Government discussion document on contractors released for public feedback

29 November 2019

The Government has recently released a discussion document for public feedback on the rights and protections of contractors in the workplace. The concern is that some contractors are vulnerable because they lack the protections offered to employees by law and the power to negotiate a better deal.

Contracting arrangements can be beneficial to both firms and workers. However, the discussion focuses on getting better outcomes for workers in the following situations:

  • Workers who are in substance employees but are misclassified as “independent contractors” by firms to reduce their entitlements.  These people are actually controlled by a company, have defined duties and have to work certain hours. Employees who are mislabelled as “independent contractors” miss out on basic employment rights. These include requiring employers and employees to deal with each other in “good faith”, protections against unfair treatment and minimum employment standards (such as minimum wage and various types of paid leave).  As an independent contractor they can also be dismissed without good cause and reasonable notice.
  • Workers in the grey areas between employee and contractor status. They operate their own business but depend on one firm for their income and have little or no control over their daily work.

Section 6 Employee Relations Act 2000 already provides an avenue for employees to challenge their worker status. However, the Government has put forward 11 options to further deter misclassification of employees as contractors and make it easier for workers to access a determination on their employment status. They are also looking for feedback on possible changes to the definition of who is an employee under New Zealand law and options to increase protections for contractors without making them employees.

This is a potentially significant issue as there are believed to be 140,000 self-employed contractors in NZ, which is more than 5% of the total working population. In addition, it is estimated that providing minimum employment entitlements to contractors would add 13% and 20% to the cost of each worker. This means the changes under discussion could add a significant cost to New Zealand businesses.  Given this, we believe there will be a high level of consultation with the industry before any changes are introduced.

The discussion document and submission forms are available here. Consultation closes on the 14th February 2020. Please let us know if you required assistance with making a submission or would like to discuss these issues further.

The Government has recently released a discussion document for public feedback on the rights and protections of contractors in the workplace. The concern is that some contractors are vulnerable because they lack the protections offered to employees by law and the power to negotiate a better deal.

Contracting arrangements can be beneficial to both firms and workers. However, the discussion focuses on getting better outcomes for workers in the following situations:

  • Workers who are in substance employees but are misclassified as “independent contractors” by firms to reduce their entitlements.  These people are actually controlled by a company, have defined duties and have to work certain hours. Employees who are mislabelled as “independent contractors” miss out on basic employment rights. These include requiring employers and employees to deal with each other in “good faith”, protections against unfair treatment and minimum employment standards (such as minimum wage and various types of paid leave).  As an independent contractor they can also be dismissed without good cause and reasonable notice.
  • Workers in the grey areas between employee and contractor status. They operate their own business but depend on one firm for their income and have little or no control over their daily work.

Section 6 Employee Relations Act 2000 already provides an avenue for employees to challenge their worker status. However, the Government has put forward 11 options to further deter misclassification of employees as contractors and make it easier for workers to access a determination on their employment status. They are also looking for feedback on possible changes to the definition of who is an employee under New Zealand law and options to increase protections for contractors without making them employees.

This is a potentially significant issue as there are believed to be 140,000 self-employed contractors in NZ, which is more than 5% of the total working population. In addition, it is estimated that providing minimum employment entitlements to contractors would add 13% and 20% to the cost of each worker. This means the changes under discussion could add a significant cost to New Zealand businesses.  Given this, we believe there will be a high level of consultation with the industry before any changes are introduced.

The discussion document and submission forms are available here. Consultation closes on the 14th February 2020. Please let us know if you required assistance with making a submission or would like to discuss these issues further.

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