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Employment Law: What to look out for in 2023 (Episode 3: Employees and Independent Contractors)

Home Insights Employment Law: What to look out for in 2023 (Episode 3: Employees and Independent Contractors)

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Published on: March 14, 2023


Please note, this is a script from Episode Three of our video series, Employment Law: What to look out for in 2023, which you can access here.

Welcome to the third instalment of our series What to look out for in Employment Law in 2023. Today, we're going to be talking about Employees and Independent Contractors.

One of the topics getting a lot of coverage at the moment is the issue of employees and contractors. This is something that should be on the radar of all businesses that have workforce that are non-employees. So this could be independent contractors, consultants, agency workers performing services, or any other people performing work for your organisation who are not your employees.

The legal test for whether someone is an employee is the real nature of the relationship. Intention is relevant, but it's not determinative. That means you could engage an independent contractor under a contractor agreement and that person could still be found to be your employee at law. How the relationship operates in practise is going to be really important.

The courts have traditionally looked at four key tests when determining whether someone was an employee.

Four key tests 

1. Intention of the parties

What did the contract say? And, what did the parties intend?

2. Level of control or supervision 

What level of control or supervision is exercised by the business over the individual?

3. The fundamental test

Are they in business on their own account? Can they work in a way that would maximize their own profit?

4. The integration test.

How integrated are they in the business? Are they part and parcel of that business? And, would third parties think that they were employees?

'Real nature of the relationship' test

It's fair to say that there's been an influx of cases before the courts in recent years regarding this Section 6 'real nature of the relationship' test. Most of those cases have been to do with drivers - taxi drivers, courier drivers, and drivers in the gig economy.

There has certainly been an increasing trend towards the courts finding employment relationships in workplaces which have been traditionally contracting environments. If you're a business that engages or has traditionally engaged contractor labour, now is a good time to reassess your arrangements and make sure they remain fit for purpose.

Now, this Section 6 'real nature of the relationship' test isn't just about employees and contractors. Really, the test is focused on whether an individual is in an employment relationship. That means this is also the test that is applied by the courts when determining if someone is a volunteer or an employee, or where there is some confusion or uncertainty around which entity is the true employer.

Controlling third party

And along the same lines, individuals also have another tool in their employment law toolbox, which is the concept of a controlling third-party. This is a claim by an individual that an organisation other than their employer had an impact on their employment relationship and should be held accountable for that.

Get in touch

We're advising a number of employers on these sorts of issues and some risk mitigation strategies. So, please feel free to get in touch if you think this could be relevant for you.

Thanks for watching, we'll see you again next week where we talk about Personal Grievance Remedies.

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