The Employment Relations Authority (Authority) has ruled in favour of a worker who claimed unpaid wages, finding that his status had shifted from independent contractor to employee during a short-term working arrangement.
The case highlights the complexities which continue to exist when distinguishing between contractor and employee status.
The facts
The dispute arose after the worker originally attempted to purchase a truck and trailer unit from the employer. However, instead of the truck purchase, the employer offered the worker the use of his truck.
The worker then completed deliveries using the employer’s truck on a per-load basis for the employer’s logistics company. During this initial period, the worker invoiced the company on a per-load basis and paid his own expenses.
The worker argued that while he initially operated as an independent contractor, the working arrangement fundamentally changed when he raised financial concerns about the viability of the contracting model.
He claimed the employer then offered him employment on an hourly rate as a short-term solution, creating a distinct employment relationship for which wages remained unpaid. The employer denied any employment relationship existed, maintaining that all work was performed under the original independent contracting terms.
Determination
The Employment Relations Act 2000 (Act) defines an employee as someone employed to do work for payment under a “contract of service.” It is only by looking at the actual nature of the working relationship that it can be determined whether the relationship is truly one of employer and employee. As such it is not always determined by what the parties call it, or what a contract might say.
The Authority found significant operational differences between the two periods. During the first, contracting, phase the worker invoiced per-load, covered his own expenses and even subcontracted work. In contrast, during the alleged, second, employment period, he reported hours worked, had expenses covered by the employer, and was paid from the employer’s personal account rather than the company’s.
The worker also submitted what the Authority described as “effectively a record of hours worked,” contrasting with earlier invoices that only recorded kilometres travelled. These changes, along with the employer’s personal payments and the absence of subcontracting, supported the worker’s claim of a genuine employment relationship.
The Authority acknowledged that the worker continued to use invoices during the employment period but found this was “a product of being eager for payment and doing what [the employer] had asked him to do.” It also dismissed the relevance of the worker’s tax status, stating that “tax status is not determinative of worker status.”
Implications
This decision reinforces the principle that employment status is determined by the substance of the relationship, not just the labels used by the parties.
It is also a timely reminder of the Government’s proposed Bill to amend the employee vs independent contractor test in Section 6 of the Act. Cases such as this one suggest that change may be needed to simplify what can become a complex matter.
If you would like further clarity around this, or any other workplace issues, get in touch with Lane Neave’s employment team today.
