Contractor vs employee: The landmark Uber ruling and what it means for you
Earlier this week a landmark ruling was handed down in New Zealand; a decision that could potentially change employment practices in this country for years to come. I thoughts to discuss what the case ruling could mean for NZ workers and employers. What are the facts, the implications and where do we go from here?
A group of NZ Uber drivers decided to a grievance against Uber, arguing that they deserved to be treated as employees, rather than contractors. While at first glance it may seem like a minor and semantic difference, being recognised as an employee would mean than drivers would be entitled to significant rights and protections.
The Employment Court found in favour of the Uber drivers on Tuesday, but the ruling related to those drivers who had decided to take this specific claim in this instance and did not automatically change the employment status of all Uber drivers in New Zealand.
In the judgement, chief judge Christina Inglis wrote that the Court “does not have jurisdiction to make broader declarations of employment status” therefore all NZ Uber drivers “do not, as a result of this judgment, instantly become employees”.
Whilst the judge is deliberately specific, the ruling will very likely create a precedent that will change the employment landscape for industries that traditionally relied on contract workers.
The news can certainly be seen as a positive for those who work for ride share companies in New Zealand such as Uber, Ola and Didi, not to mention food delivery services including Uber Eats, Delivereasy and DoorDash. It may also lead other industries, who rely on seasonal contract workers - hospitality, tourism etc - to reconsider how they approach their employment agreements. It will not, however, affect those who are actively self-employed, such as tradespeople, consultants and creatives.
Ultimately, the judge in the Uber case found that: “Uber exerted strict control, and effectively managed the way in which and when work was done, through various performance management processes and techniques, and via the tight restrictions placed on communications drivers can have with riders.” Put simply, the judge believed that Uber could not command such a high level of control over their drivers, while still claiming they were “independent”.
Therefore, in circumstances where a contractor is clearly independent, choosing their own jobs, rates and clients, the Uber ruling will have no impact. In the “gig economy” however, which has grown so rapidly and changed the way we work so significantly, the lines have become rather blurred.
While the drivers at the centre of the ruling are celebrating their win, calling it “justice for Uber drivers, Uber itself has made it clear that they are “disappointed” in the ruling and have indicated that they plan to appeal the decision. This certainly leaves things up in the air to some extent, but what does it mean for employers and contractors who are trying to wrap their heads around it right now?
The first thing to clarify is the key differences between a contractor and and employee, from a legal perspective. According to Employment New Zealand, contractors:
Don’t get things like annual leave or sick leave, they can’t bring personal grievances, they have to pay their own tax, and general civil law determines most of their rights and responsibilities.
In contrast to the almost non-existent legal rights of a contractor, an employee is, under NZ law, guaranteed:
at least the minimum wage,
holiday and leave entitlements, and
There are many differences between contractors and employees that affect the rights and responsibilities of the organisation and the employee. To make the correct decision employers must focus on the real nature of the working relationship not just the label on the agreement. The courts have developed some legal tests to help tell the difference, they are:
Control vs independence test
Fundamental/economic reality test
Employers will need to think about their situation and apply all the tests to help to decide whether a worker is an employee or contractor. No one test will give the correct answer. If you are still unsure after you’ve applied the tests, it is time to seek advice.
For more information refer to the MBIE site here.
With Fair Pay Agreements also passing into the law this week the tide seems to be firmly turned toward workers. The FPA asserts that employees can insist on sector-wide agreements, which means, for a company like Uber, if their drivers all become classified as employees there could be even bigger changes to come.