Another nail in the coffin for “independent contractor” arrangements?

Employment Court finds four Uber drivers to be employees rather than independent contractors

The Employment Court has found four Uber drivers to be employees rather than independent contractors.

The decision in E Tū Inc & Anor V Rasier Operations Bv & Ors, released in October, adds to a line of cases demonstrating the Employment Court’s decreasing tolerance for the misclassification of workers.

While no financial remedy has been sought in this case yet, the case pushes opens the door for all Uber drivers to be classified as employees, which means Uber will be obliged to pay (and presumably back pay) holiday pay and Kiwisaver for its 6,000 or so New Zealand drivers as well as offering sick leave and other minimum entitlements. Uber was also ordered to pay the four drivers’ legal costs.

How did the Court come to its decision?

The Court considered how the relationship between the Uber drivers operated in practice rather than the label placed on the arrangement by the parties in the written agreement. While the Court acknowledged that some of the usual indicators of a traditional employment relationship were missing, it identified factors which supported the finding of employment, including that:

  • Significant control was exerted on drivers including through incentive schemes that reward consistency and quality; and withdrawal of rewards for breaches of Uber’s Guidelines or slips in quality levels, measured by user ratings
  • Uber had sole discretion to control prices, service requirements, guidelines, terms and conditions and marketing
  • Drivers were restricted from forming their own relationships with riders or organising substitute drivers on their behalf.

What does this decision mean for other employers?

This case underlines the need to be very careful when engaging independent contractors in your business. While the person may say they are happy with a contractor arrangement, or even seek it out, ultimately you as the employer are taking on the risk if things head south. If the relationship has been misjudged and in practice bears the hallmarks of an employment relationship, you may be ordered to back pay minimum entitlements (such as holiday pay, sick leave etc) and be ordered to pay penalties and costs.

We suggest you contact us if you have any independent contractors engaged by your business so we can advise you on your risk profile and help with transferring people to an employment agreement if it is identified that the risks in your current arrangement are too high.

How can we help?

If you need assistance reviewing your employment agreements, advice about health and safety risk assessments or any other employment matter, our experienced specialist employment law team will be happy to help. You can view our Employment Law team here.

WRMK Lawyers takes all reasonable care to make sure that the information in this article is up-to-date and accurate at today’s date. It is necessarily general information and not intended as legal advice to be relied upon.

Our thanks to Kezia Purdie for writing this article.

 

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