Who is an employee?

The on-demand economy and the rise in independent contractors is meaning less and less of the workforce being classed as an employee. This means they are no longer subject to basic employment protection including the minimum wage and do not have the ability to unionise.

In response to these issues the US Department of Labor released new guidelines on 15 July covering when a person is an employee. Under US law to employ means “to suffer or permit to work” and their courts have used an “economic realities” test to work out when someone is a contractor according to this definition. The courts there hold that anyone economically dependent on an employer is than an employee not a contractor.

Factors they apply in test this are:

  • Is the work an integral part of the employer’s business?
  • Does the worker’s managerial skill affect their opportunity for profit or loss?
  • How does the worker’s relative investment compare to the employer’s investment?
  • Does the work performed require special skill and initiative?
  • Is the relationship between the worker and employer permanent or indefinite?
  • What is the nature and degree of the employer’s control?

What are your thoughts? Should anyone who is economically dependent on their employer be an employee rather than a contractor in New Zealand? How should we measure whether someone is economically dependent?

The Department of Labor guidelines are available here.

Read more about issues like this in our Technology and Security issue papers.


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