Are Uber drivers employees?

The Court of Appeal granted leave last week for Raiser Operations BV and four other companies (together, Uber), to appeal the Employment Court’s declaration that four of Uber’s drivers are employees.

Although the Employment Court only dealt with the four drivers making the application, its findings are not unique to those four individuals and will likely mean every Uber driver in New Zealand is an employee. So, Uber needs to make significant changes to its business, unless it wins on appeal.

The questions of law on appeal are:

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

FIRST Union is pursuing a declaration that all Uber drivers are employees.

Grounds 1 and 2 – employee vs independent contractor

Court-made law

This will be a fascinating case to watch unfold. Section 6 itself is generalised and uncontroversial. It offers little guidance, as it simply directs the Authority and courts to determine the real nature of the relationship between the parties by considering, “all relevant matters.” The parties’ intention is one of those “relevant matters,” but not the only one.

The Authority and courts have accordingly made the law themselves, by deciding on the other “relevant matters” and on the appropriate weight to give to each of those other matters. The authoritative statement of the law derives from a Supreme Court case back in 2005 (the ‘Lord of the Rings case’, Bryson v. Three Foot Six) where the Supreme Court accepted that it was necessary to consider at least the following three matters, alongside intention:

• the level of control exercised over a person
• the extent of integration of that person in the business
• how fundamental they are.

The Supreme Court made clear that these matters are non-exhaustive and other matters can be considered, as long as they are “relevant.”

Employment Court judgment

The Employment Court in the Uber case, took account of the above three matters, but also focused on the Act as a piece of “social legislation” and on the need to apply it in a way that, “upholds its central purpose of recognising there is an inequality of bargaining power.”

With that in mind, the Employment Court asked whether the Uber drivers fell within the range of workers to which the Act intended minimum worker protections to apply, having regard to the context of an evolving labour market.

The Employment Court’s focus on the vulnerability of the workers and the need for a protective framework was an interesting development and, in some ways, provided welcome clarity. The previous test in case law required an almost mathematical exercise of going through established indicia and ticking whether or not the employee, say, wears a company uniform.

That mathematical exercise was coupled, ironically, with an unpredictability, as the Authority Member or Judge could, in practice, give minor weight to one factor and significant weight to another to reach a desired outcome. Ultimately, the need for worker protection might have been the decisive influence on many decisions anyway, with the judiciary/Members working backwards from that conclusion. The Employment Court judgment puts that question of worker protection at the forefront.

Prediction

It is going to be difficult for the Court of Appeal to find that the Employment Court’s focus on this protective framework was wrong in law. The Employment Court’s description of the purpose of the Act is ultimately uncontroversial and they still dealt with the more traditional factors of control, integration and fundamentality.

Appeals are unpredictable. The appeal courts have significant discretion. But this may be a case where the Court of Appeal concludes (as the Supreme Court did in Bryson) that the Employment Court has, “merely applied law which it has correctly understood to the facts of an individual case” and it was entitled to consider the matters in its judgment and to find the Uber drivers are employees.

A UK ruling in 2016 that Uber drivers are employees sent shockwaves around the world.

Ground 3 – joint employment?

The Employment Court found that it would be arbitrary to select only one of the Uber entities as the employer, given they all performed different employment type functions.

There is precedent for joint employment and this appeal will not find otherwise. Rather it deals with the narrow question of whether entities being sufficiently connected and exercising a common element of control over employees, is enough for joint employment. Even then, the Supreme Court might not give further guidance on what “sufficient connection” or “control” looks like. This aspect of the appeal is interesting, but less intriguing than the overall question of whether the drivers are employees.

If you are looking at the question of employee vs independent contractor for your own workers, or for yourself, do not hesitate to get in contact for advice. As things stand, the Employment Court case prevails as law and any analysis of employment status requires particular focus on potential vulnerability (or otherwise) of the worker.

Fiona McMillan is a partner in the Employment Law team at Lane Neave in Auckland. Joseph Harrop is a senior associate focusing on commercial litigation and employment law at Lane Neave in Auckland.