Over-reaction to bill: Harre

By ADAM GIFFORD

Associate Minister of Labour Laila Harre says the IT industry and recruiters are over-reacting in claiming the Employment Relations Bill may kill independent contracting and force skilled workers overseas.

MPs have been besieged with constituents concerned about the bill, as the result of concerns raised by employer groups and the Act party.

Information Technology Association executive director Jim O'Neill said ITANZ was concerned at the bill's definition of employee, and its rules on how fixed-term contracts would be treated.

"The bill has gone further than anyone expected and pulls in all independent contractors and fixed-term contracts into the definition of employees," he said.

Contracting gave considerable advantages to knowledge workers whose skills were in demand, or who may only be needed for a project of specific duration. However, the bill would mean independent contractors could be deemed employees."That could either be as a result of them wanting to be reclassified or the union view that certain groups of people should be reclassified," Mr O'Neill said.

"What that means is an employer can go in to something with huge uncertainty on future liability he is taking on. It can be retrospective too, so if a person is eventually said to be an employee, the employer is liable for income tax, holiday pay, ACC and so on."

John Lacey, managing director of IT recruitment company LaceyLee, said half his business was finding contractors, and he was concerned at how employers would react.

"There are quite a few people who stay on contract for prolonged times, years even. With the Employment Contracts Act that is okay," Mr Lacey said.

"Hypothetically, under the new bill, where an employer has someone contracted for 18 months and they wish to terminate it, that contractor could turn around and say `No, I am an employee and unless I am paid redundancy I will turn up on Monday'." He said temping and contracting companies would be wary of how long they took people on for, and on what basis.

Ms Harre said it was up to a worker to decide if they were defined as an employee or a contractor. However they were defined, they should be covered by employment relations law.

"The changes are not as dramatic as some people are suggesting. There is a degree of over-reaction," Ms Harre said.

She said the bill dealt with a 1993 decision of the Court of Appeal in the TNT Couriers case, which put more emphasis on the language of the contract than had traditionally been placed on it by the courts.

Ms Harre said the courts had previously emphasised issues of control, direction and the degree to which a contractor integrated into an employer's or principal contractor's business.

There was a shift in that as a result of the TNT case to pay more attention to the form than the substance of contracts.

"We have moved so that the substance of a contract will be more important than the form when deciding who will be a contractor."

Ms Harre said it would be up to the courts to clarify issues case by case "but people being brought in to do IT projects for non-IT businesses are more likely to be described as contractors under this law than employees."

Businesses affected would be those such as courier companies using contractors to perform their core business.

Ms Harre said though issues could arise about the fixed term of contracts, they would under the existing law.

The aim of the new provision was to prevent employers using fixed-term contracts as a way to maintain a casualised workforce.

"All you will be required to show is there is a legitimate operational need for a fixed term," she said.