a. How to Properly Document the Relationship
As outlined above, while section 6(3) of the Act provides that the authority may not treat as a determining matter any statement that describes the nature of a relationship, parties to an independent contracting relationship should properly record its terms in writing.
In order for a principal to ensure, as far as possible, that a person engaged as an independent contractor is not an employee, the contract should provide that the person is in all respects an independent contractor and not an employee, partner or subsidiary of the principal. The contract should make clear that the independent contractor is solely liable for all of its debts, losses, expenses and taxation on its income. The contract should also provide that the person will not at any stage, either during or subsequent to the termination of the contract, allege that the person is an employee of the principal.
It would also be expected that the rates paid for services will be expressed with reference to GST, and that payment for services would be following provision of an invoice. Additional matters, which will separate an independent contracting arrangement from an employment agreement will include provisions addressing indemnification, warranties and insurances. Parties to such an agreement should also consider whether the dispute resolution provisions of the Arbitration Act 1996 can be incorporated into their agreement. Each of these matters is not commonly provided for in ordinary employment agreements and, accordingly, may assist in establishing, consistent with the relevant tests that the intention of the parties was to enter into a contracting relationship.
Finally, it would be expected that a person be encouraged to obtain legal advice at the time that the independent contractor agreement is negotiated.
b. Day-to-Day Management of the Relationship
At all stages of the relationship with an independent contractor, consideration should be had to whether, applying the common law tests, there may be a risk that the person is in fact an employee. If that is the case, then there should be consideration of whether it is appropriate to terminate the independent contractor agreement and re-engage the person as an employee. Doing so potentially reduces the risk of re-characterisation at
a later time. It may be that the individual confirms his or her desire to be engaged as an independent contractor notwithstanding the risk of a later re-characterisation. In those circumstances, those discussions/negotiations should be documented as a way to demonstrate the clear intent of the parties.