The Employment Court has found that a man hired as an independent contractor was in fact an employee.

The man was out of employment for a period of time, but was offered work by a building company. He and the building company signed an agreement that recorded him as being an independent contractor.

Amongst a significant number of differences from standard employees, independent contractors are not protected by employment laws, must pay their own tax, and generally have the ability to work for whoever they want.

The relationship between the building company and the man broke down. He wanted to raise a personal grievance against the company, but contractors are unable to do so. He challenged whether the real nature of his relationship was as an employee rather than a contractor.

The Court assessed a number of factors when analysing his position. It determined that:

  • The parties’ intentions had been to enter into a contractor relationship
  • The company had extensive control over the man’s work
  • He was integrated into the company
  • He was not required to wear a uniform or display the company’s material elsewhere
  • He was free to work for other employers, but never had the opportunity to do so as the company provided him around 40 hours of work per week, for three years.
  • He could not sub-contract or delegate the work
  • The company deducted tax from his income
  • He did not receive holiday or sick leave
  • He did not have to provide his own tools

Overall, the Authority decided that the man was an employee. This means that the employer is liable to pay him all of his minimum entitlements that contractors do not receive (annual leave, sick leave, holiday pay).

Since the man was working on the basis of being a contractor for about three years, the employer is likely to be liable to pay the employee a significant sum of money.

The decision also means that the employee will be able to raise a personal grievance for unjustified dismissal against the employer, potentially leading to another expensive outcome.

This decision is significant due to the number of building companies that have similar “contractor” arrangements with their workers, who may (depending on the circumstances) actually be employees.

It is important that employers get this difference right. Incorrectly engaging employees as contractors is a simple mistake to avoid, but may result in expensive consequences if not done properly.

If there are uncertainties whether any of your staff are independent contractors or employees it is wise to speak with a professional experienced in the area.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

 


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