Trying to turn contractors into employees

Kirk Hope of Business NZ writes in Stuff:

Business is concerned about a proposed law that would be harmful to business and the economy.

A Labour Party member’s Bill, the Minimum Wage (Contractor Remuneration) Amendment Bill, is due for its third reading in Parliament soon and currently looks as if it might have enough votes to be passed into law.

If so, it would be a bad law.

The Contractor Bill is seeking to pay contractors a minimum wage.

On the face of it, this sounds like a good thing. No-one supports people being paid less than the minimum wage; certainly BusinessNZ firmly supports employees’ right to minimum wage protections.

The only problem is that contractors aren’t employees.

Contractors sign up to contracts for services and are paid for outcomes, not paid by the hour.

Requiring contracts to specify hourly or weekly pay rates would have the effect of turning them into quasi-employment agreements.

Perhaps this is the aim of the Bill – to get rid of contracts for services altogether, or to create confusion about using them.

Confusion would be the inevitable outcome.

Blurring the line between employment agreements and contracts for services would throw doubt on a lot of business law. New tax rates and new employment laws would have to be created to apply to the strange hybrid that ‘contracts’ would become.

Sectors that use contracts for services a lot would be beset by uncertainty – manufacturing, building and construction, transport and many others.

The construction industry in Auckland and Christchurch would be affected. People earning their living as contractors would be most harmed by the uncertainty.

This confused outcome would result because the Contractor Bill itself is confused.

By focusing on a minimum ‘wage’ it seems to assume that a contractor always has only one contract with one client, and assumes that the single client should be paying an equivalent of the minimum wage or more.

But in fact most contractors provide their services to many clients, not just one.

An electrician or plumber for example would engage with many clients over a working week, earning a combined income well above the minimum wage.

This bill basically turns contractors into employees. Labour has never liked contractors. They think everyone should be an employee and in a union.

The Contractor Bill confuses employment agreements with contracts for services.

The correct place to have minimum wage protections is in employment agreements. Every employment agreement must pay at the minimum wage or higher, a practical protection for every New Zealand employee.

But it’s not practical to try to put minimum wage protections in contractors’ contracts. it would make many of them unworkable and would cause confusion in the marketplace.

The Contractor Bill appears to have been drafted by people with no experience with commercial contracting and who do not understand how contracts for services work.

The Labour Party in other words.

The Bill is supported by Labour, Greens, Maori Party and NZ First, and is opposed by National and ACT. The single vote of MP Peter Dunne could decide whether the Bill passes or not.

Business hopes that MPs currently supporting the Contractor Bill will think hard about the consequences of their vote.

The push for this bill is not coming from contractors. It is from unions who see it as a first step to turn contractors into union members.