We now have more details on proposed changes to the employee vs independent contractor test in Section 6 of the Employment Relations Act 2000, including an expectation that a Bill amending the Act will be introduced in 2025.
The changes appear to be intently focused on Uber and similar gig economy services, so may not be as wide-reaching as first envisaged. Click here to read more about the earlier Court of Appeal Uber decision, and here for our earlier story about the proposed changes.
Nonetheless, the Bill goes to the heart of policy values for several parties in the House and we expect to see a political scrap over its final form. Our Employment Law team will keep you updated.
What is Section 6?
Section 6 of the Employment Relations Act 2000 (the Act) provides the Employment Relations Authority (Authority) or Employment Court (Court) jurisdiction to determine whether someone is an employee or an independent contractor. The test involves an examination of the “real nature of the relationship” between a person and the would-be employer, taking into account a range of factors.
Proposed changes
The Government has proposed a new test. If all of the four criteria below apply, then the person will be considered to be a contractor, and will not be able to challenge their employment status.
The four criteria are:
- A written agreement with the worker, specifying they are an independent contractor.
- The business does not restrict the worker from working for another business (including competitors).
- 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.
- The business does not terminate the contract if the worker does not accept an additional task or engagement.
If, however, any one of the criteria is not met, then the current test under Section 6 will apply, and the individual will be able to apply for the Authority or the Court to determine the “real nature of the relationship”.
Questions to be addressed
As we say, we expect the detail of the Bill to be hard-fought in the House.
As things stand, there are several questions about how it would actually work in practice, including:
- How will the amendments apply to existing contracts?
- Will the assessment of the criteria involve an assessment of what has occurred in practice? If so, who will complete this assessment? Under the current Section 6 test, the Authority and Courts are acutely aware of “window dressing”- where the wording of the contract and the practice of the business conflict. It would be simple to ensure that the contract sets out no restrictions on an individual working for a competitor. It remains unclear what would happen if, in practice, the individual is restricted from working for other businesses due to the volume of work they are required to complete.
- While a business would be prohibited for terminating the contract if a worker does not accept additional work, how will this be assessed in practice? Most independent contractor arrangements allow either party to terminate the contract, on notice, for any reason. Neither party is then required to give the reasons for termination. If reasons for termination are required to be given by the amendment, will the contractor have recourse to challenge the reasons given?
