Dependent Contractors (Employment Relations Bill)
Under the proposed Employment Relations Act, the primary considerations for determining whether an individual contractor will be deemed to be an employee for the purposes of employment protection under the Act are as follows:
- The extent to which the dependent contractor is subjected to control and direction by the employer
- The extent to which the contractor is integrated in the business or business affairs.
Review the summary of the Act contained in the Employment Law and HR section of this site (subscriber access only)
The E.R. Authority or Court will therefore consider the reality of the relationship and how it operates, rather than the 'Label' given to it by the parties. That is, it will consider issues such as lines of reporting, hours of work, etc.
The Act will extend access to the rights, obligations and protection's of employment law to those generally classified as independent contractors, but who are in essence, working in a situation identical to a normal employment relationship.
If your business employs independent contractors you will need to consider how much direction and control you impose on them and to what degree they are part of the business. It would seem it does not matter what title they are given, or even if they account for their own Income Tax and GST etc., as the Authority or Court can still deem them to be employees and give them the same rights and access to employment law as is provided to wage and salary employees.
This therefore could potentially mean Independent Contractors would be bound by the same legislation requirements as wage and salary employees such as:
- Holidays Act
- Parental Leave and Employment Protection Act
- Employment Relations Act
- Minimum Wage Act
- Equal Pay Act, etc.
There are summaries of each of these Acts and others under the HR and Employment Law section of this site (subscriber access only)
This may therefore mean employers may have to bear the additional cost of providing Leave provisions as well as applying the normal disciplinary/termination (and possibly redundancy) Provisions to an independent contractors contract or agreement.
If this proves to be the case, Independent Contractors will need to be treated no differently than any other wage or salary employee, as upon enactment of the Bill, they will have the same rights to take a Personal Grievance to the Authority.
Review the 'Schedule 2' of the Act under the HR and Employment Law section of this site (subscriber access only)
Additionally, the ER Bill proposes that when a Fixed Term contract comes to an end, the contractor can be treated as having been unjustifiably dismissed unless the employer can prove:
- At the time the date or period of employment was agreed to end, there were genuine reasons for doing so relating to the employers operational requirements, and
- At the close of the date or period specified, the employer considers the reasons still apply.
In other words you will not be able to simply employ someone for say 6 months to help you through a busy period, then let their contract cease at the previously agreed date if there is still sufficient work for their continued employment. If you do cease their employment at the originally agreed date, despite there being an opportunity for continued employment, the contractor can elect to take a personal grievance for unjustified dismissal.
If you want some assistance in determining the level of control etc. you, as an employer may have over a contractor, and subsequently you need to consider the above ramifications, please contact PHA Consultants for advice.
