Employee or Contractor? Take the time to find out - another recent case. Employment Lawyer Auckland. Dukesons Business Law

June 2017

Employee or Contractor? Take the time to find out - another recent case. Employment Lawyer Auckland. Dukesons Business Law

This Blog isn't legal advice – if you need legal advice on any employment law issue or on any business law or commercial law issue, please contact me. I'm a business lawyer in Auckland who provides advice on employment law issues and on a wide range of business law or commercial law issues.

A couple of weeks ago, I posted a blog in relation to another case where the issue was whether a worker was a contractor or employee. The issue has arisen again.

Like the previous case, the present case involved circumstances that could point to an employment relationship or to a contractor relationship. Like the previous case, the allegations by the worker that they were an employee were sparked off by termination of the relationship.

  • Leisuretime bought a business. It assumed that M was a contractor to the business, which he probably was. M built and sold caravan trailers to the business – he worked on the business premises. At some point, Leisuretime said that it didn’t want to pay a price per trailer and wanted M to work on the basis of an hourly rate Monday to Friday. This was agreed. M said that he thought that the was therefore now an employee. Leisuretime still considered M to be a contractor.
  • M completed time sheets. Each time sheet was headed “contractor hours for Leisuretime”, which M signed as contractor. Leisuretime said that it regarded these as invoices. M was paid through the same payroll system as all workers, with no distinction. But payslips referred to WT as M's tax code.
  • The time sheets showed some variation in hours worked each day and time taken for lunch. There was some degree of supervision but it wasn’t considerable.
  • M used some of Leisuretime’s tools and some of his own.
  • Leisuretime didn’t pay M for statutory days, or pay PAYE or ACC on his behalf.

Applying the customary legal tests, the ERA determined that M was a contractor, not an employee.

Could Leisuretime have avoided all of the hassle that this case would have involved? Possibly.

On the one hand, it was probably reasonably clear that M was a contractor when the business was bought. On the other hand, when the arrangements were changed, better documentation could have been prepared. (This is easy for a lawyer to say. Issues that are obvious to lawyers often won't be obvious to business proprietors.)

There are issues for any buyer of a business in relation to existing employees and contractors. Workers, whether employees or contractors, aren't chattels that are bought and sold with businesses. A new business owner should enter into new contracts with employees and contractors. Ideally, inquiries should be made in relation to workers who are identified as contractors but who aren't obviously entirely independent e.g. they work on the business premises, they use equipment/tools provided by the business, they keep to the same work patterns as employees. The question should be asked whether they are really contractors or employees.

It isn’t easy running a small business in New Zealand. Employment law can be demanding and tricky. Getting caught up in personal grievances and arguments over whether workers are employees or contractors can take up a lot of time and energy, and be costly. Better to get things right at the outset, wherever possible.

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