Onfilm magazine: Employment Law

Employment Law

James Bryson versus Three Foot Six Limited

Alan Sorrell, barrister and past chairman of the New Zealand Film Commission, provides a summary and analysis of the recent Employment Court decision regarding the employment status of a screen technician.

There are very few special laws for the New Zealand film and television industry, despite recent media comment to the contrary. Whether one is a supplier of services (and therefore an independent contractor) or engaged via a contract of service (and therefore an employee) has always been a matter of substance rather than form.

While it would be more convenient if those labelled as independent contractors were treated as independent contractors by both the Inland Revenue Department (for tax purposes) and the Employment Court (for the purposes of the Employment Relations Act), that has never been the case.

The widely criticised decision of Judge Coral Shaw in the action brought by James Bryson against Three Foot Six Ltd demonstrates conventional analysis.

Bryson gave evidence supported by David Madigan, former president of the New Zealand Film and Video Technicians Guild. While both entertainment lawyer Karen Soich and former SPADA chief executive Jane Wrightson submitted affidavits regarding industry practice, their submissions weren't found to be particularly applicable to the facts. (This article assumes the facts as stated in the decision are correct.)

Background Facts

Bryson had a 20-year history of model making. He had worked for Weta Workshop in 1996 and 1997, and in 1998 he was employed by Weta to make models for The Lord of the Rings. On these occasions it was accepted he worked as an independent contractor. He rejoined Weta Model Shop in February 2000 and continued working on Lord of the Rings models.

Three Foot Six Ltd had a miniatures unit to film some of the special effects for The Lord of the Rings project, and Weta staff were commonly seconded to Three Foot Six.

In April 2000 Mr Bryson was seconded to Three Foot Six as a temporary model maker, and "at the end of the two weeks he was offered a permanent position with Three Foot Six as an on set model technician".

Bryson's hours were negotiated because his partner was expecting a baby. It was agreed that rather than work the usual Three Foot Six hours of 7.30am to 6.30pm, he would work "Weta-time" (ie, 8.00am to 6.00pm) until July when the baby was born. On that basis he began work at Three Foot Six. There was no written employment agreement or work contract when he began, and he was trained for the first six weeks.

In September he was given a pay increase from $18 to $22 an hour.

In October 2000 Three Foot Six supplied a written contract for all its crew.

In August 2001 Bryson got a further pay increase.

On 23 August 2001 Three Foot Six models unit was downsized and Bryson's engagement terminated.

The issue in this case was whether he was an employee and therefore able to claim for unjustifiable dismissal.

The Law
Judge Shaw stated the tests for determining what constitutes a contract of service (ie, employee status) as follows:

"The Court must determine the real nature of the relationship;

"The intention of the parties is still relevant but no longer decisive;

"Statements by the parties, including contractual statements, are not decisive of the nature of the relationship;

"The real nature of the relationship can be ascertained by analysing the tests that have been historically applied such as control, integration, and the 'fundamental' test;

"The fundamental test examines whether a person performing the services is doing so on their own account;

"Another matter which may assist in the determination of the issue is industry practice, although this is far from determinative of the primary question."

Application of the Facts to the Law

The crew deal memo had printed on the back "crew time card - tax invoice", which had to be completed each week to secure payment. The crew deal memo, based generally on the guidelines of the New Zealand Film and Video Technicians Guild, is attached to the judgment.

Bryson gave evidence that he did not understand the distinction between a contractor and employee.

The tax invoice that had to be submitted each week by Bryson stated that it was for "services rendered as an independent contractor on the theatrical motion picture The Lord of the Rings".

The invoice required the contractor to fill in his/her address, IRD number and hourly rate. There is a provision for the deduction of withholding tax. The bottom of the invoice reads:

"Time card must be completed and signed by U.P.M. and H.O.D. or payment will be delayed. Travel time only applicable when approved on call sheet. No overtime or broken turnaround without U.P.M approval.

"Agreed to and accepted by Contractor [Contractor signature]

"By signing above, Contractor acknowledges and agrees to the Standard Terms and Conditions on reverse."

Clause 28 of the conditions set out in the reverse of the crew deal memo states:

"28. Independent Contractor: The Contractor is engaged as an Independent Contractor and not as an employee of the Company. Nothing in this agreement shall be deemed to create a joint venture or partnership."

The conditions specify how the contractor is to be engaged. This set of conditions contains a number of features that were identified by the Judge as being more consistent with an employment contract. The Court also questioned whether the deal memo reliably indicates the real nature of the contract.

Counsel for Three Foot Six submitted that those clauses in the crew deal memo that appear to be more consistent with employment terms are simply based on industry practice. The Court accepted this but would not overlook these clauses when determining the nature of the employment relationship: "Whatever their origin or purpose they are part of the agreement … and are therefore a part of the facts which must be taken into account."

The absence of a written contract at the start of the working relationship, coupled with there being no direct evidence from Three Foot Six as to the terms on which that relationship began, led to the Court being left with Bryson's uncontroverted evidence. From that the Court concluded: "… he did not turn his mind to the nature of employment when he began working with Three Foot Six. He simply accepted the employment that was offered because he saw the opportunity to gain new skills."

