The employment law that the Government is looking at changing to appease Warner Bros has to do with whether film workers are classed as independent contractors or employees.

Among Warner Bros' concerns are that workers on The Hobbit may disrupt production and challenge their legal status.

Some film workers work as contractors, meaning they can have significant tax breaks and can set their own terms and conditions.

Others want to be employees, which affords them all the benefits of employment law, including statutory minimums for tea and lunch breaks, sick days, annual leave and being able to take personal grievance cases.

The issue centres around James Bryson, a model maker on The Lord of the Rings films, who was hired as an independent contractor, but was made redundant. He felt he was unjustifiably dismissed, but could only take a personal grievance case if he was legally classed as an employee.

His case ended up in the Supreme Court, which in 2005 ruled in his favour. Even though his employment contract had said he was a contractor, the nature of his job and the relationship with production company Three Foot Six showed that he should be regarded in the eyes of the law as an employee.

The Government was taking advice on the matter last night, but all options seemed on the table, including labour laws unique to The Hobbit.

Mr Key did not know why an issue from a 2005 court case was now the main problem for Warner Bros, given that it should be no more of an issue than it was before the boycott was called, when there was no question the films would be shot anywhere but New Zealand.