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Employment Today, HR Solutions - Thomson Reuters

Employment Today, HR Solutions - Thomson Reuters



Employment Today Magazine

The casualisation of the workforce

Around the world, workforces are becoming increasingly casualised. But is New Zealand’s legal framework conducive to this “gig economy” trend? Yes and no, says Blair Scotland. He examines the pitfalls.

When it comes to employment trends, New Zealand often tends to languish behind other western countries. That is not necessarily a bad thing, however, as it means we can prepare for what may be heading our way. One overseas trend that employers and lawmakers should be conscious of is the increasing casualisation of the workforce.

In 2015, US-based software firm Intuit predicted that by 2020, 43 percent of the American workforce would be casualised in some way. This means that people are increasingly engaged on individual assignments with different employers for periods that are often of determinate length, sometimes as employees and sometimes as contractors. This concept has been referred to at times as a “gig economy” or “Uber model”.

The obvious benefit of casualisation is the flexibility it provides for businesses to bring in people and skills when they need them and only for so long as they are required. This is particularly attractive in certain industries, for example, IT, where work is often driven by and tied to specific projects.

Casualisation, however, comes with a cost—particularly for workers who face greater social and economic uncertainty due to the reduced security of ongoing work. So while New Zealand should endeavour to remain competitive in a globalised world economy, it needs to be mindful about the impact a shift towards casualisation can have on hard-won minimum employment entitlements.

CASUALISED WORK AND THE LEGAL FRAMEWORK

Leaving aside the pros and cons of the trend though, the more practical question is whether New Zealand’s legal framework is conducive to a casualised workforce? The answer is yes and no. Our legal system accommodates and differentiates between casual employees, independent contractors and other types of flexible arrangements. However, it does not necessarily make the delineation and administration of these arrangements simple. Sometimes the lines become blurred, and the consequences can be extreme where the parties get it wrong.

Independent contractors are not employees. The two are both contractual relationships, but the latter receives special protections in the eyes of the law. True contractors are in business for themselves and have a variety of clients. They generally provide their own tools and experience, and they control how and when the work is done. They can even sub-contract out the work if they like. Contractors look after their own tax and administration, and have to cover any periods when they’re ill or where the work dries up. If things go wrong, there is little recourse open to a contractor unless they can point to a clear breach of their contract.

Conversely, employees have a variety of minimum protections set out in law. Their employer looks after the tax and deductions, and provides them with paid leave and holidays. They can bargain collectively by joining a union for better terms and conditions, and can take strike action to achieve this. If they are treated unjustifiably, they have the right go to specialist courts that deal with nothing but employees through the personal grievance jurisdiction.

What employers need to be aware of is that the label you place on the type of relationship is not the be all and end all. The courts can and will look at the true nature of the relationship and can overrule contracts that describe the relationship in a different way. This happens relatively regularly.

The same can be true of casual employees. Casual employment is often described as being “as and when required”—the employer does not have to offer work, and the employee does not have to accept it. When work is accepted, the employee receives the protections afforded by the law for the agreed period of work, and the employer gets the benefits of having an employee for that same time. However, where an employer starts using a casual employee regularly, there is a risk that the relationship will be treated by the law to have become permanent.

Another available arrangement is a fixed-term employment relationship. However, these sorts of arrangements are tightly regulated by the law and can only be entered into where there is a genuine reason for employing someone for a fixed term rather than on an ongoing basis and which must be documented in the employment agreement.

An example would be where the role is only required for a specific project and will no longer be required once the project is completed. Non-compliance with the strict legal requirements will mean that the fixed-term cannot be relied upon to end the relationship—an issue no shortage of employers have encountered.

GETTING IT WRONG

Getting these sorts of arrangements wrong can therefore be costly for employers. It can mean they face having an indefinite employment relationship where they were only looking for a temporary solution or no employment relationship at all. They can find themselves having to pay holiday and leave entitlements they did not think they were liable for. In the worst cases, they can face the imposition of financial penalties for breaches of minimum employment entitlements.

What can be taken from this is that the law does allow for greater casualisation of how workers and employers engage with one another. However, there is arguably a greater risk in New Zealand of significant and unintended consequences which likely deter businesses from relying as heavily on casualised arrangements as their overseas counterparts.

This is supported by a 2012 report from Statistics NZ that found that “non-standard” work arrangements, including being self-employed and casual employment, were not on the rise within New Zealand. The majority of workers in the New Zealand labour market were instead found to be in traditional on-going fulltime employment, and the prediction was that this would continue.

With changes to the world economy since 2012, and more on the horizon, we could yet see a growth in the casualised sector. How governments of the future react will therefore be interesting.

BLAIR SCOTLAND is a partner at Dundas Street Employment Lawyers.

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