A horse is a horse, of course, but is your worker an employee or an independent contractor?
Often, in the equine industry, employers can overlook the importance of having their workers enter into a contract which sets out the scope and nature of their work and terms of their engagement. While it may not seem important at the time the worker is engaged, due to the nature or duration of the work, the lack of a formal contract that clarifies an employment relationship may result in significant obligations for the employer if an issue arises.
The obligations of an employer toward an employee include (but are not limited to) deducting PAYE, contributing to ACC, providing annual holidays and sick leave, and supplying equipment and training. If someone is an employee they can also pursue the employer for a personal grievance and seek compensation for lost wages. Independent contractors, on the other hand, are generally responsible for organising these matters themselves and cannot pursue personal grievances, although there are other avenues for disputes to be addressed.
For example, the freelance track work rider who is helping you out for the week gets injured while pace working one of your horses; or the groom who is helping you out for one show while your usual groom is away on holiday gets kicked while putting in studs. In these situations, the obligations of the employer will depend on whether the individual is an employee or an independent contractor. If there is no formal contract to clarify whether an employment relationship exists, then it will be left to other factors to determine whether their status as an employee or contractor.
In the case of a dispute the Employment Relations Authority will look at a number of factors to determine whether someone has been hired as an employee or engaged as an independent contractor. These include the following:
- Intention of the parties – What did each party understand the relationship to be before the work started? The court will look at the wording of the contract (if one exists) and the nature of the conversations between each party.
- Working arrangements – How flexible are the working arrangements? Contractors tend to have more control over when and how work gets done. Employees are more tightly controlled by their employers over how work is completed.
- Ability to accept work from other sources – Contractors are generally able to accept work from a variety of places at the same time. Employees are often restricted to one employer.
- Nature of work and place in business as a whole – Contractors are typically engaged to service a temporary need, whereas employees are necessary for daily business operations.
- Uniform, tools, equipment, office - Contractors tend to use their own tools and equipment to perform their work, whereas this is supplied for employees.
- Administration and finances – Contractors usually invoice for their services and organise their own finances including tax and ACC obligations.
What can you do?
Every situation is different and the nature of business often calls for flexibility when unexpected matters happen. Some points to keep in mind:
- Make it clear in writing before the work starts that the person is being hired as an employee or engaged as an independent contractor and avoid mixing terms.
- If you are engaging someone as an independent contractor, do not seek to control every aspect of their work. They should also be free to accept work from other sources.
- Insist that independent contractors are responsible their own financial obligations such as tax and ACC payments, and have their own equipment.
- Do not attempt to engage someone as an independent contractor simply because you wish to avoid employment obligations. If someone is undertaking regular work solely for you, under your supervision, as part of the daily operations of your business, then an employment relationship may have been established.
If you have any questions related to the above, or are unclear about whether you employ someone or are employed as an independent contractor or employee, please do not hesitate to contact us.
Jesse Savage is an Associate in the Equine Team at Norris Ward McKinnon. You can contact Jesse at [email protected]
Jess Collett is a Solicitor in the Equine Team at Norris Ward McKinnon. You can contact Jess at [email protected]
