With the recent media around the Employment Court decision on 25 October 2022, you might be forgiven for thinking that every Uber Driver in New Zealand is now an employee. This is not accurate. While we anticipate the decision will be appealed to the Court of Appeal, in the meantime, we discuss the 2022 case, how it differs from the 2020 decision and what we consider might have changed between the two cases leading to the Employment Court’s decision.
What did the Employment Court decide?
The Employment Court declared that four Uber drivers were employees when they provided transportation services under the Uber app. Though this is being called the “Uber decision”, “Uber” was made up of five defendants, who operated within the Uber Rideshare and Uber Eats businesses in New Zealand. The defendants argued that:
- the drivers were independent contractors; and
- their businesses simply facilitated a contractual relationship between the drivers and customers.
What is the significance of the drivers being employees?
Being an employee rather than a contractor gives the drivers access to minimum employment rights, including but not limited to minimum wage, rest and meal breaks, leave, and the ability to pursue a personal grievance claim.
This could spell significant liability for the employing party if the employees were incorrectly treated as contractors.
What test did the Court apply?
The legal test that is applied to answer the question of whether an individual is an employee or an independent contractor:
- looks beyond the wording of the contract between the parties;
- looks at the real nature of the relationship between the parties as it operates in practice; and
- considers the level of control the employing party has over the worker.
Have there been cases like this before?
In 2020, an Uber driver was found to be an independent contractor as it was considered that he operated his own business as he wished, using the Uber brand.  The 2020 case relied on the exact same contractual arrangement. In reaching their decision, the Court determined the driver:
- could determine whether and how long he undertook services;
- provided all the necessary equipment and tools to undertake the work;
- could determine what vehicle, smart phone, a data plan and insurance to use; and
- was responsible for his tax obligations.
Looking further afield, we are seeing trends towards delivery drivers being found to be employees. For example, the recent United Kingdom Supreme Court decision in Uber BV v Aslam and a decision by the Australian Fair Work Commission, which ruled that a Deliveroo driver was an employee.
How does the Court’s 2022 decision differ from the 2020 Uber case?
Although the approach taken by the Court in analysing the relationship has not changed and the same contract was being interpreted, the Court has reached the opposite outcome than that which was found by the Court in 2020.
What impact has the shift to flexible working had on the Employment Court’s decision?
Flexibility across hours, days and location of work has become the norm across a range of industries – irrespective of whether a worker is an employee or a contractor. Accordingly, that flexibility is given less weight in terms of the ‘level of control’ exercised by the employing party.
There was a time when the ability to determine your place, hours and days or work strongly signalled that there was a low level of control between the parties and accordingly pointed towards a contractor arrangement rather than an employment relationship.
The societal shift to flexible working is now having a potentially unintended consequence on the employee contractor distinction.
More about the Employment Court’s reasoning
In deciding whether the four individual Uber drivers were employees, the Employment Court had to determine the real nature of the relationship between each company and the individual Uber drivers.
The Employment Court considered the following factors in their assessment:
- the nature of the Uber business and the way it operated in practice;
- the impact of the Uber business model and its operation on the drivers;
- who benefitted from the work undertaken by the drivers;
- who exercised control over the drivers’ work, the way in which it was conducted and when and how it was conducted;
- any indications of intention, including what can be drawn from the nature, terms and conditions of the documentation between the parties; and
- the extent to which the drivers identified as, and were identified by others as, part of the Uber business.
The Court also commented that the evidence showed that Uber exercised a high level of control over the drivers through fare settings, fare reviews, and standards of behaviour. It was held that this did not support the argument that Uber simply facilitated a contractual relationship between the drivers and customers.
What will happen next?
We acknowledge that, with the appeal period of the most recent case still open, this will create some uncertainty for organisations looking to engage independent contractors. We anticipate having some direction from the senior Courts in due course.
In the meantime, the decision reached by the Court shows the challenges for those seeking to engage independent contractors and also the challenges in providing advice regarding the true nature of the agreement. If the Employment Court can take the exact same contract and similar arrangement or set of facts but decide in one case that the driver is an employee and in another that they are a contractor, this highlights the risks of independent contractor arrangements and the need to regularly review and consider the true nature of the relationship.
Get in touch with the team at Black Door Law for tailored advice on employment agreements and contract for services, or any other employment-related issues.
Disclaimer: This information is intended as general legal information and does not constitute legal advice. If you have a specific issue and wish to discuss it get in contact with the Black Door Law team