18.06.2021

Construction Contractor Controversy: Guidance on the Status of Contractors

Workers in the construction industry are frequently engaged as independent contractors.

While many hold a perception that this is a common industry practice, the assertion or even intention that a worker is a contractor cannot always be taken at face value.

In the recent case of Barry v C I Builders Limited, the Employment Court held that the real nature of Mr Barry’s relationship with C I Builders (CIB) was one of employment, despite the contractual agreement stating otherwise.   

This judgment follows a significant 2020 case where the Court held that a courier driver engaged as a ‘contractor’ by Parcel Express Ltd was, in fact, an employee. 

Once again, the Court has emphasised that the way in which a relationship operates in practice will determine the status of the parties, rather than the “convenient application of a name tag”. The Court has consistently noted when considering ‘employee or contractor?’ cases that each issue will turn on its own facts. Save for workers engaged in film production work, there is no ‘blanket rule’ that determines the employment relationship status of a worker.

In order to determine that the relationship is truly a contracting relationship, the Court will be looking for evidence that, amongst other things, the relationship was or is a commercial arm’s length arrangement that allows a worker to operate her or his own business. 

It is certainly not impossible that a builder could in fact be an independent contractor, but intention alone will not carry the day.  A builder who set his or her own prices, works for a variety of clients at different sites, while providing all of the tools and/or plant for the job could lead to a conclusion that the builder is in business on her or his own account.   

This was not the case for Mr Barry in his relationship with CIB, even where the intention of commencing an independent contractor relationship was present at the outset.  The following factors were held to be indicative of an employment relationship between Mr Barry and CIB:

  • There was nothing to externally differentiate Mr Barry from any of the employee workers on site;
  • CIB provided majority of the tools used on site and retained control over the way in which Mr Barry performed his work. Mr Barry’s work hours were 40 hours per week which meant that he could not realistically work for others at the same time. Mr Barry was not able to subcontract his work;
  • CIB deducted tax from Mr Barry’s pay each week. Mr Barry was paid on a weekly basis, instead of a job completion basis; and
  • Mr Barry did not bear any commercial risk. Conversely, he did not have the ability to make a profit for completing his work more efficiently, or the ability to accrue business goodwill.

The Employment Court is often swift to condemn employers who attempt to use contractor relationships to avoid minimum employment standards (such as holiday leave or sick leave) or other employment benefits or protections (such as justification for dismissal, collective bargaining, or unlawfully using a contractor relationship to establish suitability for employment).  This is for good reason as employees have access to a range of entitlements that are otherwise not available to contractors.

A worker either is, or is not, correctly categorised as an independent contractor. The correct categorisation depends on the nature of the relationship and the way in which it operates.  The relationship can and often does change over time, meaning that businesses engaging contractors should monitor how the relationship operates over time.

If you have any questions about contractors or, employees or the distinction between the two, please get in touch with our Employment Team or your usual contact at Hesketh Henry.

 

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.

 

Do you need expert legal advice?
Contact the expert team at Hesketh Henry.
Kerry
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

Related Articles / Insights & Opinion

iStock  Construction dpi
Call me? Care is required when calling on a bond
In the recent High Court decision Hawkins Ltd v Elizabeth Properties Ltd, Hawkins was successful in preventing EPL from calling on a $3m bond pending determination of a dispute principally over the ap...
10.04.2024
HH News NZS  Release
What You Need to Know About the New NZS3910:2023
The new NZS3910:2023 (conditions of contract for building and civil engineering construction) was released by Standards New Zealand in December 2024 (see our article here).  It is now gaining relevan...
10.04.2024 Posted in Construction
Money stack black and white
Income is classified as relationship property – surprised?
For all couples, embarking on the journey of building a life together involves not only love and commitment but also financial considerations.  As you navigate through shared finances, it’s imp...
26.03.2024 Posted in Private Wealth
Forestry Unsplash ruben hanssen wl ylTCM
Forestry: Regulatory Roundup March 2024
The challenging economic environment for New Zealand’s forestry industry continues, with China’s demand for our logs remaining subdued. Moreover, in addition to the change in Government, t...
25.03.2024 Posted in Forestry & Property
solar
OIO Spotlight: Solar projects, exempted interests and farmland considerations
As New Zealand renewable energy developments continue to attract interest from global investors, we take a look at some recent approaches of the Overseas Investment Office in assessing consent require...
BCC Trade Credit v Thera Agri Capital: Policyholder Successful Against Credit Insurer in Australian Court of Appeal Decision
When applying for trade credit insurance, a prospective insured will typically provide information on the financing arrangements that will form the basis of cover. Where there is deviation from these ...
05.03.2024 Posted in Insurance & Trade and Transport
iStock
Parker v Magnum Hire: A new era of personal grievance remedies awarded in the Employment Relations Authority?
If you heard a sudden loud noise last week – no it wasn’t a jet plane flying overhead, it was the gasp of employment lawyers across New Zealand when the Employment Relations Authority published it...
26.02.2024 Posted in Employment
SEND AN ENQUIRY
Send us an enquiry

For expert legal advice, please complete the form below or call us on (09) 375 8700.