Government moves to stop contractors challenging employment status

Intention of parties considered by courts; new legislation could be narrower

BY Gwen Drewitt 20 Jul 2024

The government appears to be moving ahead with plans to prevent independent contractors from challenging their employment status through the courts.

The announcement is hot-on-the-heels of a challenge to the Employment Court’s decision that Uber drivers were employees in law - E tū Inc & Anor v. Raiser Operations BV & Ors, [2022] NZEmpC 192. This most recent challenge took place in the Court of Appeal earlier this year, with the court yet to publish its decision.

Before the election, ACT campaigned to amend the Employment Relations Act so contractors who explicitly signed up for a contracting arrangement could not challenge their employment status in the Employment Court. Whether the government is intending to maintain this approach remains unclear. In the meantime, government officials are preparing advice on preventing further challenges to employment status, with consultation taking place over the past week.

MBIE’s call for feedback suggests that the government is concerned with placing more emphasis on the intention of the parties involved. Currently, the parties’ intentions are considered relevant by the courts, in addition to the following matters:

the level of control exercised over a person
the extent of integration of that person in the business
how fundamental they are to the business.

These matters are non-exhaustive, and the courts will consider all relevant matters which give insight into the nature of the relationship. However, it is possible that new legislation might undo this “court-made law” in favour of a much narrower approach.

Implications on contractual relationship

Unions are understandably concerned with the proposal, with Council of Trade Unions president Richard Wagstaff stating this could be “the most egregious attack on worker rights in decades.” On the other hand, the benefit of such changes would clearly be that businesses and workers will have more certainty about the nature of their relationship.

It is unclear if the government has turned its mind to whether existing contracts would remain open to challenge. It is unusual that legislation is retrospective in effect and so it may be that plenty of ambiguously worded contracts could still be disputed. Indeed, employee status would remain a live issue in circumstances where no contract exists at all.

The proposal is one of many possible changes to employment law, with the government clearly wanting to make its mark on the employment law landscape.