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A Contract to Build?

The Chief Employment Court Judge recently commented that while a particular model of working may be commonplace within a particular industry, it does not follow that the commonly adopted model reflects the “real nature” of whether or not there is an employment relationship. The case of Barry v C I Builders Ltd is the most recent of several cases that have challenged the commonly adopted model in a particular industry.

employee vs contractorMr Barry spent around three years working for a building company, C I Builders Ltd (CIB). When that finished, Mr Barry claimed that he was an employee and that he was entitled to bring a personal grievance claim and pursue other employee related entitlements. CIB said that Mr Barry was an independent contractor and could not bring those claims.

There was no dispute that it was made clear from the outset that Mr Barry was being engaged as an independent contractor.

The law

The Employment Relations Act says that the “real nature of the relationship” determines whether a person is an employee. In considering what the “real nature of the relationship” is, the Court must consider all relevant matters, including any matters that indicate the intention of the person. But the cases indicate that neither the intention of the parties and/or the labelling they put on the arrangement is determinative.

Mr Barry is a relatively experienced construction worker and the Court accepted that he could complete tasks without needing to be closely supervised. In analysing the control CIB had over Mr Barry, the Court noted that Mr Barry was told what he was to do and when. He moved between sites as directed by CIB; he picked up supplies for CIB as directed; he worked on particular jobs as directed; and the jobs he was working on would change – all at the direction and under the control of CIB. So, while the exercise of control was not consistently applied throughout each day of work, the Court said the key point was that CIB retained the power to exercise control as and when it chose, to suit its business needs.

CIB contended that Mr Barry had flexibility in terms of his work patterns, but the Court noted that this was not reflected in the documentation before the Court. Rather, the records showed a relatively consistent pattern of work hours per day, from week to week, and in terms of start and finish times. Further, Mr Barry worked consistently for CIB for an extended period of time. CIB’s timesheets appeared to show select occasions on which Mr Barry worked less than a 40-hour week, but those periods included public holidays and also coincided with a sick day recorded by Mr Barry.

Mr Barry also gave evidence that the hours he worked on certain days could be influenced by a variety of factors including weather and the availability of work. The Court noted that the hours worked on a construction site do not mirror the regularity of office hours.

In analysing the autonomy that Mr Barry had, the Court noted that Mr Barry was expected to turn up each day and work a full day. While he did not put in leave forms, he did advise either a site manager or the owner of CIB if he was proposing to take time off or leave early. The Court concluded that the reality was that during that three-year period that Mr Barry worked for CIB he worked an average of 40 hours per week and took an average of just over four weeks off per year (most of which were taken in order to meet childcare commitments during school holidays). Also, Mr Barry did not undertake work for anyone else during the three-year period. All his work was for CIB.  The Court concluded that Mr Barry did not exercise any real degree of autonomy over his work with CIB.

On the payroll side, withholding tax was deducted from Mr Barry’s pay each week. Mr Barry also made ACC contributions for a period during his time with CIB. While these suggested that Mr Barry was not an employee, the Court said concluded that this simply reflected the way in which the relationship was characterised at the outset by CIB. The Court said it was also notable that Mr Barry did not invoice CIB, unlike others who did contract work for the company. Rather, he provided screen shots of his hours of work each week.

Like the outcome in Leota v Parcel Express (a case involving courier drivers), the Court concluded that Mr Barry was an employee. As such, he is entitled to bring a personal grievance claim and pursue other employee related entitlements.

Possible legislative change?

Contractors could be given more rights, including the ability to be covered by Fair Pay Agreement.

Workplace Relations Minister Michael Wood told a Select Committee last week that a working group had been convened between BusinessNZ, the Council of Trade Unions and the Ministry of Business, Innovation and Employment.

The Minister said that the types of workers engaged as contractors varies from the likes of cleaners, fruit pickers and couriers at one end of the pay spectrum, to highly paid IT and communications specialists at the other. He said that the Government’s concerns lie with those towards the former end of the spectrum.

The outcome of this may include broadening the definition of an employee, extending employment law protections to a range of contractors, putting a burden of proof on employers to show that workers are contractors, and giving some contractors the right to bargain collectively.

Conclusion

Given the Government’s clear majority in Parliament, it certainly has the ability to change this area of employment law further.