Driving change? Court of Appeal agrees drivers are employees

Analysing the findings and implications of landmark Uber case

The Court of Appeal has dismissed Uber’s appeal of the Employment Court verdict that found four Uber drivers were employees rather than contractors. [1] 

In the landmark case, the Court of Appeal upheld the Employment Court's finding that the drivers were employees at times when they were logged into the Uber driver app.

However, while the Court of Appeal agreed with the Employment Court’s conclusion, it disagreed with its approach. 

Correction of approach

The relevant test for whether a worker is an employee is contained in section 6 of the Employment Relations Act (Act). The Court of Appeal noted that the Employment Court's approach deviated from the established process in three respects:

1. Starting point for inquiry: The Employment Court did not consider the contractual documents at the start of its inquiry.
2. Focus on vulnerability: The Employment Court placed emphasis on the drivers' vulnerability and framed the test around whether section 6, construed purposively, was intended to apply to the relationship between Uber and the drivers when viewed realistically. The Court confirmed that it is Parliament’s role to determine whether employment protections should be extended to non-employees in vulnerable positions.
3. Reframing common law tests: The Court of Appeal found the reframing lost the original purpose of the test. It is preferable for the tests to be applied explicitly and not merged with other inquiries. 

The correct test 

The Court of Appeal referenced the Supreme Court’s decision in Bryson v Three Foot Six Ltd [2], which is the binding authority in respect of section 6. The Court of Appeal detailed the two-step process:

1. Step One: Determine the working relationship being classified. Identify the real nature of the parties’ mutual rights and obligations. This requires an examination of the substantive rights and obligations of the parties in the contract and consideration of how the relationship operates in practice. It is an objective assessment of the common intention of the parties in respect of their mutual rights and obligations.
2. Step Two: Apply classification criteria to the working relationship. Assess whether the real rights and obligations between the parties constitute a contract of service (i.e., an employment contract) using the common law tests: the control test, the integration test, and the fundamental test.

The Court of Appeal recognised that the platform economy introduces new ways of working. Regardless, the same test applies. Section 6 of the Act must be applied to each platform with a realistic appreciation of how those new ways of working operate in practice. The Court of Appeal found there was no evidence before it to suggest there were consistent practices across a wider gig or platform economy that could inform the decision in the present case.

Application of the correct test 

The Court of Appeal carefully considered the contract between Uber and the four drivers. The contract sought to frame Uber as a payment intermediary and did not appear to give rise to an employment relationship. However, the Court concluded many of the provisions designed to point away from an employee relationship were window-dressing and did not reflect the reality of the relationship.

The Court then applied the common law tests: the control test, the integration test and the fundamental test. 

The Court of Appeal found Uber exercised a high level of control when a driver was logged into the app. Uber maintained control of the services provided to the rider, fare structures, service standards, performance metrics through ratings, incentives and penalties. The Court held the level of control was consistent with an employment relationship. The commercial reasons for exercising the control were irrelevant. 

While the Court of Appeal noted the drivers were integral to Uber’s business of providing riders with a substantially homogenous passenger transport service, it did not consider this a strong indicator of employment status in this case.  

In respect of the fundamental test, the Court concluded the drivers operated within Uber’s business rather than running their own. While logged into the app, drivers could not build their own business goodwill, had limited influence over the quantity or quality of the work and were subject to a high level of control and direction. The drivers could not negotiate their terms.

Implications 

This decision is an important reminder that businesses who contract with workers need to carefully consider if the contractual documents reflect the reality of the businesses’ operations and the relationship with the worker.

This may be particularly relevant for businesses that offer a standardised experience to consumers and achieve this by maintaining a high level of control over the operations and provision of the service by workers.

If you require advice regarding independent contractors, employees or the status of workers, please contact Olivia Rose on @email or 09 306 0624 or Ben Molloy on @email or 09 306 0625. 

References: 

[1] Rasier Operations BV v E Tū Inc [2024] NZCA 403.

[2] Bryson v Three Foot Six Ltd [2005] NZSC 34, [2005] 3 NZLR 721.