Media Focus on Courier Drivers' Plight Brings Risks to the ForePosted on July 31, 2018 in Commercial (Tags: Employment Relations Authority;, Employment Contract, Employment Law, contractor, Courier Drivers)
Recent media interest in the plight of courier drivers in New Zealand has brought to the fore the risks of engaging workers as independent contractors. Many courier drivers claim to be working below minimum wage as contractors, yet they cannot work for more than one company, they wear company uniforms and have the company’s branding on their vans. Disputes relating to independent contracts are outside the scope of the Employment Relations Authority and Employment Court as they are not governed by the Employment Relations Act, unlike an employment relationship. This gives the parties the freedom to determine their own terms which will govern the contract.
However, the courts will look beyond the terms of an agreement which claims to be an independent contract to determine the real nature of the relationship between the parties.
If it is found that the contract is one of employment rather than independent contract, the “employer” must comply with the terms of the Employment Relations Act in relation to termination, holiday pay, sick pay, minimum wage provisions as well as the broad concepts of good faith and natural justice which permeate employment law. This can have quite unintended consequences for the employer. This is particularly so where notice is given in accordance with the independent contract without the process required under employment law.
While there is no clear line to be drawn between an employment relationship and one of independent contract, there are a number of factors which would suggest an employment relationship if present.
- Control. If the employer exercises control over the person’s work in the manner in which it is to be done, the greater the degree of control, the more likely it is that it is an employment relationship. Does the employee/contractor dictate the hours that they work or is that dictated by the employer? Do they undertake work for other parties? Does the employee have to request leave?
- Integration of the worker. If the work performed is an integral part of the business and where the person performing it is a key part of the organisation, they are more likely to be an employee. You could look at whether the person has business cards which represent that they are part of the employer’s business, rather than acting in their own right. Do they work in the office alongside other employees? Is the work ongoing, or a one-off? The greater the degree of integration, the more likely they are to be employees.
- Economic reality. Does the person behave like a business person operating on their own account? Do they take financial risk? Do they provide their own equipment? Do they hire their own staff where needed? Do they invoice and pay their own tax? Do they have liability insurance?
A common provision in an independent contactor agreement is a restraint of trade which seeks to prevent the contactor from contracting to other parties while contracting to a company and for a period after. Ironically, this could be counter-productive as it could make the worker look more like an employee tied to the employer by limiting their freedom to contract with other parties. It is important to make sure that such provisions are carefully drafted to show they only protect the proprietary interests of the contracting company and no more.
Relationships can also change over time so frequent review of agreements is advisable to ensure they are being performed in the manner intended.