Contractor or Employee - What's the Difference?

Gerrad Brimble, Geoff Bevan

A recent article on shone a light on the difficult working conditions many courier drivers face. Courier drivers (many of whom are independent contractors) spoke of long days, no breaks or holidays, and financial penalties if they could not finish all their deliveries.

Independent contractors do not have the same rights and protections as employees, such as the right to minimum wage, reasonable rest and meal breaks, and paid holidays. In theory the trade-off for independent contractors is greater control and flexibility over how and when they work, whom they work for, how much they charge for their services and how much they can earn. In practice though that is not always the case.

The First Union has now announced it has begun proceedings in the Employment Court to determine if courier drivers are in fact independent contractors, or if they are instead really employees. Clearly there is a great deal of water to go under that bridge yet, but the outcome of those proceedings could have significant implications for the organisations that engage courier drivers as independent contractors. The implications could extend further -  First Union has already indicated some truck drivers could be in the same boat.

Whether a worker is an employee or an independent contractor is not always clear and straight forward. There are well established legal tests to help determine the true nature of the relationship:

Organisations engaging an independent contractor should be aware that, even though the parties might agree the relationship is one of principal and contractor, if the true nature of the relationship is actually an employment relationship, the organisation will have minimum employment obligations to the worker (and will likely have arrears to pay as well).  This can be very costly – for example, a company may find itself liable to pay several years of accrued holiday pay.

As well, relationships can also change over time. For example, someone who starts off as an independent contractor might, over a number of years, be integrated into the business and end up being no different to an employee.

Organisations should therefore regularly review long-term relationships with independent contractors and consider if the way the worker is being engaged is still appropriate.

For further advice please contact our employment law team.