Your Uber Driver has arrived – and is an employee!

There has been ongoing legal debate as to whether Uber drivers are employees or contractors, and the Court of Appeal may have had the last word, finding today that four Uber drivers were, at law, employees.

Background

The debate was reignited and taken to the Court of Appeal after the 2022 Employment Court finding, by Chief Judge Christina Inglis, that drivers who perform work for Uber were in an employment relationship with Uber.

Soon after the 2022 judgment was released, Uber was granted leave to appeal in the Court of Appeal on the following questions of law:

• • Did the Employment Court err by misdirecting itself on the application of section 6 (the meaning of “employee”) of the Employment Relations Act 2000?

  • Did the Employment Court err by misapplying the test in section 6, or was the Court’s conclusion so insupportable as to amount to an error of law?

  • Did the Employment Court err in finding that joint employment may arise in New Zealand simply as a result of a number of entities being sufficiently connected and exercising common control over an employee? This issue was not pursued by Uber at the hearing of the appeal.

Finding

Spoiler alert: the Employment Court did get it wrong, but the Court of Appeal arrived at the same result by different means – the Uber drivers are indeed employees.

The Court of Appeal found that Chief Judge Inglis had misdirected herself in the way she framed the section 6 test.  Firstly because the Chief Judge failed to take into account (as a starting point of the inquiry) the express terms of the agreement and other relevant contractual documents and, secondly, because the Chief Judge had infused the three limbs of the Supreme Court decision in Bryson v Three Foot Six Ltd test and applied it in a manner which would lead to an overly broad approach to who is an employee.

These findings regarding the Chief Judge’s misdirection therefore allowed the Court of Appeal to then apply the correct test under section 6.

The Court of Appeal found that when the agreement is reviewed against the reality of the relationship between Uber and drivers, the provisions that are designed to point away from employee status are “window dressing”.  It does not reflect the reality of the relationship, which was that Uber has a high level of unilateral control over the drivers. 

Under Section 6(3)(a) the court must also have to regard any matters that indicate the intention of the parties, noting that the labels placed on the parties are not determinative of an intention (section 6(3)(b)).

The Court of Appeal found that there were no indications of the parties’ common intention which were materially useful.  Rather, the parties’ shared intentions are illuminated by the realities of the relationship, not by text which has been drafted by Uber as window dressing.

This took the Court of Appeal to the common law tests, described in Bryson, of the control, integration and the fundamental tests.

Ultimately it was found that Uber exercises a high level of control over nearly every facet of the manner in which a driver provides services to riders, and over the payment for those services. 

When one focused on the realities of the relationship, it was clear that drivers were not in business on their own account.  This is because when a driver is logged into the Uber driver app, they have no opportunity to establish any business goodwill of their own, or to influence the quantity or quality of the work they receive, and the revenue from that work.  They cannot bargain with Uber for preference in relation to access to ride requests, information about rides, or supplementary payments.

For these reasons, the Court of Appeal held that drivers cannot in reality be said to be carrying out transport service businesses on their own account when they are logged into the Uber driver app.

Wider Implications

The application by the Court of Appeal is narrower in scope than that applied by the Employment Court but emphasises that a relationship which features significant control is likely to be considered employment.  While this decision only technically applies to the four drivers who were involved in the case, it is likely to have a wide-reaching impact on all Uber drivers in New Zealand and other contractors. 

In the case of Uber drivers, this judgment will mean that many drivers may now be in a position to seek declarations that they are employees, and be entitled to minimum entitlements (such as annual holidays, sick leave and the ability to raise a personal grievance).  There are some indications that Uber may challenge this decision to the Supreme Court, so whether this is short-lived will be interesting to see.

For contractors, it has again established the correct test under section 6 of the Employment Relations Act 2000, however it has come at a time where the coalition government is actively reviewing whether or not to amend the law around employees vs contractors.  In the 2023 election, the Act party campaigned to amend section 6 to explicitly prevent contractors from challenging their contractor status.

Refresh – The test for determining whether a worker is an employee vs contractor

The leading case for determining whether a person is an employee or independent contractor was the application of the ‘real nature’ test by the Supreme Court case, Bryson v Three Foot Six Ltd, which requires that the Court considers all relevant matters under section 6(3) of the Act, which includes:

• • • The intention of the parties within the relationship
    • The control test – which considers the degree of control exercised by the company or the business and whether the worker has independence
    • Integration – whether the work performed is fundamental to the business and how integrated the worker is
    • The fundamental test – whether a person is effectively working on their own account i.e. looking at the economic reality.

If you have any questions about employment law in New Zealand, please get in touch with our Employment Law Team or your usual contact at Hesketh Henry.

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.