Government seeking feedback on proposed ‘protections’ for contractors

The changing nature of work, including the expansion of the gig economy, has led to increased scrutiny of the use of contractors to provide services.

The Government has published a discussion paper and is seeking feedback on a range of potential options designed to improve ‘rights and protections’ for contractors. Submissions on the paper are due by 14 February 2020.

The status quo

In New Zealand, there are two categories of workers: employees or contractors. Employees are afforded protection by our legislative framework that provides for minimum entitlements, rights, and protections. Contractors do not receive any such entitlements as their relationship with a principal is that of a commercial contract.

Feedback sought

This debate has been on foot in New Zealand for several years and the Government’s discussion paper has identified two key issues to be addressed:

  1. Workers who are (in substance) employees, but are misclassified as ‘independent contractors’, and
  2. Workers in the ‘grey zone', between employee and contractor status, who can experience poor working conditions.

To address these issues, the Government is seeking feedback on four areas for change, with the ultimate aim of:

  • Ensuring all employees (including those misclassified as contractors) receive their statutory minimum rights and entitlements,
  • Reducing the imbalance of bargaining power between organisations and ‘vulnerable contractors’, and
  • Ensuring system settings encourage inclusive economic growth and competition.

The four areas are:

1. Deter the misclassification of employees as contractors

  • Increase proactive targeting by Labour Inspectors – Labour Inspectors could scale up their current inspection efforts, increase their priority, and proactively target investigations where they think misclassification is happening.
  • Give Labour Inspectors the ability to decide workers’ employment status (potentially being a binding decision) – currently, only the Employment Relations Authority or the Employment Court can determine employment status.
  • Introduce penalties for misrepresenting an employment relationship as a contracting arrangement – currently, organisations are only liable for unpaid employment entitlements.

2. Easy access to determinations of worker employment status

  • Introduce disclosure requirements for organisations when hiring workersorganisations would need to tell workers what their legal obligations are and where to seek advice before accepting the contractual arrangement.
  • Reduce costs for workers seeking employment status determinations – the discussion paper states that cost is a barrier to status disputes.
  • Put the burden of proving that a worker is a contractor on organisationsthe worker would be presumed to be an employee until the organisation proves that they are not.
  • Extend the application of employment status determinations to workers in fundamentally similar circumstances – this option would broaden the applicability of decisions to similar workers, even if they were not party to the legal action.

3. Change who is an employee under New Zealand law

  • Define workers in some occupations as employees – this significant change proposed would mean that certain types of work would only be able to be performed through an employment relationship.
  • Change the tests used by courts to determine employment status to include ‘vulnerable contractors’ – this would be a significant change as the common law courts have developed a series of tests to determine the ‘real nature of the relationship’ between the parties – i.e. whether a worker is an employee or a contractor.

4. Enhance protections for contractors without making them employees

  • Extend the right to bargain collectively to some contractors – currently, only employees can bargain collectively in respect of their terms and conditions of employment.
  • Create a new category of worker with some employment rights and protections – this option would be a significant change by creating a new category of ‘dependent contractor’ whose status falls somewhere between employees and contractors.

If enacted, the proposed changes would significantly alter our industrial relations landscape and have a substantial impact on many gig economy business models. The changes would reduce or remove the flexibility that contractors currently enjoy and provide to organisations as part of their resourcing needs.

The Government wants to hear your views on these options, particularly: what the benefits, costs and risks of the different options are; how the different options may work in practice; how these options could be improved to deliver better outcomes; and the potential impacts they may have for workers, businesses and the public.

Submissions can be made by downloading the submission form and sending this to the Ministry of Business, Innovation and Employment no later than 5pm on 14 February 2020.

How we can help

If you have any questions about the discussion paper or would like assistance with submissions, please contact one of our experts as soon as possible.

Further information

You can directly access the discussion paper here.  You can also access the submission form here.

Who can help

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