Hon Brooke van Velden
Minister for Workplace Relations and Safety

Workplace Relations and Safety Minister Brooke van Velden says upcoming changes to the Employment Relations Act will provide greater certainty for contractors and businesses.

“These changes to legislation are necessary to ensure businesses and workers have more clarity from the start of their contracting arrangement. It is an ACT-National coalition commitment and is another action completed in the Government’s Quarter 3 Action Plan,” says Ms van Velden.

“The coalition Government has agreed to amending the Employment Relations Act to provide a gateway test that businesses can use when responding to a claim that a person is an employee and not a contractor. If the working arrangement in question meets the four factors set out in the test, then the person is considered to be a contractor. If one or more of these factors are not met, then the existing test will apply.”

The criteria for the gateway test are:

• a written agreement with the worker, specifying they are an independent contractor, and
• the business does not restrict the worker from working for another business (including competitors), and
• the business does not require the worker to be available to work on specific times of day or days, or for a minimum number of hours OR the worker can sub-contract the work, and
• the business does not terminate the contract if the worker does not accept an additional task or engagement.

“Work is underway to progress these changes through the Employment Relations Amendment Bill which I hope to introduce in 2025.

“This new approach will provide businesses with more certainty to proceed with innovative business models involving contractors where this is appropriate, and also enable businesses to offer better terms and conditions to their contractors with less concern that it might impact the contractor’s status.

“Contractors play an important role in New Zealand’s economy and society. The reliability and efficiency of services available as part of the gig economy is a hallmark of our modern age. Contracting arrangements can also benefit a range of workers who cannot commit to standard hours or find benefit in flexible work, like people who are job hunting or re-entering the job market, students, or parents with young children.

”The current process for workers challenging their employment status through the courts can be costly for businesses, and can increase business uncertainty in general.

“Although employment status cases are treated on a case-by-case basis, if a worker is found to be a contractor in one sector or for one occupation, this can rapidly increase uncertainty for similar businesses who hire these types of workers.

“There are a range of workers and businesses across the country who are involved in contracting relationships, and who will benefit from increased clarity of worker status, which this Government will deliver.

“I believe these changes could improve conditions for some contractors, reduce risk for firms, and help ensure businesses compete on quality, price and productivity,” Ms van Velden says.

Existing Test

When a worker challenges their employment status under section 6 of the Act, the Employment Relations Authority and Employment Court use the following series of tests developed under common law to determine whether a worker is an employee or a contractor. 

• The intention test: the type of relationship that the parties to the contract intended and can normally be worked out from the wording in parties’ written agreement (if there is one).
• The control vs independence test: the greater the control exercised over the worker’s work content, hours, and methods, the more likely it is that a person is an employee.
• The integration test: this looks at whether the work performed by a person is fundamental to the employer’s business.
• The fundamental/economic reality test: this looks at whether the contractor is a person in business on their own account.

© Scoop Media