The Employment Relations Authority has decided that a medical doctor engaged as a contractor is in fact an employee.

The doctor had come from overseas and was on an immigration visa that required them to be an employee, but was offered and agreed to a contractor position at a medical practice.  He signed an agreement saying he was a contractor and registered for GST and collected and paid GST as well as paying his own tax.

The ERA held that he was an employee, as although the contract said he was a contractor, he was under immigration requirements obliged to be an employee and he had no intention to be a contractor because that would have invalidated his visa.  He also had no ability to increase his business and take on any financial risk.  He was not paid per patient and had no opportunity to work elsewhere.  The economic reality test takes all this into account and also that he had no freedom to advertise or to market himself or to do any business development activities.  He could also not take on any extra work or work elsewhere or decide to do any less work.

The ERA held that his tax status and paying his own tax and collecting GST was a flow on effect and was not his choice.

This finding that he was an employee will have a significant impact on the doctor’s position because he has claimed unjustified dismissal and unjustified disadvantage.  If he was a contractor he could not bring a claim in the Employment Relations Authority.

If you have engaged staff on a contractor basis, then you need to make sure they qualify as contractors under various tests imposed and that they are genuinely a contractor and not really an employee.  Failure to do so, as in this case, will have significant impacts and cause significant problems for your business.

Alan Knowsley

Employment & Medical Lawyer
Wellington