EMPLOYEE/CONTRACTOR DISTINCTION CONFIRMED
Bryson v Three Foot Six Limited (2005) 22 NZTC 19,242
This is not a tax case but is the first occasion on which the Supreme Court has visited the employee/independent contractor distinction. That distinction involves tax consequences in that an employer is obliged to account for PAYE and other imposts, while a person engaging an independent contractor is not.
Mr Bryson was engaged by the company to work on special effects for The Lord of the Rings project. He was eventually made redundant and argued that he was unfairly dismissed. He was only able to pursue a personal grievance in terms of the Employment Relations Act 2000 if he was an employee.
The matter was apparently not clear cut. The employment authority first decided Mr Bryson was a contractor. He took the matter to the Employment Court which decided he was the employee. The Court of Appeal gave leave for the Employment Court decision to be appealed and decided by majority that Mr Bryson was a contractor and the matter came on to the Supreme Court from the Court of Appeal.
The Supreme Court dealt with the case by examining the circumstances in which an Appellate Court should overturn a decision of the Employment Court.
The principles outlined by the Supreme Court that go to the appellate jurisdiction are:
(a) Construction of a document is usually a question of law but where the parties’ intention must be gathered from surrounding discussions or negotiation, that is not necessarily the case;
(b) Whether a person is an employee or an independent contractor is generally a question of fact. It becomes a question of law when the given facts can lead to only one possible answer and the Court below has not arrived at that answer. If a decision either way is possible, the appellate Court should intervene only if the Court below has misdirected itself in law;
(c) The proper inquiry by an appellate Court was whether the Employment Court had correctly expressed and applied the law to the facts. If that had occurred, then there was no basis for the appellate Court to intervene unless the decision was clearly insupportable;
(d) An appellant from a decision of the Employment Court arguing that the decision could not be supported by the evidence faced what the Court described as a “very high hurdle”.
Applying these tests, the Court noted the Employment Court Judge had set out the applicable tests which she considered when deciding the case. They were:
(i) The Court must determine the real nature of the relationship;
(ii) The intention of the parties is still relevant but no longer decisive;
(iii) Statements by the parties, including contractual statements, are not decisive of the nature of their relationship;
(iv) The real nature of the relationship can be ascertained by analysing the tests that have been historically applied such as control, integration and the “fundamental” test;
(v) The fundamental test examines whether a person performing the service is doing so on their own account;
(vi) Another matter which may assist in the determination of the issue is industry practice, although this is far from determinative of the primary question.
The Court of Appeal considered that the Employment Court Judge had properly identified and applied the correct legal tests when arriving at her decision. It could not be said the decision was clearly insupportable and on that basis it held effectively that the Court of Appeal had intervened when it should not have and reinstated the decision of the Employment Court.
The Supreme Court’s approval of the Employment Court’s exposition of the appropriate tests establishes them as the appropriate measures by which to determine the existence or not of an employment relationship. They reflect changes in the statute law concerning employment that have given the Employment Court far greater scope to go behind the apparent expression of the relationship between the parties.
The case is important also as a salutary reminder of the important limits the Supreme Court places on the role of superior Courts. Unless a Court is given jurisdiction to retry matters of fact, the appellate function is constrained. This is a timely reminder of the need to ensure that at trial a proper factual foundation for one’s case is made.
© G D Clews 2005