Contractor versus Employee Case Law Development

Contractor versus Employee Case Law Development

A recent case Whitham v Brutalitees Ltd [[2026] NZERA 325 has highlighted the importance of classifying a work relationship correctly as the worker was found to be an employee, not an independent contractor, with the worker claiming she had been unjustifiably dismissed without notice, warning, proper investigation, or any real opportunity to respond to the employer’s allegations.

Background

Ms Whitham responded to a Facebook advertisement for a piercing apprentice in May 2024, attended an initial meeting, and began performing piercings and shop duties. Initially she was paid, being told she was in training, but later received some bank-transfer payments. Her usual work pattern was Tuesday to Saturday, from noon to 5pm, using the business tools and equipment, and doing tasks such as preparing piercing tools, cleaning, serving customers and selling shop items.

In July 2024, she was sent and signed a contractor agreement in August, but said the arrangement was never properly explained, and she had to chase payment. By September 2024 she said she had not been paid for several weeks.

On 19 September 2024, Ms Whitham attended a meeting with Ms Dawson, Brutalitees’ sole director and majority shareholder, and Josh, another person associated with the business. Ms Whitham recorded part of the meeting. During it, concerns were raised about her tasks and performance, and told she would not be paid and not welcome back. The exchange involved threats of physical violence and abusive, degrading language.

The Employment Relations Authority (ERA) applied the Employment Relations Act 2000 test and assessed the real nature of the relationship, including intention, control, integration and whether she was in business on her own account. Ms Whitham argued the apprentice advertisement, set hours and payment arrangements, restrictions in the contractor agreement, use of the shop’s tools, integration into daily operations, lack of commercial risk, and absence of invoices all pointed to employment. The ERA accepted she was an employee.

On dismissal, Brutalitees alleged repeated breaches of trust, hygiene and safety failures, misuse of resources and reputational risk. The ERA found the process fell well short of what a fair and reasonable employer could have done. Ms Whitham was not told in advance what would be discussed, that her employment was at risk, not given a reasonable chance to respond, and her explanation was not genuinely considered before being dismissed. Concerns and dismissal occurred in the same meeting. The ERA found the dismissal procedurally and substantively unjustified

Decision

The ERA found the dismissal of to Ms Whitham be both substantively and procedurally unjustified. It awarded her $15,000 compensation, unpaid wages of $6,484.32, holiday pay of $833.40, lost wages of $7,523.75 and a $750 penalty, It was also ordered to pay a further $750 penalty to the Crown. (The penalties were for failing to provide a written employment agreement, failing to keep or provide wage and time records, and failing to pay wages and holiday pay)

Key takeaways

Crucial to classify the ‘real nature’ of a working relationship correctly. ERA will examine the real nature of the relationship – not the labels!

Employers are expected to act in Good Faith in terminating workers including putting concerns to a worker, allowing real opportunity to respond to them and have their explanation considered before any decisions to end a relationship are taken.

Employers should be familiar with the new Gateway test applying since Employment Relations Act amended February 21 2026 for determining if a worker is an Independent Contractor or Employee

Written Agreement: The contract explicitly states the worker is an independent contractor or is not an employee.

No Restrictions on Other Work: The business does not stop the worker from performing work for other clients or competitors.

Hours Flexibility or Subcontracting: The worker is not required to work specific times, days, or minimum hours, or they have the freedom to sub-contract the work,

Right to Decline Extra Work: The business cannot terminate or penalize the arrangement if the worker declines an offer of additional work

Independent Advice: The worker had a reasonable opportunity to seek independent legal or business advice before signing the agreement

For more information, refer the advice under Case Law. For specialist advice in this area, please contact me at michaelp@businesscanterbury.org.nz.