Court decision raises distinction between an independent contractor and employee
Cases / 21 May 2020
The Employment Court has recently issued a decision, Leota v Parcel Express Limited  NZEmpC 61, which will likely have a wider affect on employers and the distinction between an independent contractor and employee. Here, the Court held that despite Mr Leota signing an independent contractor agreement, the real nature of the relationship was an employment relationship. This case reiterates the importance of correctly classifying your workers and highlights the wider implications this decision may have on independent contractor relationships.
Mr Leota was a driver for courier company Parcel Express and he sought a declaration from the Court that he was an employee. In deciding that the real nature of the relationship was one of employment, the Court considered the high level of control exerted over Mr Leota by Parcel Express, as seen within some of the following factors:
- Mr Leota was given a predetermined run and Parcel Express retained the ability to change the run;
- He could only do deliveries and pick ups for Parcel Express customers;
- He could not change days of work and was required to be at the depot at certain times of the day for meetings and briefings, for business needs, scheduled by Parcel Express;
- He was required to comply with company procedures, directions and requests;
- He was instructed to purchase a van for company use, and was limited to using only company signage;
- He was provided with a uniform he must wear;
- There were virtually no opportunities for Mr Leota to expand his business as the van was occupied for five days a week;
- If he required leave, he needed to find cover and he could not exceed 20 working days holiday in a 12 month period without company approval; and
- He was responsible to hold insurance.
The Court held that despite being called “his own boss,” Mr Leota did not exercise any real degree of autonomy over his work and was not in business for himself. In addition, Mr Leota was Samoan and English was his second language. The Court commented that it would be difficult to have a strong argument that a document describing the relationship is determinative when one party is disadvantaged by having a limited understanding and knowledge of the implications of signing the agreement labelled by the other party. It held that Mr Leota had no real appreciation of the basis of the legal relationship.
Message for Employers
The Court commented that this case was an “intensely fact-specific inquiry”, which it is fair to say is commonly the situation where looking at whether a worker is an employee or contractor. This case is a timely reminder for anyone who has independent contractors to look at the facts of their own situation and seek to ensure the categorisation is appropriate. Understanding the nature of the relationship is important to avoid exposure to retrospective employment obligations owed to workers, as in this case.
If you have any doubts about the status of your workers or would like further advice around an independent contractor relationship, our team can help.
Disclaimer: We remind you that while this article provides commentary on employment law and health and safety topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek legal advice from your lawyer for any questions specific to your workplace.