Uber round two – contractor or employee?

Tuesday, July 27, 2021

Uber drivers in New Zealand are one step closer to having their employment status established, which currently sits in something of a legal grey area. Workers’ unions E tū and First Union have filed a joint claim in the Employment Court seeking a declaration that Uber drivers are employees. This declaration would essentially afford Uber drivers the same minimum wage rates and leave entitlements as employees. The unions have argued that Uber operates a system that is designed to avoid provision of minimum standards and entitlements. The alternative is that Uber drivers are contractors, conducting business on their own account, with the assistance of the Uber app.

This same question came into the spotlight earlier this year when the New Zealand Employment Court released its determination that the applicant Uber driver, Mr Arachchige, was not an employee of Uber. This decision sets out the current position in New Zealand. The finding that Mr Arachchige was not employed by Uber was based on the following conclusions:

  • Mr Arachchige’s Services Agreement was not, in form, an employment agreement;
  • The relationship operated in practice in line with the Services Agreement;
  • While Mr Arachchige could not build a client base he made other business decisions; and
  • The work of Uber drivers is integral to Uber’s business but with little control, and drivers retained significant control over their work.

The Employment Court found that, while there were aspects of Mr Arachchige’s relationship with Uber which may point to employment, the intent of the parties throughout the relationship was that Mr Arachchige would operate his own business in the manner and at the times he wished. His work was not directed or controlled by Uber beyond some matters which might be expected given he was operating under the Uber ‘brand’. The recent leading cases Leota and Southern Taxis were also considered and distinguished on the basis that the drivers in Leota and Southern Taxis worked as directed. In addition, Mr Arachchige was not particularly vulnerable or lacking comprehension of what he had agreed to, as was found to be the case with the driver in Leota.

In light of this, it will be interesting to see how the applicant unions in this new claim will differentiate their application from Arachchige.

It is worth noting that this question has also been considered by the UK Supreme Court in Uber BV v Aslam which determined the status of Uber drivers as being workers (neither employees nor contractors – see below) and as such, having some employment rights. The driver in this case was in the same position, and raised similar arguments, to Mr Arachchige. In finding that the applicant was a worker, the Court relied particularly on the fact that Uber:

  • Imposed numerous conditions to control drivers (held the power to amend terms unilaterally, requiring them to accept trips, fixing the fares, setting the default route, limiting the choice of acceptable vehicles);
  • Imposed a rating system, which was effectively a performance management and disciplinary procedure;
  • Handled passengers’ complaints and determined issues about refunds, sometimes without notifying the driver whose remuneration may be affected, and sometimes covered the financial loss where the driver was not at fault; and
  • Controlled key information (passenger's identities and intended destination).

The UK decision therefore indicates a clear divergence from the current precedent in New Zealand, primarily on account of the legislative provisions in the UK providing for an additional category of ‘workers’ alongside employees and contractors. This class of ‘workers’ are self-employed but provide their services as part of a profession or business undertaking carried on by someone else. Workers under a ‘workers contract’ are entitled to some employment rights such as minimum wage and paid annual leave, but not others such as protection from unfair dismissal.

This variance in such similar issues illustrates the difficulty in the grey area at play between independent contractors and employees in New Zealand. Questions have been raised as to whether introducing a separate ‘dependent contractor’ category of worker would adequately protect workers who sit in the grey area. The recent claim brought by E tū and First Union may assist to clarify the position and should at least provide some useful commentary from the Employment Court on this. In any case, this update serves as a reminder to review the employment and contractor relationships in your workplace. If you engage workers that may be sitting within the grey area as a ‘dependent contractor’, please feel free to contact our employment team for advice on how best to mitigate your risk.

 

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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