12.07.2021

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.

 

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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.

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