More Rights for Contractors?

29 November 2019

Despite that, nothing has happened until now and others have been left to argue the case for change. In recent years there have been a number of cases where the ERA and Employment Court have determined that workers purported to be contractors, were in fact employees - eg Prasad v LSG  Skychefs and  Dunedin's Southern Taxis.   

A potentially very significant matter, Leota v Parcel Express Limited is currently progressing through the Employment Court.  Mr Leota is arguing he is an employee of Parcel Express and not a contracted courier driver of the company.  This case has some way to go. Another involving Uber drivers is in the queue.

Then this week, coincidentally or not, Lees-Galloway published a consultation document on “Better Protections for Contractors”. There are four key themes suggested for consideration:

1. Deterring employers from misclassifying workers as contractors and not employees by:

• Increasing proactive targeting by Labour Inspectors (good luck getting one of them at the moment),
• Giving Labour Inspectors the ability to decide workers’ employment status, and
• Introducing penalties for misrepresenting an employment relationship as a contracting arrangement.

2. Making it easier for workers to access a determination of their employment status by:

• Introducing disclosure requirements for firms when hiring contractors,
• Reducing costs for workers seeking employment status determinations,
• Putting the burden of proving a worker is a contractor on firms,
• Extending the application of employment status determinations to workers in similar circumstances.

3. Changing who is an employee under New Zealand law, by:

• Defining some occupations of workers as employees (in similar fashion to real estate agents who are currently classified as contractors),
• Changing the tests the courts use to determine employment status, to include a wider group of workers.

4. Enhancing protections for contractors without making them employees, by:

• Extending the right to bargain collectively to some contractors,
• Creating a new category of workers with some employment rights and protections.

It seems inevitable there will be change to some degree, but how far such protections should go – and more importantly the process for making some of the determinations proposed – will be hotly debated.  A change in the law to create a new class of worker will at least be carefully scrutinized going through Parliament and would provide certainty for all parties, compared with allowing Labour Inspectors to decide on the hoof whether a worker is an employee or a contractor.

In my opinion, we’re better off providing a higher level of fairness for contractors, rather than attempting to reclassify them as employees, which in many cases may not suit the workers concerned. 

That could mean codifying into some commercial relationships a duty of good faith, structures & processes for collective negotiation and institutions to assist resolve disputes, similar to the duty of good faith and collective bargaining rules that are codified by legislation into employment relationships. 

Arguably, a good faith obligation already exists in certain types of commercial relationships.  In the Dymock’s case in the Privy Council (which related to a franchise arrangement), the Court recognised a general duty of good faith in relationship agreements and took the view that such relationships are not simply commercial but of long-term mutuality, and are “dependent upon coordinated action and cooperation”.

In SP Bates & Associates v Woolworths (NZ) Ltd, Fisher J  stated that “Where A and B contract with each other to confer a discretion on A that does not render B subject to A’s uninhibited whim, in my judgment the authorities show that not only must the discretion be exercised honestly and in good faith, but having regard to the provisions of the contract by which it is conferred, it must not be exercised arbitrarily, capriciously or unreasonably”.

You can see from that, the age old problem of deciding which types of commercial contract should be covered by any new protections and which should be excluded.

Whether any of this sees the light of day before the next Election remains to be seen.  Watch this space.