Another Case Contractor or Employee – Dukesons Business Law - Employment Lawyer – Business Lawyer

June 2021

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

In Barry, it was decided that a builder who was engaged as a contractor was in reality an employee. In my view, the decision is correct on the facts. It’s another warning for businesses that seek to avoid employment law by engaging workers as contractors. It’s one of several recent cases which, for the most part, have found that on the facts, a worker was an employee, not a contractor.

There are many genuine independent contractors. In the construction industry, many builders, brickies, plasterers, plumbers, electricians etc carry on their own businesses, and there are many equivalents in the white collar field (a now outdated term). But where a worker is engaged to perform work regularly for another business, the question must be asked whether they are working in reality as a contractor or as an employee.

Some of the telling facts in Barry were that:

  • Barry did what he was told when he was told in terms of what work to do and where. He had some flexibility due to his experience as a builder, but in the main, CIB exercised considerable control over what Barry did;
  • Barry worked consistently much the same hours week after week and was expected to turn up and work a full day;
  • Barry didn’t work for anyone else;
  • There was no evidence that Barry could have subcontracted work;
  • Barry was heavily integrated into CIB’s business – he had virtually no tools and used CIB’s tools; he sometimes drove a CIB van;
  • Barry never issued invoices to CIB;
  • Barry was paid on the basis of hours worked rather than on completion of tasks;
  • Barry was included in CIB’s application for a wage subsidy.

Looked at from an outsider’s view, there was nothing to distinguish Barry from an employee and he couldn’t be regarded as carrying on his own business – he didn’t bear any risk of loss or have an opportunity to make a profit or to build up any goodwill.

There were factors that pointed the other way such as CIB deducting tax from payments to Barry and that he was never paid for annual leave or sick leave but they were heavily outweighed by the above factors.

Some businesses are determined to have some or all of their workers engaged as contractors and are prepared to take the risk that this will withstand scrutiny. Advice that it's very difficult to dress up a genuine employee as a contractor is sometimes ignored (or the risk is taken). New Zealand employment law is designed specifically to try to avoid that situation occurring.

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