Changes Coming For Contractor or Employee Test
Whether a person is an employee or contractor has always been up for debate and there has been a lot of ubcertainty around it. As a result Workplace Relations and Safety Minister Brooke van Velden has announced changes to the Employment Relations Act aimed at providing clarity for contractors and businesses. An amendment to the Employment Relations Act to give effect to this change is planned for 2025.
The Coalition Government has agreed to introduce a 'gateway test' to help determine whether a person is a contractor or an employee. If a working arrangement meets the four criteria in the test, the individual is classified as a contractor. If any factors aren't met, the existing legal test applies. This update follows a recent Court of Appeal case involving Uber drivers, which highlighted the need for clearer guidelines.
The gateway test that the Government is looking to introduce is as follows:
These changes will be welcomed by businesses as it will give them greater certainty and less risk of being called before the Employment Court.
Whilst we wait for these changes to pass through Parliament the existing rules continue to apply. Under the current framework of the Employment Relations Act 2000, the courts use several tests to determine whether someone is an employee or contractor. These include:
While these tests are comprehensive, they can be subjective and leave room for interpretation, leading to uncertainty for both workers and businesses. It is our recommendation where you are uncertain that you have an employee or a contractor that you seek the appropriate legal advice from a specialist in the employment law area.
The Coalition Government has agreed to introduce a 'gateway test' to help determine whether a person is a contractor or an employee. If a working arrangement meets the four criteria in the test, the individual is classified as a contractor. If any factors aren't met, the existing legal test applies. This update follows a recent Court of Appeal case involving Uber drivers, which highlighted the need for clearer guidelines.
The gateway test that the Government is looking to introduce is as follows:
- a written agreement with the worker specifying they are an independent contractor, and
- the business does not restrict the worker from working for another business (including competitors), and
- the business does not require the worker to be available to work on specific times of day or days, or for a minimum number of hours OR the worker can subcontract the work, and
- the business does not terminate the contract if the worker does not accept an additional task or engagement.
These changes will be welcomed by businesses as it will give them greater certainty and less risk of being called before the Employment Court.
Whilst we wait for these changes to pass through Parliament the existing rules continue to apply. Under the current framework of the Employment Relations Act 2000, the courts use several tests to determine whether someone is an employee or contractor. These include:
- The intention test - This assesses the nature of the relationship as intended by both parties, usually based on the written agreement.
- Control v indepedence test - The more control the business has over the worker's duties, hours, and methods, the more likely the worker is an employee.
- Integration test - This looks at whether the work is fundamental to the core activities of the business.
- Economic reality test - This considers whether the worker is genuinely operating as a business on their own account.
While these tests are comprehensive, they can be subjective and leave room for interpretation, leading to uncertainty for both workers and businesses. It is our recommendation where you are uncertain that you have an employee or a contractor that you seek the appropriate legal advice from a specialist in the employment law area.
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