Business dreads liability under employment bill

Mark and Mary-Anne Gilbert run a specialist removal business and use contractors to carry out work such as packing and transporting antiques. The Employment Relations Bill (ERB) is making them reluctant to invest in their business. Here, in an open letter to Labour Minister Margaret Wilson and Prime Minister Helen Clark, they explain why they are so worried about the introduction of the ERB:

I understand what the bill is endeavouring to achieve but feel you do not understand the practical implications the legislation will have for our business and thousands more like us across the country.

My wife and I run a small company based around the transportation of artwork, antiques and fragile furniture ... We have built this business over the past 14 years and have established ourselves as a market leader, providing first-class service in a very difficult market.

Our experience over the years has been that we needed to use contractors as they provided a more consistent level of service and care.

We set up the relationship between ourselves and the contractors on the basis that we would need to dictate the manner in which the work was completed and they would have to work exclusively for us.

The reality of our business is that any lesser control by us would have seen a deterioration in standards. The contractors hold three-year contracts that are renewed and can be onsold at any time by them.

At present these contractors are earning an average of $10,000 a month and we are all happy with the situation as it stands. Our main concern with the new legislation is that the contractors will be able to challenge their status at any time.

While they have no cause to do this at present, experience has shown us that when a contractor decides he wants to move on (or a dispute arises), then he no longer cares about the ongoing relationship and this legislation will give him the opportunity to challenge his employment status.

If the courts decide, having taken into consideration the criteria of control and integration, that the contractor was in fact an employee and not a contractor, then as a business we would not only be liable for any holiday pay and sick pay owing to an employee (backdated to the beginning of the legislation) but also we would be liable for any PAYE Inland Revenue felt was due as a result of the change in status.

This possibility puts us in a position where we could be liable for tens of thousands of dollars each year. This liability would destroy any profitability our business has and could well bankrupt us.

We are in no position at present to purchase all of our contractors' vehicles and, even if we were, the nature of our business is such that it could not carry on providing the same degree of service with waged employees.

We then have to consider the possible implications of our liabilities should our contractors' status change, and can only assume that at some stage in the near future this may happen.

In this case we would not be able to carry on in this business knowing we could not meet these liabilities.

As directors of our company, it is illegal for us to trade knowing we cannot meet our commitments. Our only choice, should this legislation proceed in its present form, would be to close our business immediately, putting 22 people out of work.

Right now we are having to defer any spending within the business because of the uncertainty involved.

This means that the $30,000 upgrade we are planning for our radio telephone system is on hold until we are confident that the ERB will not put us out of business. (The company we are dealing with for this upgrade has had $300,000 worth of business put on hold for the same reason.)

Little wonder that business confidence is slipping (plummeting out of control?).

Our request is that the legislation be amended to allow businesses such as ours to continue using contractors without fear that at some later stage their status will be challenged and thus open the business up to unreasonable liability and possible liquidation.

We have 22 families directly associated with this business who will not only be out of work should this legislation proceed in its present form, but in the case of our contractors, will lose the life-savings they have poured into their businesses in the form of vehicles and contracts.

Multiply the above by the number of similar businesses in this country and widespread hardship will follow.

We are sure this is not your intention but, rest assured, this will be the reality if the ERB is not amended.

Please note that this is not an attempt by "big business" to hype the issue, but rather the concerns a small business has for its ongoing survival.