Mislabelling working arrangements  as contractor’s costly business : Barry and CJ Builders

 

Last year Mike Leota successfully sued parcel express for wrongful  labelling as a contractor.

Now  in another landmark case the employment court has found in favour of a Ross Barry being an employee rather than a contractor working for CJ Builders.

This case has potential to affect thousands of current working arrangements not only in the building industry  as the industry in which this case arose but many others.

Similar arrangements which may not withstand scrutiny if undermined will be costly as many legal  obligations such as minimum wage ,tax and ACC obligations will become retrospectively owing from the date of the engagement.

The two cases indicate a growing trend cementing a leaning towards relabelling contractors as employees even though the parties have agreed in the contract otherwise and a wake-up call for employers relying on contractor agreements as a substitute for employment arrangements.

Simple labels will not work. The true nature of the relationship will be the determining factor. What looks like an employment arrangement will be one no matter what it is labelled or agreed to.

Mr Barry spent around 3 years working for a building company. He was treated as an independent contractor by the company. He went to court claiming he was in fact (reality) an employee not a contractor and the court agreed.

In Mr Barry’s case there was no written employment agreement. The arrangement was verbal ( done on  handshake) loose. Mr Barry had been out of work and referred to the building company by an acquaintance .  The parties met at a café. CJ Building was a family operated business. Mr Ireland the owner/director made it clear that the role was that of a contractor and Mr Barry would be responsible for all  ACC levies rate of pay holiday pay ,invoicing and withholding tax.

What influenced the direction the court took was  Mr Barry’s claim , he had no choice but simply to accept the situation as presented by CJ Builders.

Whilst the court accepted that both parties understood the label to be an independent contractor the court accepted that intention was not necessarily the defining factor. The intent  the court said needed to marry up with the reality in practice of the arrangement; intention will not operate to convert the relationship into something it is not the court stressed.

Further the court went on to stress that one of the key objects of the law was to acknowledge and address the inherent inequality of power in employment relationships.

The court found that the bargaining power between the parties was not equal. Here Mr Barry just like Mr Leota the courier driver the court found had agreed to something that he did not necessarily understand or appreciate there was an alternative option. The parties  the courts found in both cases were not on equal footing.: introducing a new power/equality of bargaining assessment test.

The court then went on to forensically assess the work arrangement and concluded that for all practical purposes Mr Barry was an employee; for example, he worked as an employee and was not conducting any separate form of business. He was not able to work for anyone else because he worked full time for CJ Builders.

He was treated as an employee for example a telling feature was that CJ Builder treated him as an employee when they applied for the covid 19 wage subsidy.

Although again the court made it clear that each case will be decided on its facts there are common themes running presenting a red flag to contracting arrangements and the fine line between them and employment arrangements.

Advice should be sort beforehand to make sure the arrangement is the right fit for the purpose . getting it wrong will cost dearly.

Contact us for an obligation free discussion if you have a question regarding working arrangements.