Fundamental changes to contractor arrangements deliberated

Author:Ms Amanda Douglas
Profession:Wynn Williams Lawyers

The Ministry of Business, Innovation and Employment (MBIE) is looking at reclassifying contractors and, if imposed, this could change the contractor landscape.

MBIE recently released a discussion document, Better Protections for Contractors, seeking public feedback on MBIE's proposed options to address its concerns of misclassification of employees as "independent contractors," and workers who are in the "grey zone" between employees and contractors. For some time, there has been talk of a third category of "dependent contractors" and MBIE is exploring this as a part of its discussion document.

The paper proposes 11 options for change to introduce some statutory rights and entitlements, and enhanced protections for some workers in current contractor arrangements.

However, most of these options, if implemented, could significantly limit the parties' freedom of contract, create even more confusion as to the parties' rights and obligations, and increase costs for businesses and the taxpayer. Most of these proposed changes, if adopted, could also lead to unintended consequences for your organisation. Contractors, too, could have their benefits and flexibility of self-employment greatly impacted.

MBIE's proposed 11 options for change are briefly summarised below.

Options to Deter Misclassification of Employees as Contractors

Option 1: Increase proactive targeting by Labour Inspectors to detect non-compliance. This will allow Labour Inspectors to actively look for exploitation of workers, including investigating and challenging organisations' conduct.

Option 2: Give Labour Inspectors the ability to decide workers' employment status. In addition to their investigative powers, Labour Inspectors would be able to decide whether a worker is an employee or a contractor, either at the request of the worker or, possibly, at the Labour Inspector's own initiative.

Option 3: Introduce penalties for misrepresenting an employment relationship as a contracting arrangement. Currently, organisations are only liable for unpaid statutory minimum entitlements in cases of any misclassification. This option would create an additional penalty for organisations who misclassify employees as contractors. In its present version, this option would impose penalties on firms even where the misclassification was due to a genuine mistake or confusion by the parties.

Options to Make It Easier for Workers to Access a Determination of Their Employment Status

Option 4: Introduce...

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