The Employment Relations Authority has decided that a
medical doctor engaged as a contractor is in fact an employee.
The doctor had come from overseas and was on an
immigration visa that required them to be an employee, but was offered and
agreed to a contractor position at a medical practice. He signed an agreement saying he was a
contractor and registered for GST and collected and paid GST as well as paying
his own tax.
The ERA held that he was an employee, as although the
contract said he was a contractor, he was under immigration requirements obliged
to be an employee and he had no intention to be a contractor because that would
have invalidated his visa. He also had
no ability to increase his business and take on any financial risk. He was not paid per patient and had no
opportunity to work elsewhere. The
economic reality test takes all this into account and also that he had no
freedom to advertise or to market himself or to do any business development
activities. He could also not take on
any extra work or work elsewhere or decide to do any less work.
The ERA held that his tax status and paying his own tax
and collecting GST was a flow on effect and was not his choice.
This finding that he was an employee will have a
significant impact on the doctor’s position because he has claimed unjustified
dismissal and unjustified disadvantage.
If he was a contractor he could not bring a claim in the Employment
Relations Authority.
If you have engaged staff on a contractor basis, then you
need to make sure they qualify as contractors under various tests imposed and
that they are genuinely a contractor and not really an employee. Failure to do so, as in this case, will have
significant impacts and cause significant problems for your business.
Alan
Knowsley
Employment
Lawyer Wellington
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