Court takes Uber for joyride: but Government pulls the handbrake

The Court of Appeal has found four drivers were employees of Uber when they were logged into the Uber driver app. While Uber was successful in its challenge to the approach taken by Chief Judge Inglis of the Employment Court, the Court of Appeal agreed the result reached was correct.

This is a landmark decision, as employee status is the gate which a worker must pass through before they can access minimum entitlements under the Employment Relations Act 2000 (“the Act”). Entitlements such as holiday pay, sick leave, and the ability to raise personal grievances are available to employees whereas to contractors they are not. Approximately 900 Uber drivers have filed minimum entitlement proceedings in the Employment Relations Authority pending this decision.

While the Court of Appeal upheld the decision that the drivers were employees, it was determined the Chief Judge misdirected herself when applying the section 6 test under the Act. The section 6 test is an objective inquiry used to determine whether a worker is an employee by looking at the real nature of the relationship. In line with New Zealand’s leading case on determining employment status - Bryson v Three Foot Six Limited [2005] NZSC 34 – the inquiry must start with looking at the express terms of the agreement between the parties.

Uber has already expressed it intends to appeal the decision to the Supreme Court. However, the coalition government has been quick to respond to the court’s ruling. National and Act have just announced upcoming changes to the Act which will provide more certainty between contractors and principals. This comes in the form of introducing a gateway test, which is a criteria a worker would be assessed against to determine if the working arrangement is that of a contractor and principal.

The criteria to pass the gateway test are:

• A written agreement explicitly stating a worker is an independent contractor; and
  
  
• The business does not restrict the worker from working for another business; and
  
  
• The business does not require the worker to:

o    be available to work on specified times of day(s) or for a minimum number of hours; or

o    the worker can sub-contract the work; and

• The business does not terminate the contract if the worker does not accept an additional task or engagement.

If all aspects of the gateway test are met then the worker is an independent contractor, and they will not be able to challenge their working status. However, if one or more of these criteria is not met, then the existing section 6 test will apply to determine if the worker is an employee.

Key takeaways

While these changes are hoping to be introduced in early 2025, if businesses are looking to hire independent contractors, we recommend all written independent contractor agreements expressly cover off the gateway test requirements.

If you are seeking advice about your contractors or employees, or require assistance in drafting your worker arrangements, the team at Ford Sumner can assist you. We are experts in employment law and navigating the employment relationship. Please do not hesitate to contact Jaesen Sumner or Ruth Williams for more information.

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