The Government has announced a proposed amendment to employment law aimed at clarifying how workers are classified as either employees or contractors. The new law introduces a more defined legal test to determine a worker’s status, providing greater clarity for both businesses and workers.

New Contractor Classification Criteria

The proposed law establishes a four-part threshold test, which all must be satisfied for a worker to be classified as a contractor. The criteria are:

1. Written Agreement: There must be a written agreement that explicitly states the worker is an independent contractor.
2. Work Flexibility: The business must not prevent the worker from working for other businesses, including competitors.
3. No Specific Availability: The business cannot require the worker to be available at specific times or for a minimum number of hours, and the worker must be free to subcontract the work.
4. No Task Obligation: The business cannot terminate the contract if the worker declines an additional task or engagement.

If any of these criteria are not met, the current legal test for determining employment status will apply. This test examines the intention of both parties and the true nature of the working relationship, rather than just the wording in the contract.

Impact of the Proposed Law

The Government aims to provide more certainty for businesses and workers regarding worker classification. The law change comes after a recent Court of Appeal ruling that classified Uber drivers as employees. This decision could open the door for workers in gig-based industries to challenge their employment status. The proposed amendment seeks to limit such legal challenges by clearly defining contractor status.

When Will the New Law Take Effect?

The new law is expected to come into force next year, offering businesses time to adjust to the updated legal framework.

Seek Legal Advice

If you are unsure how the changes might impact your business or working arrangements, leading law firms offer fixed-price initial consultations to help you understand your options and how the law applies to your situation.