contractor agreements. Conversely, in another recent decision, an Uber driver was found to be an independent contractor.
The reason these cases are important is because employees, such as Barry, have a range of entitlements that contractors do not have, including the right to sue for unjustified dismissal and to claim holiday pay and other leave entitlements.
In parallel with what appears to be a general movement by the Employment Court towards recognising a broader range of workers as employees, the Government announced last week that it has reconvened a working group to consider options to better protect workers who are classed as contractors.
Minister Michael Wood echoed some of the sentiments expressed by the Employment Court in saying that there are “some abuses within the current system that need to be dealt with”.
To the extent that there has been a loophole around the engagement of contractors, this is being steadily tightened up.