Employee v Contractor
On 21 February 2026, a new ‘gateway test’ was introduced to determine whether an individual is an employee or a contractor in terms of employment law. The gateway test does not apply retrospectively.
Gateway test: An individual is a contractor if they meet all the gateway test criteria. These are:
• There must be a written agreement stating they are an independent contractor or are not an employee
• No restriction from working for others (except while undertaking agreed work)
• They are not required to work at a specified time/period OR they can subcontract the work, subject to legally required or justifiable vetting
• Additional future work can be declined without the arrangement being terminated, and
• There has been a reasonable opportunity to seek independent advice before entering into the arrangement.
If all criteria are satisfied, the individual is a contractor. If any of the criteria is not met or for claims brought prior to 21 February 2026 the common law test (below) applies.
The four factors below are considered together to determine whether an individual is a contractor:
1. Intention – what did the parties intend the relationship to be? Consider entitlements received – for example, contractors are not entitled to holiday pay.
2. Control v independence – high employer control over hours, work and methods may be indicative of an employer/employee relationship
3. Integration – is the role fundamental to an employer’s business and continuous in nature, and
4. Fundamental/economic reality – does the economic reality reflect a person in business on their own account? Consider fee structure, tax obligations, ability for the individual to profit and who bears financial risk.
The distinction between an employee and contractor is highly relevant for the rural sector as you may have both contractors (such as sharemilkers and contract milkers) and employees (farm hands, managers, etc) working on your property.
DISCLAIMER: All the information published is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this article. Views expressed are those of individual authors, and do not necessarily reflect the view of this firm. Articles appearing in this newsletter may be reproduced with prior approval from the editor and credit given to the source. Copyright, NZ LAW Limited, 2019. Editor: Adrienne Olsen. E-mail: adrienne@adroite.co.nz. Ph: 029 286 3650 or 04 496 5513.