In most cases, it’s pretty clear cut whether you’re an employee or a contractor. It’s an important distinction as your rights and responsibilities are very different. Courier drivers have been in the news lately, because it seems there are differing views about whether they are employees or contractors. In many cases the distinction is not as obvious as it seems.
Employee vs Contractor: What’s The Difference?
Employees have a signed ‘Employment Agreement’ and receive a salary or wage in return for their work. They are guaranteed employment rights like holiday and leave entitlements, the minimum wage and the right to raise a personal grievance.
Employers can set your work hours, place of work, and ask you to wear company uniform to name a few. These details are generally set out in your ‘Employment Agreement'.
Contractors are self-employed and earn income by invoicing for the goods and services they provide. Contractors pay their own taxes, and generally aren’t covered by employment related laws. That means no holiday/sick leave, or personal grievances.
On the other hand, contractors usually have more flexibility around their work hours and pay rates.
Courier Driver Case Study
Most courier drivers are called ‘Independent Contractors’ but seem to have a very dependent relationship with the companies they are working for.
It’s normal for contractors, in this case courier drivers, to buy their own van, signage, uniforms, parcel scanner and business insurance. In this case, they are contractually obliged to only work for one company. For example, a courier driver working for NZ Post would not be allowed to deliver for Freightways or PBT.
The issue here is that the drivers are being asked to behave as if they are employees, by only working with one company and being dependent on them. But, they’re not getting the protections all employees receive, like sick days, annual holidays or minimum wage.
Christchurch Budget Service David Marra says independent contractors earning less than the minimum wage make up the majority of people coming through the door for budgeting services and advice, and former Employment Court Chief Judge Graeme Colgan believes there may be grounds for a class action lawsuit to recover lost wages.
Are You An Employee or Contractor?
Section 6 of the Employment Relations Act (2000) defines who is an employee under New Zealand Law, however, to decide whether someone is actually an employee or a contractor, there are a number of different 'tests' to determine what is the real relationship between a company and the person working for it.
These tests are the 'intention test', 'control vs independence test', 'integration test' and the 'fundamental/economic reality test'. To get the most accurate answer, you must apply all the tests to your situation.
Take the tests here:
If after taking the tests you’re still unsure, or you think you might be classified incorrectly, talk to us. Companies who wrong treat someone as an employee run the risk of being liable for unpaid taxes, unpaid minimum wages plus holiday leave and entitlements. Employees who were wrongly treated as contractors may be entitled to unpaid earnings and tax rebates.
At Godfreys Law, we provide real solutions for employees, employers and contractors. If you’re unsure of your employment status, want to make sure you have strong employment agreements, or think you’re missing out on some entitlements, contact the team at Godfreys Law on (03) 366 7469.
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