Contractor or Employee? Know Your Rights and Get What You’re Owed

Many workers in New Zealand are classified as “independent contractors” even though they’re really working like employees. While the flexibility can be appealing, many workers are discovering that their so-called contracting arrangements look and feel a lot like ordinary employment.

At Solidarity Employment Advocacy Limited, we see this problem every day. It’s called sham contracting — when a business labels someone a contractor to sidestep employment law and avoid the rights and benefits employees are legally entitled to receive.

However, it’s not what your contract says that matters, but what your working relationship actually looks like in practice. If your hours, pay, and day-to-day work are controlled by someone else, you could be missing out on your rights as an employee. When someone is hired as an “independent contractor” on paper, but in reality, they are working like an employee New Zealand Employment Law recognises this as an employment relationship and a sham contract.

Knowing the difference between a genuine contractor and an employee is the first step to protecting your rights.

Employee or Contractor - What is the Difference and Why it Matters

For workers, being wrongly labelled as a contractor can mean losing out on their legal entitlements.
It can also make it harder to challenge unfair treatment and unjustified dismissal, since many employment protections do not extend to contractors. Contract law is also less accessible than employment law for dispute management and escalation.

Your legal status affects nearly every aspect of your working life.

If you’re treated like staff but told you’re “self-employed,” it’s worth questioning whether that’s genuine contracting — or a misclassification.

What the Law Actually Looks at in Determining Status

Section 6 of the Employment Relations Act 2000 aims to prevent exploitative misclassification of employees as contractors by making it clear that labels do not decide your employment status. The real nature of the relationship is what matters.

The test for distinguishing between independent contractors and employees under s 6 was outlined by the Supreme Court in Bryson v Three Foot Six Ltd [2005] NZSC 34. This test was described by the Court of Appeal as a two-stage approach:

1. Identifying the nature of rights and obligations between the parties (including written terms of employment, and any departure from those terms).
2. Deciding whether the relationship amounts to contract of service by applying the control, integration and fundamental (economic reality) tests.

When deciding if someone is a contractor or an employee, courts and the Employment Relations Authority look at the whole picture, including factors such as:

• Control: Who decides how, when, and where the work is done? Can both parties work independently of each other?
• Integration: Is the person part of the business or operating their own?
• Financial risk: Does the worker supply their own tools, set their own prices, or take on business risks?
• Economic Dependence/Independence: Can the person work for others, build their own client base, or negotiate terms?

A Turning Point for Sham Contracts: The Uber Case

A major New Zealand case involving Uber drivers reshaped how “gig economy” work is viewed under employment law. In Rasier Operations BV v E tū Inc [2022] NZEmpC 192, four Uber drivers argued that they were actually employees. Despite Uber having labeled them as independent contractors, the Employment Court found that drivers were employees, not independent contractors, because:

• Uber controlled key aspects of their work through the app, including fares and pricing, performance ratings and standards, penalties for declining rides and deactivation;
• Drivers had no real ability to negotiate terms or build independent businesses; and
• They were economically dependent on Uber’s platform.

As a result, the Court ruled that the drivers were employees while logged into the app. This decision reinforced that substance prevails over form: the true nature of the working relationship always comes first.

In dismissing Uber’s appeal (Rasier Operations BV v E tū Inc [2024] NZCA 403), the Court of Appeal confirmed that the correct approach is to look at control, integration, and economic dependence — and that so-called “contractor” arrangements can still amount to employment when the business exerts significant control. Uber has since appealed to the Supreme Court, and the outcome will have major implications for gig workers across New Zealand.

Proposed Law Changes: The Employment Relations Amendment Bill 2025

The Uber ruling sparked calls for clearer legal definitions. The Government has since signalled possible reforms to New Zealand employment law to address misclassification and protect gig-economy workers. In 2025, the Government introduced the Employment Relations Amendment Bill, proposing major changes to how employee status and personal grievance rights are defined.

The Bill introduces a “Specified Contractor” Gateway Test, which would automatically classify someone as a contractor — not an employee — if all of the following criteria are met:

1. The agreement is in writing and explicitly states the person is an independent contractor
2. The worker is free to perform work for other clients or businesses
3. The worker isn’t required to accept extra work beyond what’s agreed
4. The worker has flexible hours or can subcontract the work
5. The worker had a reasonable opportunity to obtain independent advice before signing

If all five boxes are ticked, the person would be conclusively treated as a contractor, and the “real nature” test would not apply.
If any one of them fails, the traditional section 6 analysis still governs.

What to Do if You are an Employee and Think You’re Misclassified

If you’ve been told you’re a contractor but your work feels more like employment, you don’t have to figure it out on your own. Or if you’re concerned about how the legislative change may impact your situation, reach out to us. Our team can review your situation, help identify whether your contract might actually be a sham contracting arrangement, and advise you on your rights and next steps.

Contact us if you believe you may have been misclassified; you may be entitled to back pay, leave entitlements, and other legal remedies.

If you’re unsure about your work status or suspect a sham contracting situation, it’s worth getting advice early. You might have more rights than you realise.

What to do if You are a Company hiring independent contractors

While the potential changes are still in development, businesses can use this period to ensure their practices are in line with current law, while remaining flexible enough to adapt to the future. Businesses can take several proactive steps:

• Audit existing contractor agreements: Begin reviewing current contracts to ensure they align with the gateway test’s criteria. Look for clauses that could indicate control over hours, exclusivity, or availability that might need to be amended.
• Assess flexibility policies: Ensure that independent contractors are genuinely allowed to work for competitors and are not bound to specific hours or tasks that resemble those of employees.
• Seek guidance: Given the potential for ambiguity, obtaining advice can help mitigate risks. Employment law experts can assist in drafting or reviewing agreements to ensure compliance with both the gateway test and existing employment law.

Having an early and informed view of how current practices align with the proposed new rules will not only help avoid disputes but also strengthen relationships with independent contractors by providing greater certainty and fairness. Feel free to reach out to Solidarity Employment Advocacy for assistance with reviewing and updating contracts.