When Contractors are Employees

An employment determination has found a former taxi company in clear breach of minimum employment rights, by treating employees as contractors to save money. 

The Employment Relations Authority (ERA) has determined Dunedin’s Southern Taxis owes four former drivers nearly $100,000 in arrears in minimum wages and holiday pay. 

The Labour Inspectorate National Manager said this case is clear evidence of sham contracting and that employers need to be very clear about the difference between contractors and employees. Minimum employment standards cannot be removed if, in essence, the employer treats staff in any way as employees. 

This case follows a similar case in the UK where the Supreme Court determined a plumber was an employee despite the documentation referring to him as a contractor. 

Uber’s drivers have also taken a similar issue to court in the United Kingdom, United States and Canada to argue that they are employees of Uber, not contractors. 

In Australia, the Fair Work Ombudsman has taken proceedings against Foodora for its treatment of three workers, and the Transport Union is taking an unfair dismissal claim on behalf of another worker.  The key issues appear to be requirements to wear uniforms and the degree of control the worker has. 

In New Zealand, First Union is taking legal action on behalf of courier drivers, and will argue they are essentially employees rather than independent contractors. 

The Employment Court must determine the real nature of the relationship, which requires looking at the actual conduct between the parties and related matters. This includes the intention of the parties, the degree of control the employer has over the person, the level of independence the person has when performing the work and how integrated the person is into the business. 

If you engage contractors, click here take the following quick test to check whether those workers are employees or contractors. The Labour Inspectorate have clearly signalled that sham contracting is a growing concern and that they will take enforcement action and seek penalties.