Over the years, the status of a worker as a contractor or an employee has been challenged through the Employment Court and Employment Relations Authority (Authority).

The Employment Court’s recognition of four Uber drivers as employees rather than contractors in E Tū Incorporated v Raiser Operations BV Ltd & Ors [2022] – upheld by the Court of Appeal – has been a turning point in this discussion.

On 15 September 2024, the Workplace Relations and Safety Minister announced the “Gateway Test” as one of the amendments to the Employment Relations Act 2000 (the Act). This test sets four criteria to determine whether a worker is an independent contractor. The four criteria are:

• A written agreement with the worker, specifying they are an independent contractor;
• The business does not restrict the worker from working for another business (including competitors);
• The business does not require the worker to be available to work on specific times of day or days, or for a minimum number of hours OR the worker can sub-contract the work;
• The business does not terminate the contract if the worker does not accept an additional task or engagement.

The Employment Court and Authority currently look at the overall nature and intention of the working relationship between the business/employer and the worker to decide if a worker is a contractor or an employee. Once the Gateway Test is part of the Act, any claims which challenge a worker’s status as an employee will depend on whether the above four criteria are met. If any of the criteria are not met, the Court will continue to use the current test – analysing the nature and intention of the relationship – to decide the worker’s status. If all four criteria are satisfied, the worker will be deemed a contractor.

This change is important for businesses and employers that rely on freelance or remote work which has become increasingly common over the past few years. The Minister considered that contracting work out to independent contractors can save the businesses money. Independent contractors should have the freedom to work with multiple businesses in the same line of work on their own schedule, allowing them to increase their overall income and earning capability.

It may seem you do not need a written agreement if the nature of the work does not follow traditional business practices, but this can lead to potential risks. For example, if you advertise a job informally through platforms such as Facebook, and the nature of the job starts to vary, a worker may challenge their status as a contractor or employee.

The purpose of the Gateway Test is to reduce the number of claims being brought to the Employment Court and Authority which can be lengthy and costly to both parties. The Minister has clearly stated that current contract agreements will not be affected by the test once it is embedded into the Act.

The Gateway Test is one of the numerous changes to employment law in New Zealand in 2025. If you are a business or employer and would like to discuss how these changes could impact you, please reach out to Ariana Kim, solicitor (03 925 7956 / ariana@mmlaw.co.nz).