Minimum Wage (Contractor Remuneration) Amendment Bill - Submission to the Transport and Industrial Relations Committee [2015] NZHRCSub 7 (24 September 2015)

Last Updated: 3 December 2015

Submission on Minimum Wage (Contractor Remuneration) Amendment Bill

Transport and Industrial Relations Committee

24 September 2015

_Introduction

1. The Human Rights Commission welcomes the opportunity to provide this submission to the Transport and Industrial Relations Committee on the Minimum Wage (Contractor Remuneration) Amendment Bill (‘the Bill’).

2. The main purpose of the Bill is to amend the Minimum Wage Act 1983 to provide that specified types of independent contractors may not be paid less than a minimum rate, equivalent to the minimum wage. If enacted, the Bill will rename the legislation to the Minimum Wage and Remuneration Act 1983, reflecting its broader scope.

Position of the Commission

3. The Commission supports the Bill’s intention to address situations where minimum wage obligations are avoided by the use of contracts for service that are similar to an employment relationship and which provide payment on terms similar to wages.¹

Workers subject to these kinds of contracts have been described by Mazengarb’s Employment Law as “dependent contractors”, who “work under a notional contract for services but whose employment depends on one employer or principal.”²

4. In reflection of this, the Bill is not designed to cover all contracts for service.

_{Schedule 2 of the Bill sets out a list of services that will be provided minimum}

¹ Hon. David Parker MP, Minimum Wage (Contractor Remuneration) Amendment Bill, First Reading, Hansard, 12

August 2015, http://www.parliament.nz/en-nz/pb/debates/debates/51HansD_20150812_00000028/minimum- wage-contractor-remuneration-amendment-bill-—

² Mazengarb’s Employment Law (2015) para ERA6.9.1, LexisNexis New Zealand

remuneration protection.³ These services, which include such work as cleaning, personal home-care support and food catering, are generally accorded relatively low levels of pay.

5. The Commission’s Tracking Equalities at Work on-line monitoring tool⁴, indicates that women and young people are more likely to be receiving lower rates of pay. In particular, the data shows that:

• 15-24 year old women are the most marginalised group of workers in the labour market in terms of pay, receiving on average an hourly wage of

$14.25 per hour, less than half the average hourly wage of the least marginalised group, male Pakeha aged 45-64.

• Two-thirds (66.6%) of minimum wage earners in 2014 were women.

6. Amongst ethnic groups, Pacific people are also over-represented in minimum wage jobs relative to their population size.⁵ Furthermore, gender and ethnicity disparities compound so that Pacific and Maori women receive lower levels of pay than Pakeha women.⁶ Disabled people are also disproportionately represented amongst low income workers.⁷ It follows that similar disparities may exist amongst those workers engaged under ‘dependent contracts’ for services. By introducing minimum remuneration requirements into certain sectors where the use of dependent contractors is prevalent, the Bill may partially address these disparities.

7. While the Bill is a Private Members Bill that, if enacted, would appear to represent a departure from current government policy, the Commission considers that its objectives are broadly consistent with the objectives of the recently introduced Employment Standards Bill. The intention of the Employment Standards Bill is to provide for stronger and more effective enforcement of employment standards, such as the minimum wage, and prohibit practices that lack “sufficient mutuality” between

³ Building and construction services; cleaning services; courier services; food catering services; fast-food delivery services; newspaper or pamphlet delivery services to letterboxes; personal home-care support to an individual in the individual’s house; public entertainment services as an actor, musician or singer; the manufacture of clothing, footwear or textiles; telemarketing services; market research services; licensed security guard services; services in the forestry industry; truck-driving services delivering goods.

⁴ _{http://tracking-equality.hrc.co.nz/#/issue/pay}

⁵ _ibid

⁶ _ibid

⁷ _ibid

parties.⁸ The Commission notes that the Committee will be considering the

Employment Standards Bill shortly, almost in parallel with this Bill.

8. In addition, the Commission notes that the Bill’s proposals are not unique. Minimum wage or remuneration protections for independent contractors whose contracts for service resemble employment are provided in some comparable overseas jurisdictions. In the UK, for example, people designated as ‘workers’⁹ are generally guaranteed minimum wage protections¹⁰, regardless of whether their services are procured by way of an employment agreement.

9. The Commission acknowledges that currently there are legal avenues available for workers who are being paid less than the minimum wage under an independent contract in circumstances where the real nature of the relationship indicates an employment arrangement.¹¹ In doing so, the Employment Court or Employment Relations Authority must determine the real nature of the relationship between the contracting parties. This requires the Court or Authority to consider all relevant matters, including any matters that indicate the intention of the persons. Furthermore, any statement by the persons that describes the nature of their relationship (in a contract or letter for example) is not to be treated as a determining matter.

10. This issue has been subject to considerable scrutiny by the Courts, from Cooke J’s formulation of the ‘economic reality’ test in Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173, through to the leading judgment of the Supreme Court in Bryson v Three Foot Six Ltd [2005] NZSC 34; [2005] 2 NZELR 135. At the heart of this issue is the degree of control exercised by the identified employer. As the Supreme Court held in Bryson, “contractual labelling” is not determinative.

