Employment law must change

Employment law needs to change in the wake of the Mainzeal collapse to protect contractors - and reflect the country's changing labour landscape, says an employment law specialist.

Auckland employment lawyer Max Whitehead, principal of the Whitehead Group, said the law needed changing to give contractors and sub-contractors some recourse if their main contract went under or the relationship irretrievably broke down, leaving them out of pocket.

He said that where 20 or 30 years ago most of New Zealand's workforce was employed by large corporations, today 97 per cent of the companies here were small to medium enterprises (SMEs) and increasingly using contract workers.

"More and more people are being made redundant and then re-hired as contractors," he said.

"At the moment contractors don't have the full protection of employment law if something untoward happens."

With the workplace model increasingly moving towards a contracting labour force it's time to take a another look at employment law to see if it fits that model, Whitehead said.

"The distinction between employers and contractors needs to be examined closely," he said.

Andrew Crisp, deputy chief executive of infrastructure and resource markets for the Ministry of Business, Innovation and Employment (MBIE), said good evidence would be needed that any regulatory solution to protect sub-contractors addressed the problems and did not create unnecessary costs or other issues.

He said there were already some legal mechanisms available for contractors in the Construction Contracts Act which provided processes to ensure timely payment to contractors and sub-contractors.

Further amendments to the bill were also before Parliament, including broadening the definition of construction work and allowing more direct enforcement of determinations about rights and obligations.

New Zealand Contractors Federation CEO Jeremy Sole said the passing of the Construction Contracts Act in 2002 went a long way to providing SME contractors with protection - but it was also important to educate contractors on the steps they needed to take to protect themselves under the law.

"Some of these things should be common knowledge in the industry but we still have trouble even getting subbies and contractors to use formal contracts," he said.

Sole said the dilemma for sub-contractors in tight economic times was that they didn't want to turn down work.

"It's a difficult thing because in the current climate if some work pops up you want to be able to take it so you can keep your house, or keep your equipment, and keep your employees going," he said.

"Subbies are more likely to take risks in the current market than they would at other times, even though things are also more risky."

His advice on ways sub-contractors and contractors can protect themselves includes:

- Submit your invoices or payment claims as spelled out in the Act, or you'll have no statutory protection at all.

- When you have gear, especially if it's substantial gear such as excavators, set up a personal property agreement, which you can do online for about $5 without involving anybody else. This is a register of personal property so should a liquidator be called in they won't be able to say "we'll have that please". BUT the document expires after 12 months, at which point you need to remove the item from site, bring it back and re-register it.

- Use a credit reporting agency like Veda to check your clients' credit history and performance.