By Terri Gough - 21 Jun 2019
Sometimes the distinction between an employee and an
independent contractor is unclear. In the eyes of the law however,
the difference is profound.
An employee receives all the protections afforded by the
Employment Relations Act and common law. In particular, the
employer is obligated to deal with the employee in good faith and
cannot terminate the employee's employment unjustifiably.
Furthermore, the parties to an employment agreement must comply
with an obligation of trust and confidence towards each other.
The contractor, by contrast, receives no such protections. The
principal engaging a contractor may terminate the contractor's
services on notice, they need not treat them with good faith and
there is no implied mutual obligation of trust and confidence
between the parties.
It follows that establishing whether the person you engaged is
an independent contractor or an employee is critically important.
To differentiate them one must determine the real nature of the
relationship. In turn, this requires an assessment of such factors
as:
- The intention of the parties.
- Whether the services are performed by the person on their own
account. This includes consideration of whether they provide their
own equipment, whether they hire their own assistant(s), the degree
of financial risk they are taking and the degree of responsibility
for investment and management they have. Also relevant is how much
they are likely to profit from their own endeavours in the
performance of the services rendered.
- The degree of control that is exerted by the principal/employer
over the work and the manner in which it is to be done. The greater
extent to which the person is regulated and supervised, the more
likely they are an employee.
- Whether the work performed is an integral part of the business
and whether the person can be considered part and parcel of the
organisation.
- Common industry practice.
The analysis is not always easy and factors sometimes point in
different directions. Martelli McKegg's specialist
employment law team can assist you if you have any queries or
concerns.
Contacts
Terri
Gough
Claire
Mansell