News & Thinking

Uber drivers held to be employees

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Anne Wilson

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Anne Wilson

Giuliana Petronelli

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Giuliana Petronelli

In a landmark decision issued yesterday, the Employment Court has held that four Uber drivers were employees, not independent contractors.

This decision highlights the growing risk that technology platforms and companies using gig workers could be in breach of minimum employment standards.

Other jurisdictions including the UK, Australia and Canada have considered the same issue with mixed results.

The status of a worker as either an employee or independent contractor is important because it determines their rights to claim minimum legislative entitlements including the minimum wage, holiday pay and compulsory employer contributions to KiwiSaver. The Courts will consider relevant factors to determine the true nature of the relationship irrespective of the contractual arrangements in place.

Judge Inglis reached a different outcome than a previous Employment decision in 2020 that held that, Mr Arachchige, an Uber driver was an independent contractor. In reaching her conclusion, her Honour acknowledged the Employment Relations Act’s purpose to protect vulnerable workers and minimum employment standards and, in doing so, adopted a broad approach to the interpretation of the definition of employee in section 6 of the Employment Relations Act saying that:

“Employment Relations legislation calls for an interpretative approach which acknowledges and advances the underlying social purposes of the statute.”

“In a nutshell, the question to be asked and answered is whether section 6 construed purposefully, was intended to apply to the relationship at issue when viewed realistically.”

The Court followed the leading Supreme Court case on employment status, Bryson v Three Foot six decided 20 years ago before the emergence of gig economies and technology platforms. The Supreme Court held that a non-exhaustive list of factors needed to be weighed to reach a conclusion, although the traditional fundamental test and tests of integration and control were still useful in determining the true nature of the relationship.

In relation to the four Uber drivers, the Employment Court said that they were subject to very effective direction and control exercised by Uber in a subtle way, including via the rating system, the incentive scheme, prompts, “encouragements”, a warning system, the disciplinary system and deactivation. The Uber drivers were not in business for themselves, they had no ability to set their own rates, market themselves or to contact their customers. The only way they could increase their earnings or profits was to work longer hours. The flexibility and choice the drivers had was not exclusive to a contractor relationship.

The Court acknowledged that its judgment only applied to the four drivers but emphasised that it may have a broader impact on Uber given the uniformity of the way it operated. Employment status cases are very fact specific and do not have a direct application to others. However businesses that use gig workers should be reviewing their contractor arrangements in light of the above decision.

The New Zealand Government is currently considering reforming the law around the classification of employees and minimum rights for contractors but no legislation has yet been introduced.

TVNZ coverage of the case can be found here NZ Uber drivers win employment rights court case.