Preston Russell Law

The differences between an employee and an independent contractor can sometimes be difficult to see.
However only employees have the right to pursue personal grievance claims. If Mr Bryson was an independent contractor then he could not have a personal grievance claim against Three Foot Six Limited.
However, if he was found to be an employee then he could pursue this claim.
In the Employment Relations Authority he was found to be an independent contractor. This meant that he could not pursue his personal grievance claim for unjustified dismissal.
This decision was then appealed to the Employment Court. The Employment Court decided that he was an employee of the company and therefore had a valid personal grievance.
This decision was then taken to the Court of Appeal. The Court of Appeal determined that the Employment Court judgment was incorrect and agreed with the Authority decision that Mr Bryson was an independent contractor. Finally the decision was taken to the Supreme Court.
The Supreme Court overturned the Court of Appeal and agreed with the Employment Court decision that Mr Bryson was in fact an employee.
Mr Bryson had a 20 year history of model making as a hobby. He had worked for Weta workshops in 1996 and 1997 and was employed in 1998 to make miniatures for The Lord of the Rings films.
He went back to Weta Workshops Model Shop in February 2000 and continued working on the Lord of the Rings model. Three Foot Six and Weta Workshop worked closely together and Three Foot Six were administering the production of the Lord of the Rings in 1999.
It had a miniature unit to film some of the special effects. In April 2000 Mr Bryson was seconded from Weta to Three Foot Six to work in its miniatures unit as a temporary model maker. At the end of two weeks he was offered a permanent position. He was not given a written Employment Agreement or work contract when he began. In September he asked for and received a pay increase. In October 2000 Three Foot Six supplied a written contract for all its crew which referred throughout to contractor and independent contractor. Mr Bryson continued to work for Three Foot Six on the set until 2001. On 23 August 2001 it was announced that Three Foot Six had ordered the miniatures unit to downsize. In September Mr Bryson was told that he was not being kept on. He was made redundant and alleged unjustifiable dismissal.
The Employment Court found that the new definition of “employee” under Section 6 of the Employment Relations Act 2000 meant that new principles had to be applied in determining the employment status of any person. These were that:
1. The Court must determine the real nature of the relationship.
2. The intention of the parties was to still be relevant but no longer decisive.
3. Statements by the parties including contractual statements were not decisive of the nature of the relationship.
4. The real nature of the relationship was to be ascertained by analysing the tests that have been historically applied such as the control, integration and “fundamental” tests.
5. The fundamental test examines whether a person performing the services is doing so on their own account.
6. Industry practice may assist in the determination of the issue but it is far from determinative of the primary question.
The Supreme Court found that the Employment Court decision was correct and should not have been overturned by the Court of Appeal. They found that:
(a) ‘All relevant matters’ are able to be taken into account by the Court and this includes the written and oral terms of the contract, the way in which the relationship operates in practice, inclusive of the divergence from and supplementation of the terms, the behaviour of the parties in implementing their contract, and regard to features of control, integration and the fundamental test.
(b) The Employment Court Judge was not wrong in stating that industry practice, on the facts of the case, was of little use in establishing the intentions of both parties as it was clear that Mr Bryson’s working conditions were not typical of the industry.
(c) When applying the historical common law tests of control, integration and the fundamental test in conjunction with other relevant matters to determine the real nature of the relationship was correct.
(d) It was open to the Employment Court Judge to find on the facts that the invoicing of Mr Bryson’s services and the taxation arrangements were little more than consequences of the contractual label of independent contractor.
(e) It was reasonable for the Employment Court Judge to reach the overall conclusion that Mr Bryson was an employee.
The Supreme Court found that whether or not Judges in an appellate Court might have reached a different conclusion if sitting in the Employment Court, it could not be found that the Employment Court Judge had made a decision which was inconsistent with the evidence or contradictory of it or one which could properly be described as insupportable.
The Employment Court Judge had come to the conclusion that the real nature of the employment was that of an employee. This was because:
”There was no evidence Mr Bryson was acting as a separate business entity. He had arrived by transfer from Weta and took up the position he was offered. It was not a short term position and he had no other employment while he was with Three Foot Six. He had model making skills but no relevant experience for his new position. He required six weeks training. He could not be said to have been contracting his skills. Much of the crew deal memo read like a contract of service.
Three Foot Six closely controlled his work. He was expected to work regular hours and was treated as an employee, being paid for downtime. The [Employment Court] Judge emphasised that her decision was based solely on the individual circumstances of Mr Bryson’s employment and was not to be regarded as affecting the status of any other employee in the film industry.”
This decision demonstrates that it does not matter what label is used on an Employment Agreement. If a Court later looks at the relationship, they will look at all relevant matters.
This includes the intention of the parties, what the contract states, if the person can take the profits and run the risks of a sole trader, if they are fully integrated into the work or not, if they are able to delegate their work, if they can work outside their job, whether they are working on their own account, and possibly industry practice.
Therefore it is important to know whether the people you have working for you are actually employees or independent contractors regardless of what their Employment Agreement states. If you are not sure what impact this has on you or your business please contact the employment law team at Preston Russell Law.
Miriam Sinclair is a law graduate working in our employment law and litigation teams. She is currently in Christchurch doing her Professionals course and will return a fully-fledged solicitor before the end of the year.  Click here for the employment law team.