Why contracting is so important...

Here's my view on why contracting is under threat and what we should do about it - my article published in The Post and The Press this week -

Your right to contract

As an advocate for business I want us to have a sound legal system with clear rules for business to follow.

Our own legal system, based on English law, has freedoms, rights and duties that go right back to ancient Greece and Rome, and one of the most important things we inherited was the right to contract.

It’s important because contracting is an agreed and certain way of achieving something.

You can contract for a job to be done to an agreed standard, budget, and time, and your contract can be enforceable under law.

You can bargain with another willing person for an agreed payment for delivering an agreed outcome, and as long as your negotiations are lawful (no duress or misrepresentation), then the legal system will recognise your contract as binding.

You can see why contracts are so important - they are based on undertakings freely given that allow certainty and confidence to plan, invest in, and undertake business activities.

Unfortunately, contracts as a business tool are under threat.

In recent years we’ve seen a number of cases where an individual signs up to a formal contract but later attempts to have it overturned, on the basis that they are not ‘really’ a contractor at all, but are actually an employee of the other party.

Being redefined as an employee would mean getting benefits like annual leave, sick leave, and the ability to take a personal grievance and join a union, quite an attractive proposition - it may be attractive to unions as well since they stand to gain new members, perhaps the reason why such claims are often supported by a union.

But an employment agreement and a contract for services are very different things.

An employment agreement is focused on the working relationship between the employer and employee, and must include defined working times, exclusivity of the relationship, and benefits such as holidays, the ability to join a union and so on.

Whereas a contract is simply focused on the goals and outcomes of the work, with no requirements implied for holidays or union membership,

The increasingly frequent cases where a contractor seeks to be redefined as an employee are undermining the standing of contract law and undermining the environment for business.

A prominent case concerns Uber drivers, in a case currently before the Court of Appeal.?

It’s getting a lot of attention because it follows several cases brought by Uber drivers here and elsewhere that have resulted in differing judgments in different jurisdictions.

One reason for the differing outcomes is that the cases have been based on differing facts.

Another reason is ambiguous wording of employment law that can give rise to confusion about what is in fact the correct ‘status of worker.’

I believe employment law should made be crystal clear on this matter, so the potential for confusion is minimised.

Fortunately, in NZ our Government is taking action to removal the potential for ambiguity.? Under the ACT-National coalition agreement it has pledged to review our employment law to better protect choice and freedom to contract.

The Workplace Relations and Safety Minister says the intention is to achieve certainty for contracting parties so that their intent when entering into a contract for services is upheld.

This is an entirely appropriate action, as Parliament should be making and improving laws, not the courts.

Contracting has always been an important part of the way we work in NZ.

Significant infrastructure development always depends on contract work.

New forms of working including platform work like Uber definitely depend on contractors.

Contracting is useful for small or new businesses - engaging a contractor rather than an employee allows the business to scale up or down quickly, without the risk of taking on a full-time employee until they have confidence they can sustain the work.

Contracting is an aspect of a flexible workforce that suits a lot of workers and their lifestyles. ?It can be particularly useful for people who can’t commit to standard hours, like students or parents with young children.

Contracting can be a stopgap between roles, or a way to re-enter the job market, or to allow time to establish another business.?

For many contractors, the ability to earn greater amounts than if they were an employee is a good trade-off for forgoing the benefits of employee status.

Most contractors are happy being in a contracting relationship. ?According to Stats NZ, about 1 in 20 New Zealanders are contractors, and ongoing surveys show the vast majority prefer this status to being someone’s employee.?

Hays salary guide data show that over 20% cent of employers in NZ engage contract and temporary staff on a regular ongoing basis, and over 40% do so for special projects or workloads.

I welcome the Government’s desire to ensure that businesses and workers who explicitly agree to a contracting arrangement can have certainty about the nature of that relationship.

Contracting is a valid tool for business and we’d be happy if our laws reflected that.

?

?

Catherine Beard is Advocacy Director BusinessNZ