It is important to have clearly set out agreements when signing up employees or independent contractors. If the intentions are not clear in the agreement the situation can become both confusing and costly.  For example…if it is found that the person is an employee, the employer will be liable for annual holiday and sick leave payments, ACC levies and potentially PAYE payments which can quickly amount to many thousands of dollars in unexpected costs.

In a recent case the Employment Relations Authority had to decide whether a business owner had engaged a worker as an employee or as an independent contractor.  The agreement produced was a standard employment agreement that had been modified in an attempt to create an independent contractor agreement.  However the document created was ambiguous and unsatisfactory.  It was neither an employment agreement or an independent contractor’s agreement.  Additionally the agreement had never been signed!

Adding to the confusion was the fact that the worker had filled out a “staff job application form.”  The business owner used this to record the details of the worker, who they viewed as an independent contractor, but as the form was not suitable for this purpose this created even more confusion.

The state of the various written documents posed great difficulty for the Authority in deciding the case. In order to overcome the difficulties the Authority looked at the interactions between the parties, and the nature of the relationship, and decided that it was “more probable” the worker was an independent contractor.

However, all of this legal action could have been avoided if there had been a clear and signed agreement to begin with.  For this reason, it is very important to have clear, signed agreements from the outset.  

If you would like a specific employment agreement or independent contractor agreement tailor-made to suit the requirements of your business feel free to call Alan Knowsley for a relaxed and confidential initial chat.