According to Stats NZ there were just under 144,000 contractors in New Zealand in 2019 which was roughly 5% of the working population. From time to time questions are raised as to whether a contractor is truly a contractor or whether they should be legally considered employees and therefore protected by NZ employee laws. Generally employment status cases are looked at by the New Zealand employment court on a case-by-case basis.
The Government has announced their intention to implement a new gateway test to help clarify whether a person is considered a contractor or an employee when their work status is contested. This change was revealed on September 15 2024 by Workplace Relations and Safety Minister Brooke van Velden and aligns with the ACT-National coalition's commitment to addressing the status of contract workers. The aim of the proposed changes is to add clarity and consistency and reduce the need for costly court proceedings.
The announcement comes after the high profile Uber case in 2022 in which the NZ Court of Appeal ruled that four Uber drivers were employees based on current statutory and common law tests while they were logged into the Uber app. The decision was a historic one and bought the issue of employment status into the spotlight and made it a hot topic of political debate in the 2023 election. It was again in the news when Uber lost it's appeal of the initial decision earlier this year.
The proposed criteria for the gateway test is:
- A written agreement between business and worker specifying the worker is an independent contractor,
- The business does not restrict the worker to work for other businesses, including competitors,
- The business does not require the worker to work at specific times or for a set number of hours, OR the worker has the option to subcontract the work, and
- The business does not terminate the contract in the event of a worker declining additional tasks or engagements.
If all these conditions are met, the individual will be classified as a contractor. However, if one or more of the criteria are not fulfilled, the existing test under section 6 of the Employment Relations Act 2000 will apply.
The introduction of such a test will have wide-reaching implications across multiple industries in New Zealand, particularly those that heavily rely on freelance or "gig" workers. It is likely that businesses will need to review their contracts and practices to ensure compliance with the new requirements. Workers can expect changes in the way contracts are structured, as businesses seek to avoid inadvertently classifying workers as employees, which would entitle them to benefits such as annual leave, sick pay, and minimum wage protections.
Upon implementation workers currently classified as contractors should be aware that they may find themselves classified as employees. Whilst there are advantages to being an employee there are also advantages to being a contractor and employee status may not be what the worker wants.
Workers who meet the gateway criteria will have the security of knowing they are legally recognised as contractors and that this cannot be challenged.
These and potentially other changes to Employment Law in NZ are likely to come into effect via the Employment Relations Amendment Bill in 2025. You can read the full release from the beehive here: Beehive Release
If you have questions over your employment status and employment rights here in New Zealand, get in touch with the team here at My Advocate, experts in New Zealand Employment Law.