Uber drivers - the latest decision in the contractor or employee debate

Monday, October 31, 2022

The Employment Court has ruled that four Uber drivers, who worked in both the ride sharing and the meal delivery services, were employees rather than independent contractors (E Tū Incorporated & another v Rasier Operations BV & others [2022] NZEmpC 192). 

This will have significant implications for minimum wage, holidays, sick leave, and other entitlements and protections available to employees. While this decision only relates to the four drivers whose jobs were considered in this case, there may be wider ranging implications for other Uber drivers, and for other workers generally.

Background

The E tū union sought declarations of employment status on behalf of four Uber drivers. The selected drivers represent a cross-section of workers driving for Uber, covering those who work only for the ride share services and those who also do meal deliveries, and both long-term and newer workers.

Employment status is important, because it is the gateway to access a range of entitlements and protections which are not available to contractors. The Employment Court acknowledged that the line between employee and contractor has become blurred in recent times, saying:

“The width between the gate posts has always been important, but it is fair to say that it has assumed increased importance in light of the growing fragmentation, casualisation and globalisation of work and workforces in New Zealand. More fundamentally, new ways of working have generated a degree of uncertainty as to the continued utility of the gate posts.”

The Employment Court’s position on determining employment generally

The Employment Court began by noting that the Employment Relations Act 2000 is social legislation, designed to protect and promote societal norms. It does this by looking beyond what an agreement says, to determine the real nature of the relationship. 

Chief Judge Inglis said that adopting a strictly contractual approach and determining whether the key characteristics existed “misses the central point”, that “the rights sought to be asserted by the plaintiffs are created by statute, not by contract”. Instead:

“differentiating between workers who are employed and those who are not is not susceptible to a bright line test. Returning to fundamentals is, in my view, particularly helpful when dealing with new and developing ways of working, in the context of the increased fragmentation of workplaces and the growth of atypical working arrangements. Employment relations legislation calls for an interpretative approach which acknowledges and advances the underlying social purposes of the statute. The Employment Relations Act recognises and protects employment relationships and provides a gateway to the constellation-like suite of minimum standards legislation, via s 6. It is these features which determine the prism through which any particular relationship is to be assessed.

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

The Employment Court confirmed that Bryson v Three Foot Six Ltd [2005] NZSC 34, [2005] 3 NZLR 721 remains the leading authority on section 6, and whether a worker is an employee or a contractor, but noted that Bryson “was decided almost 20 years ago, and well before employment cases involving the gig economy and technology platforms began emerging”. Chief Judge Inglis decided that:

“I do not read Bryson as requiring a narrow approach to be adopted when construing s 6, or somehow relegating its application to more traditional workplace relationships. Rather the Supreme Court made it clear that a range of non-exhaustive common law tools may appropriately be deployed when determining the “real nature of the relationship” in any particular case.”

In this case, the matters that were relevant to assessing the nature of the relationship, which incorporated features of direction, control, and integration, were:

  • the nature of the business and the way it operated in practice;
  • the effect of the business model and its operation on the workers;
  • who benefitted from the work undertaken;
  • who exercised control over the workers, the way in which the work 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 workers identified as, and were identified by others as, part of the business.

The Employment Court’s view in these cases

In the case of the Uber drivers, there were aspects in favour of a contractual relationship, and others in favour of an employment relationship. For example, drivers were not obliged to be present in a physical workplace, at particular times, or on stipulated days. They could log in and out of the App, take time off and work any number of hours (subject to statutory driving hour limitations). However, Uber has complete control over the financial side of the arrangement, setting fares, cancelling fares, and making refunds to a customer. Uber Eats operates in a materially similar manner.

Of note, were the following:

  • Uber decides the costs of each trip and charges it to the customer. The fare is paid to Uber, Uber pays the driver, minus a service fee which Uber determines and deducts. Uber can change the fare. The driver has no control over the setting of rates or determining the calculation methodology;
  • Uber’s ‘Community Guidelines’ play a central role in the performance management system and drivers were subject to a very effective direction and control exercised in a subtle way, including via the rating system, incentive scheme, prompts, a warning system, a disciplinary system and deactivation;
  • Drivers had little or no ability to improve their economic position through professional or entrepreneurial skill. The opportunity to grow the business was effectively non-existent (other than by working longer hours);
  • Flexibility and choice were largely illusory as the way the model works in practice effectively increases the level of control by Uber and the subordination of the drivers to Uber;
  • Being a facilitator does not affect the application of section 6;
  • The focus of control was whether or not control was being exerted, not why;
  • In terms of integration, the provision of a vehicle and smartphone was neutral as it didn’t reflect the sort of investment which may indicate they were running their own business;
  • The work did not require special expertise or skills, nor managerial capacity or capital investment (other than a car and phone); and
  • The terms provided were a fait accompli with no realistic opportunity to negotiate.

Chief Judge Inglis noted that the flexibility and choice of when to work offered by Uber was not helpful in determining status:

“flexibility is a feature of modern employment relationships. Casual employees, for example, can exercise flexibility and choice about when they work (there being no legal obligation to accept work offered). The fact that they can choose to work at times that suit their personal commitments does not mean that their worker status changes. And any employee, casual or otherwise, is entitled to request flexible working hours and such requests can only be denied on a limited number of grounds.  In short, flexible working arrangements are now commonplace, including among employees, so the fact that they exist in any particular case is not necessarily an indicator that the real nature of the relationship is not one of employment”.

Chief Judge Inglis consider all of the matters above, and decided that the relationship was that of employer and employee, rather than principal and contractor.

Who is the employer?

One other notable aspect of this decision is that Uber is not operated by a single company. Rather, there are different companies, with most drivers contracted to work for two or more companies, each of which controlled different aspects of the Uber service.

Chief Judge Inglis decided that:

“While s 5 of the Employment Relations Act uses the singular rather than plural to define “employer” (“a person employing any employee or employees”), the Interpretation Act provides that words in the singular include words in the plural, unless the context provides otherwise.  I can detect nothing in the Act which tells against joint, or multiple, employers employing an employee; nor can I detect anything which suggests that such a finding should only be made in confined circumstances. To approach the issue in a narrow way would, in my view, cut across the underlying purpose of the legislation.”

In this case, it would be arbitrary to ascribe the employment relationship to one employer when more than one exercised control over the drivers. Chief Judge Inglis therefore made declarations that there were joint employment arrangements for the drivers.

What this decision means

This decision was limited to the facts relating to the four Uber drivers whose status was being considered. Chief Judge Inglis notes that:

“The Court does not have jurisdiction to make broader declarations of employment status to include, for example, all Uber drivers.”

It’s a cautionary tale and indicates the Court is going to look to the heart of whether an individual is truly in business on their own account.

Thank you to Partner Kirsty McDonald and Hayley Dale for preparing this article. If you have any questions about the employee/contractor divide, or about employment law generally, please contact a member of our Employment Law team.

 

Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.

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