Employee or Independent Contractor? ‘Traditional tests’ already available – so why the need for legislation?
28 October 2010
Is the proposed legislative change going to enforce that the ‘traditional tests’ (see following ‘checklist’) will continue to be used in establishing the true relationship between the parties, in determining whether or not the person hired is an ‘independent contractor’ or an ’employee’?
(ie; Just because the words ‘Independent Contractor’ have been written on a contract – does not make it so.
The “Real nature of the relationship test” is what counts.)
Surely, if the producers, actors and their agents were all VERY clear on these ‘traditional tests’ for establishing whether or not someone was an ‘independent contractor’ or an ’employee’ – then this legislation would not be necessary?
Perhaps the mandatory use of such a ‘checklist’ before the signing of such contracts would be helpful in establishing whether or not someone was in fact ‘independent contractor’ or an ’employee’?
The recent decision of the Supreme Court in Bryson v Three Foot Six Ltd  NZSC 34 has confirmed that the traditional tests (see the attached checklist), will continue to be used in establishing the true nature of the relationship between parties.
SPADA UPDATE ON THE BRYSON DECISION
“Minter Ellison has set out relevant questions for applying the traditional tests (see the attached checklist) when considering the real nature of the relationship between parties.
There are a number of questions to be asked, the answers to which will help to establish whether a worker is an employee or an independent contractor.
As a general guide, if you have more ticks in the “YES” column then there is more prospect that the status of a worker is that of a contractor; if you have more ticks in the “NO” column then there is more prospect that the status of a worker is that of an employee.
Relevant questions to ask:
YES Indicates Independent Contractor
NO Indicates Employee
“Real nature of the relationship test” – look at the contractual wording, industry practice and any other relevant factors, as well as the following tests to determine what the “real nature” of the relationship is:
“Control Test”: how much control does the worker have?
Does the worker have control over his or her hours?
Does the worker have control over where the work is done?
Does the worker have control over what work is done?
Can the worker be dismissed without a good reason?
“Integration Test”: is the worker a part of the “employer’s” business?
Does the worker charge the principal GST?
Does the worker invoice the principal?
Does the worker have his or her own client base?
Does the worker pay his or her own ACC levies?
Does the worker pay any overheads related to the job?
Is there anything preventing the worker from having the benefit of “minimum entitlements” such as paid holidays, paid sick leave and paid bereavement leave?
“Fundamental (or Economic Reality) Test”: is the worker in business on his or her own account?
Does the worker provide his or her own equipment?
Does the worker hire his or her own helpers?
Does the worker take any responsibility for investment and management?
Does the worker have the opportunity to profit from sound management and performance of his or her tasks?
Does the worker undertake any financial risk him or herself?
Other relevant factors may include the following
Does the worker claim for expenses off his/her tax (eg tools, equipment, clothing, transport costs etc)?
Does the worker operate as a company?
Does the worker invoice for his or her services? ”
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