Old-style action may not have real legs

The Dominion Post 31 August 2009

Readers will have seen the recent news about engineers employed by a Telecom subsidiary picketing outside Telecom offices.

The engineers are complaining because 600 of them are to be made redundant. Telecom has contracted out their work to an Australian firm, Visionstream. It appears that Visionstream is going to offer work to the affected engineers anyway, so why so much protest?

Unions and employees have long been sensitive to having work contracted out. Many believe they are more secure as employees with union coverage and the protection of the Employment Relations Act.

Over the years low-paid workers such as hospital cleaners felt they were extremely vulnerable when hospital contractors changed and the incoming contractor picked whom it wanted.

In the late 1970s, oil companies and breweries changed from directly employing tanker drivers to engaging owner-drivers.

The drivers' union often led the wage round in those days and no doubt tanker drivers played a role in strengthening its arm. They were a militant group generally and annoyed their employers. The employers tried to sidestep the union by making them owner- drivers. Many of the workers seemed to enjoy the change too, as the financial benefit was great.

Contracting out has been a political hot potato for many years, and was an issue that the Labour government grappled with after it came into power in 1999.

It was faced with a dilemma: unions wanted legislative protection for their members against contracting out, but many workers wanted to be contractors rather than employees. They like the tax benefits that come with running their own business.

There is also real difficulty in having uncertainty around whether individuals are employees or contractors. There is nothing worse than the business receiving contracted services being told by Inland Revenue that the workers they thought were contractors paying (or sometimes not paying) their own tax are really employees, and being asked for back tax. Sometimes it can be difficult to ascertain the real nature of the working relationship.

The Council of Trade Unions appears to object to Telecom contracting work out to Visionstream, and also to Visionstream engaging the workers as independent contractors rather than employees.

Labour's earlier legislation said that where vulnerable workers such as cleaners in hospitals had their work transferred from one employer to another, they were entitled to transfer to the new employer themselves.

Most people would have no objection to these vulnerable workers being protected in this way. Such workers include people employed in cleaning, catering, caretaking, laundry services and the like in hospitals and schools.

Labour dealt with other "non- vulnerable" workers by providing that when there is a transfer of work from one employer to another, there must be a process for trying to continue employment of the old staff, without guaranteeing they continue in work.

So Labour's Employment Relations Act, which National has not amended, gives some protection to the protesting Telecom engineers with regard to the first step of the Telecom process - namely, what happens when their work is contracted out to a new entity. There are also protections as to whether they are really employees or contractors.

The Labour government shifted the "contractor or employee test" in favour of workers by saying that whether a person is an employee depends upon "the real nature of the relationship between" the parties.

What the parties say in their actual contract is only one factor. All the relevant circumstances have to be considered. From what has been revealed in the media on this issue, it would appear likely that the people in question would be classified as contractors. No doubt Visionstream has ensured any contractor agreement offered is likely to survive any test in the courts.

The union therefore has an uphill battle in gaining any traction in the dispute with Telecom. It is hard to argue that Telecom is not entitled to contract out work to Visionstream if it decides it is in its commercial interest to do that. It is also hard to argue Visionstream is not entitled to engage contractors to provide the services to Telecom.

And if some of Telecom's old engineers decide they want to enter into a contractor relationship with Visionstream then as long as that relationship is genuine, it is hard to see why the courts would overturn that. No doubt the CTU must reflect members' concerns and keep the issue in public focus. It will help ensure continued protection for those vulnerable workers who have little ability to negotiate for themselves. It may not save the engineers' jobs, however. Perhaps they are today's equivalent of the old tanker drivers and we are seeing history repeat itself.

Peter Cullen is a partner at Cullen - the Employment Law Firm

Email: peter@cullenlaw.co.nz