In a recent decision of the Employment Relations Authority, the Authority found that a person (“Bob”) engaged by the employer as a contractor was in fact an employee.  This was despite both the employer and Bob thinking that Bob was engaged as a contractor.

Bob, having been found to be an employee, then made a further claim against the employer for all holiday pay that would have accrued during his employment.  The employer refused on the grounds that, because both parties thought Bob was actually a contractor, Bob’s higher-than-usual hourly rate reflected his lack of entitlement under the Holidays Act.

The Authority accepted that both parties had acted in good faith on the basis that Bob was not an employee.  However, because in law he had been found to be an employee, he was entitled to all the rights of an employee.  Therefore the Authority ordered the employer to pay Bob 8% of his gross earnings from the commencement of his employment until its termination.

There can sometimes be a very fine line between an employee and a person engaged as a contractor.  The obligations of the employer and the rights of the person can change dramatically depending on which one it is.  Where an employer mistakenly treats an employee as a contractor there can be harsh financial consequences.

When you are engaging a person to perform work for you, it is important that the scope of your relationship is very clearly defined.  If you need assistance with any aspect of engaging a person to perform work for you, call me on (04) 473 6850.