11. However, low paid, vulnerable workers under contracts for service are likely to face a number of practical barriers to taking legal action to assert their employment rights. By providing for minimum remuneration for such workers, and with it the oversight of the Labour Inspectorate, the Bill may have the effect of driving better employment practices within less scrutinised corners of the labour market.

⁸ _{Employment Standards Bill 2015, Explanatory note}

⁹ _{https://www.gov.uk/employment-status/worker}

¹⁰ _{https://www.gov.uk/national-minimum-wage/who-gets-the-minimum-wage}

¹¹ _{Employment Relations Act s 6(2)}

Human rights implications

12. By aiming to provide minimum remuneration protection to a specific category of vulnerable worker, the Bill accords with New Zealand’s international treaty commitments and, more broadly, can be seen as seeking to progress economic and social rights.

13. The Bill engages a number of provisions in human rights treaties ratified by the New

Zealand Government. These include:

• Articles 6 and 7 of International Covenant on Economic, Social and Cultural Rights concerning the right to work, in particular Article 7(a)(i) which provides that all workers, as a minimum, receive fair wages and equal remuneration without distinction of any kind.

• Article 11.1 of the Convention on the Elimination of Discrimination Against Women concerning equal rights for women in the workforce, in particular Articles 11.1(c) and (d) concerning conditions of service and remuneration.

• Article 32.2(b) of the UN Convention on the Rights of the Child as regards the provision of appropriate regulation of the hours and conditions of employment of workers aged under 18.

• Articles 27.1(a) and (b) of UN Convention on the Rights of Persons with Disabilities concerning the right of disabled workers to just and favourable conditions of work, including remuneration, on an equal basis with others.

14. It its General Comment on the Right to Work¹² the UN Committee on Economic Social and Cultural Rights did not directly address the legal distinctions between work undertaken via an employment agreement or independent contract. The Committee did, however, comment that:

• States should ensure that standards are in place that enable workers to support themselves and their families, consistent with the fair and equal remuneration requirements of Article 7.¹³

¹² Committee on Economic, Social and Cultural Rights, General Comment No 18: The Right to Work, 35^th

_{session, E/C.12/GC/18 (2006)}

¹³ _{E/C.12/GC/18 (2006) para 7}

• States should also take measures to reduce, to the fullest extent possible, the numbers of workers operating outside the formal economy and compel employers to comply with labour legislation.¹⁴

ILO Conventions

15. New Zealand has ratified ILO Convention 26, the Minimum Wage-Fixing Machinery Convention 1928 (ILO 26). ILO 26 provides a set of obligations on ILO Member States to fix in place minimum wage protections for workers “employed in certain of the trades or parts of trades... for which no arrangements exist for the effective regulation of wages by collective agreement or otherwise and wages are exceptionally low”.¹⁵¹⁶

16. New Zealand has also ratified the Equal Remuneration Convention 1951 (ILO 100), which required ILO Member States to put in place measures to ensure the provision of equal pay for equal value amongst male and female workers. This includes measures to objectively appraise the value of certain jobs based on the value of work performed¹⁷.

Child labour

17. The Commission notes that the Bill does not extend minimum remuneration requirement for child workers aged under 16. This is consistent with New Zealand Government policy over the previous decades. If enacted, the Bill will therefore have no impact on child workers, many of whom work as ‘dependent contractors’ doing pamphlet deliveries and other forms of work otherwise protected by the Bill.

18. The New Zealand Government still maintains a reservation against Article 32.2 of the UN Convention on the Rights of the Child which provides for minimum employment standards, including a minimum age of entry into the workforce, for children aged under 18. New Zealand is also yet to ratify ILO Convention 138 on a minimum age of entry to employment.

¹⁴ _{Ibid para 10}

¹⁵ _{Article 1}

¹⁶ New Zealand has not, however, ratified the subsequent Minimum Wage Fixing Convention 1970 (ILO Convention 131) which obliges Member States to set in place minimum wage protections for “all groups of wage

earners whose terms of employment are such that coverage would be appropriate.”

¹⁷ Articles 2 and 3.1

19. The UN Committee on the Rights of the Child has noted its concern regarding New Zealand’s position in this regard and has recommended that the reservation be lifted.¹⁸ The Commission has also previously submitted that without statutory protections, such as minimum wages and employment conditions, young workers risk marginalisation.¹⁹

20. In light of this, the Committee may wish to consider the implications of setting in place minimum wage and remuneration requirements for specified categories of workers aged under 16 and seek advice from the Ministry of Business, Innovation and Employment accordingly.

Contact Person: John Hancock, Senior Legal Adviser

_[e-mail]

¹⁸ _{CRC/C/NZL/3-4 paragraph 9 and 50}

¹⁹ _{Human Rights Commission, Submission of the Human Rights Commission on the Youth Minimum Wage, 11}

April 2000