All in a day's work: Delivered fresh, fast and illegally to your door...

Is your pizza being delivered by an employee or a contractor?

I have to say that there are few things that would make me choke on my slice of pizza faster than knowing that it was delivered in breach of the law.

That said, you do read about those horror stories of people finding insects and body parts in their food from time to time - and I'm reliably informed, finding half of something is infinitely worse than finding the whole thing...!

However, illegal pizza delivery is the dilemma facing Pizza Hut at the moment.

Apparently, approximately one-fifth of Pizza Hut's delivery drivers have been told they can no longer work for the company as their roles are contrary to the terms of their student work permits.

In particular, the drivers are engaged by the company as independent contractors, not as employees. This means they are self employed and contracting to Pizza Hut, and self employment is not permitted under the immigration policy for international students.

So, you may ask, what is the difference between an independent contractor and an employee? The statutory test is: what is the real nature of the relationship?

There is no one factor that makes someone an independent contractor or an employee. In fact, it is important to bear in mind that engaging someone as an independent contractor, pursuant to a contractor agreement, is not determinative of them being an independent contractor in and of itself. This is because the legislation also says that a statement made by the parties to describe their relationship is not "a determining matter".

Instead, it is a matter of balancing a variety of factors, such as:

• Taxation - employees should have PAYE deducted at source, contractors would generally be registered for GST (and would usually pay their own tax);

• Leave arrangements - contractors are generally paid for the hours they work - if they don't work, they don't get paid and have no entitlement to either annual leave or sick leave under employment legislation (the Holidays Act 2003);

• Degree of supervision - is the person working as an independent specialist, largely independently of the organisation? It is accepted that a certain degree of supervision or oversight will be necessary to ensure that the organisation runs effectively, but a true contractor would not become integrated into the organisation as with an employee;

• Hours of work - in line with the degree of supervision, is there any variation or flexibility in relation to the hours of work, including the opportunity to simultaneously contract with other organisations?;

• Who provides the tools and equipment - a contractor would generally bring with them their own tools and equipment and invoice the company for charges incurred, such as phone calls, equipment rental, internet usage etc.

Please note this is not an exhaustive list and is just an example of some of the factors that will be taken into account as part of the balancing exercise to ascertain whether a person is an employee or an independent contractor.

For many organisations, the perceived attractiveness of an independent contractor arrangement is that a contract for services can be terminated on notice, without requiring cause or justification (or much in the way of a process).

Compared with s103A of the Employment Relations Act 2000, which requires the decision to be one that: a fair and reasonable employer would make, in all the circumstances at the time the decision to dismiss was made, ending a contract with an independent contractor is fairly simple.

But, as I have noted above, the question is: what is the real nature of the relationship? If someone is engaged as an independent contractor, and the organisation seeks to rely on that status and terminate them by simply giving notice, the worst case scenario is that the person will argue that they are in fact an employee and seek to being a personal grievance (only employees can pursue this remedy), alleging unjustified dismissal.

The reality is that if the person succeeds in the argument that the real nature of the relationship is that of employer/employee, it is highly likely that the termination will be an unjustified dismissal as the requisite fair process would not have been followed.

Interestingly, it is reported that most of the 85 Pizza Hut delivery drivers affected by this development have been asked to re-apply as part time employees, to "get around the issue", blurring the lines as to what the real nature of that particular relationship is in relation to all of the other drivers who a staying on as contractors.

The reality is, whichever way you slice, dice, or attempt to serve (or twist) it up (not that I'm in marketing for Pizza Hut!), the issue of determining someone's status in these circumstances remains a balancing act.


Bridget Smith