Proposed new laws to increase contractor protection

The Ministry of Business, Innovation and Employment (MBIE) issued its Discussion Paper “Better protections for contractors" this month. The aim of the Discussion Paper is to provide better protection for contractors, on the basis that contractors have limited rights and protections compared to employees. Submissions regarding the Discussion Paper are due by 14 February 2020.

The issue of worker classification has had increasing focus in the ‘gig’ economy, with roles such as Uber drivers challenging traditional ‘worker’ models, as well as recent challenges to the status of certain types of workers, such as courier drivers and labour hire workers.

Differentiating between contractors and employees

Contractors are engaged to provide services to one or more businesses on their own account. They enjoy greater autonomy compared to employees, including the ability to work for multiple organisations at once. Contractors will be responsible for their own tax and ACC levies, and will not protection under most employment laws (with the exception of health and safety laws which cover all workers).

The question of an individual’s true status requires a factual analysis by the courts, looking at the real nature of the relationship, including how the particular relationship operates in practice and what was intended between the parties.

Basis for the Government’s proposals – why consult?

The Government’s basis for concerns are set out in the Discussion Paper, with particular concern regarding:

• Workers who are employees but have been misclassified as independent contractors, thereby businesses avoiding obligations regarding minimum employment rights and protections; and
• Workers who are in the ‘grey area’ between employee and contractor status, and do not fall clearly into either category.
• A worker in the ‘grey area’ between employee and contractor is not entitled to minimum employment standards as an employee, but may not also have the ability to exercise all benefits as a contractor, such as real control over the way in which they work. The Discussion Paper describes these types of worker to be “vulnerable contractors", and has proposed possible solutions with a view to:
• Ensuring employees receive minimum entitlements as required by law;
• Reducing the vulnerability of contractors by achieving a better balance of bargaining power between businesses and contractors; and
• Ensuring regulation encourages inclusive economic growth and competition.

A new class of worker - “Dependent contractors”

One option for change being floated is the introduction of a new category of worker, a “dependant contractor"; which is a hybrid between employee and contractor, and where there would be benefits received of each category. For example; entitlement to minimum wage protections, paid leave, the right to collectively bargain and protection against unjustified dismissal. However, the dependent contractor would remain responsible for their own taxes, and enjoy greater autonomy over their working arrangements.

This proposal reflects other jurisdictions, including Italy, Canada and the United Kingdom, where the “dependent contractor” has been entitled to some of the minimum employment standards afforded to employees, including entitlement to holiday pay, sick pay, and the minimum wage. However, generally, this does not extend to rights to pursue an unjustified dismissal claim.

There is a risk of uncertainty created by this proposal and whether it would effectively address the vulnerability of this group of workers, or, whether it would simply create additional compliance complexity.

Submissions

Submissions are welcomed on the Discussion Paper, and due by 5pm, Friday 14 February 2010. These will be reviewed before MBIE develops final proposals.

The Discussion Paper can be read at: https://www.mbie.govt.nz/assets/better-protections-for-contractors-discussion-document-for-public-feedback.pdf

The team at DTI Lawyers are able to assist drafting or reviewing your submission to MBIE, or clarifying any queries you have regarding the existing and proposed laws in this area.