Earlier this week, the Court of Appeal upheld the Employment Court's ruling^[1] that four Uber drivers were employees, not contractors^[2]. Although this decision directly affects those four drivers, it has broader implications for the status of contractors and the nature of flexible working arrangements in New Zealand. This raises the question of whether we will soon be seeing legislative reform in this space.

Employment Court decision 

Uber has always classified its drivers as independent contractors who operate their own businesses. Consequently, Uber drivers do not receive benefits such as minimum wage, holidays and leave, minimum hours of work, rest and meal breaks, KiwiSaver and or the ability to pursue a personal grievance.

Four Uber drivers sought declarations that they were employees in the Employment Court. Uber denied that the drivers were employees, claiming that it merely facilitated the contractual relationship. The Employment Court rejected this argument, with Chief Judge Inglis finding a high degree of control and subordination in the relationship between Uber and the drivers. 

The appeal

On appeal, Uber argued that the Employment Court had misapplied the test for whether someone is an employee (contained in section 6 of the Employment Relations Act 2000). The Court of Appeal agreed that the Employment Court’s approach was flawed. 

The leading authority on the section 6 test is the decision of the Supreme Court in Bryson v Three Foot Six Ltd^[3], which outlines a two-stage approach:

1. Identify the real nature of the rights and obligations of both parties; and 
2. Determine if these rights and obligations amount to a ‘contract of service,’ which signifies an employment relationship, using common law tests: the integration test, control test, and fundamental test.

The Court of Appeal found that the Chief Judge’s approach to section 6 was novel and diverged from the approach set out by the Supreme Court in Bryson. The Employment Court focused on the drivers' vulnerability and the need for protection, while placing less emphasis on the contractual documentation.

Applying the Bryson test, the Court of Appeal noted that the written agreement and the parties' intentions did not provide material assistance, as the provisions suggesting driver independence were not reflective of reality. Although the driver agreement appeared on the face of it to not create an employment relationship, many of the provisions were deemed “window-dressing” and did not reflect the true nature of the relationship. Drivers were precluded from making any meaningful decisions about the terms on which they provide services, and Uber retained significant unilateral control. 

In the second stage of the test, the Court of Appeal found that the drivers were not in business on their own account, with the freedom to make decisions expected of an independent business operator. Uber set the terms of the driver agreement and had the ability to modify these terms unilaterally. When logged into the Uber driver app, drivers could not build their own business goodwill or influence the quantity or quality of their work, or the revenue they earned, except in limited circumstances where Uber granted them preferences.

The Court of Appeal found that the conclusion reached by the Chief Judge was correct (although it adopted a different approach to reach that same conclusion). Therefore, the appeal was dismissed. Uber has confirmed that it will be seeking leave to appeal to the Supreme Court.

What’s next? 

The Court of Appeal acknowledged that new working arrangements have created new issues regarding employment laws. However, it noted that such issues must be addressed within the current parameters of the ERA. This raises the question: will Parliament address these significant issues soon?

While this judgment does not automatically apply to all Uber drivers in New Zealand, it is highly relevant to both Uber drivers and similar businesses.

Emma Foley, Managing Director of Uber Australia & New Zealand, highlighted the ongoing uncertainty in contractor arrangements, stating that “such arrangements, where people have genuine flexibility and are also free to work for other companies, including competitors - are an important feature for all industries across New Zealand in the twenty-first century".

Before the election, ACT campaigned to amend the ERA so that contractors who signed up for a contracting arrangement could not then challenge their status in court. The coalition agreement between National and ACT said they would, "maintain the status quo that contractors who have explicitly signed up for a contracting arrangement can't challenge their employment status in the Employment Court”^[4].

The coalition government released its Q3 action plan (July 1 to September 30 2024) which included taking cabinet decisions on legislative amendments to clarify the employment status of contractors. The Ministry for Business, Innovation and Employment has called for feedback on these potential changes, indicating that the Government wishes to put more weight on the intention of the parties involved. It’s unclear whether the Government has assessed how existing contracts might be impacted by legislative changes or if they could remain subject to challenge.

In light of this, we are anticipating some upcoming reform in the legislative space, particularly given the outcome of this appeal. 

Special thanks to Pema Gyeltshen for her assistance in writing this article.