Court of Appeal confirms rights of independent contractors as employees

The status of independent contractors is back in the spotlight, with the Court of Appeal finding in favour of labour hire workers engaged at LSG SkyChefs in a dispute with the airline catering company over employee entitlements.

The distinction between employees and independent contractors has long been the subject of debate but labour hire arrangements and how workers are engaged in the growing ‘gig economy’ present new challenges.

Independent contractors are not afforded the same minimum employment rights enjoyed by employees under the Employment Relations Act and other related legislation.

Last year, the Employment Court found in favour of LSG SkyChef’s labour hire workers.  The decision declared that they were employees of LSG SkyChefs.  These employees provided catering services to LSG Skychefs.  Workers providing catering services and cleaning services have greater protections under the Employment Relations Act.  However, these workers did not benefit from employment law minimums due to their engagement as independent contractors through a labour hire company.

This week’s Court of Appeal decision confirmed the Employment Court ruling that the real nature of the relationship with LSG Skychefs was that of employment not independent contractor.  In doing so the Employment Court stated that on the facts before it, any other conclusion would have been ‘surprising’.

Upon the Court of Appeal’s ruling, John Ryall, Assistant National Secretary of New Zealand trade union E tū said:

“This decision cements a very important legal victory for the New Zealand workforce.

“Labour hire is being regularly used by many New Zealand companies to move the risk of employment on to a group of very vulnerable workers. It is time that the companies using labour hire in this way changed their business model.

“Our union will be knocking on the door of other companies who were also exploiting the mostly migrant labour hire workforce.”

Another area in which the status of workers engaged as independent contractors is being debated across the globe is the gig economy.  For example, the UK Supreme Court has recently handed down its decision on this topic in the Pimlico Plumbers litigation.  That case considered whether an individual, Gary Smith, was a ‘worker’ despite signing an agreement with the company which engaged him as a self-employed contractor.  Factors which pointed in favour of ‘worker’ status included the company’s control over Mr Smith’s uniform, when and how payment was received by Mr Smith and the relationship of subordination between Mr Smith and the company.  In the UK, a worker is entitled to holiday pay, sick pay, the minimum wage and other minimum entitlements. We can expect further guidance later this year on this topic when the UK Court of Appeal considers the Uber case.

In New Zealand, demand for flexible ‘gig’ oriented work shows no signs of slowing down, so we can only assume this conversation will be ongoing.  This issue is just one of the many challenges New Zealand’s fast evolving labour market presents for employers and employees seeking to fully understand their rights and responsibilities. For more information, get in touch with one of our experts.

For more information, get in touch with one of our experts.

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