One aspect of the Court's reasoning that is troubling is the statement in paragraph 36:

"It is clear from the evidence of the witnesses of the defendant that they did not contemplate at any stage that Mr Bryson's employment relationship was anything other than as an independent contractor because that was the invariable practice of Three Foot Six or across the film industry. On the facts of this case, industry practice is of little use in establishing the intention of both parties. Mr Bryson acknowledges he had been employed as an independent contractor with Weta Workshop but that is not sufficient evidence from which to infer he knowingly intended to be an independent contractor of Three Foot Six."

This finding illustrates the risks of submitting such an issue to judicial determination, rather than it being the subject of a written agreement signed by the parties. It is surprising - standing back from the case - that Bryson, claiming the tax benefits of an independent contractor, and having previously been employed twice by Weta (as an independent contractor), was not fully aware of the issue. It seems reasonable that Three Foot Six expected the usual arrangements to apply and that Bryson would engage on that basis.

However, in addition to failing to have a written agreement, the production company failed to recognise that a number of the aspects regarding how Bryson was controlled and worked were more of the nature of an employment relationship.

Apparently he lacked the requisite skills when he started with Three Foot Six, as he was trained for six weeks by Rob Townshend. The routine of the set was that of an employee engaged on a permanent basis doing other work for the employer when its principal activities did not require him. The work on set was described as collaborative but was closely supervised by the DOP and ultimately by Peter Jackson and others.

The evidence was that Bryson provided minimal tools - ie, a cordless drill, a large craft knife and a scalpel - while the production supplied the rest and replaced any personal tools that were lost or broken.

Bryson was determined as having been fully integrated with the work of the production.

The pay slips given to Bryson appeared to show the deduction of PAYE, although evidence was given by Three Foot Six that this was Withholding Tax. Bryson was not registered for GST. He did not have any independent entity - such as a company - that was engaged by Three Foot Six. It appears from the decision that the lack of registration for GST, coupled with the pay slip showing a deduction of PAYE negated the evidence that Bryson completed an IR3 form and claimed expenses as if he were an independent contractor.

On ordinary contractual interpretation principles giving commercial arrangements business efficacy, it is surprising that so little weight was given to the previous arrangements that had existed between Bryson and Weta.

Industry practice evidence
The Judge was not persuaded as to the relevance of the evidence given in this area.

The evidence of one of the witnesses regarding the adverse effects on the industry that would be caused by personal grievance procedures was described by the Judge as follows: "This evidence could be interpreted to mean that a significant reason for the present employment arrangement is to avoid the responsibilities imposed by employment law, in which case they are a sham."

There is no doubt the ramifications of this decision regarding the broader industry was squarely before the Judge. David Madigan, as past president of the Technician's Guild, was recorded as having observed: "… most screen technicians are unaware of the significant differences between contractors and employees."

Barrie Osborne is also recorded as having "implied that should this change, New Zealand might become a less attractive location for lucrative film deals".

Osborne is also described as having accepted: "… there could be a case for treating some sectors of the industry differently in terms of their employment relationship, provided the conditions were negotiated with the Guild and contained the flexibility recognised by the industry."

The Court said generally on this issue: "Whilst these concerns are acknowledged, I am of the view that, in the context of this case, they are overstated."

In concluding that - despite the crew deal memo and being paid on invoice - the real nature of Bryson's employment was that of a contract of service, the Court noted the following:

There was no evidence Bryson was acting as a "separate business entity" that contracted independently to Three Foot Six;

He did not tender for the position but was seconded to it;

The position was not short term;

He had no other employment while he was at Three Foot Six;

He required six weeks training;

Much of the crew deal memo reads like a contract of service, including discretion to pay sick leave;

There was close control of the work done by Bryson, including being required to attend regular meetings and take directions about the work he had to do during times when his services were not otherwise required;

Independent contractors would not be paid for down time and could engage in other work.

While emphasising that her decision was "based solely on the individual circumstances" of Bryson - and should therefore not be seen as a "affecting the as yet untested status of any other employee in the film industry" - Judge Shaw concluded: "On the other hand, I am conscious that this decision may well cause the employer in this case, as well as SPADA and the Guild, to revisit the question of the employment or contractual status of people such as Mr Bryson, namely those who are obviously not operating as a separate entity and who are required by the production company to work under controlled conditions. As Mr Osborne accepted, there may be a case for treating some categories of crew differently from others and this should be resolved by agreement with the Guild."

Conclusion
It is easy for structures to be subverted by practice. In this case, the failure to get a written contract at the start of the relationship, insist on a GST number, and correctly describe the deduction of withholding tax were material in the outcome.

The pragmatic exigencies of the production meant that the parties did not consider and agree about what was going on. Separate - albeit well justified - beliefs are not sufficient to create agreement.

This decision does not change the law but reminds those production companies with an ongoing establishment that is not entirely closed down at the conclusion of a production, to carefully consider the status of and the arrangements with those engaged by them.