Summary
The Court of Appeal (“CA”)has upheld the Employment Court’s decision in E tū Inc & Anor v Raiser Operations BV & Ors finding that the true nature of the relationship between Uber and its drivers, was one of employment. The Court clarified the test to be applied under section 6 of the Employment Relations Act 2000.
Background
The distinction between employer and contractor is significant, in light of the protections and benefits afforded to employees and conversely the obligations or lack thereof of businesses when engaging workers.
In E tū Inc & Anor v Raiser Operations BV & Ors the Employment Court decided that certain Uber drivers were not contractors, as their written agreement specified, but were actually employees.
This decision was appealed by Raiser Operations BV & Ors to the CA.
The Case
The CA considered:
1. That the Employment Court had erred in misdirecting itself on the interpretation of section 6 (the meaning of “employee”); and
2. Therefore, it needed to consider what the result would be in applying the correct section 6 test to the facts.
Interpretation of s6
The CA identified there was an error of law in the Employment Court’s approach to the interpretation of section 6 when it found that the provision should be construed purposively. The CA held reservations about the Employment Court’s statement that it needed to ascertain who the legislation was intended by Parliament to extend minimum worker protections to and its emphasis on vulnerability. The CA confirmed that Parliament clearly intended protections to apply to employees, and the only task of the Court is to apply the test set out by the Supreme Court in Bryson v Three Foot Six Ltd.
The CA found that the Chief Judge had misdirected the section 6 test by posing it in an overly broad way due to infusing common law tests into other inquiries. The fundamental test was framed by the Chief Judge as asking “who benefitted from the work undertaken by the [four] drivers” and who was working for whose interests”. The CA considered that expressing the test in this way did not assist in distinguishing between employees and other workers. For instance, an independent contractor could be described as working in the interests of their principal. The fundamental test is focused on the central issue of identifying the true nature of the arrangements between a worker and the principal for whom they work, by asking “is the worker in business on their own account? Or are they employed in the principal’s business?”
Applicationof Test
The CA determined that given the finding under the first question, it was relevant to consider what the result would be in applying the correct section 6 test to the facts.
1 Real Nature of Relationship
The starting point was the substantive rights and obligations contained in the agreement and other contractual obligations of the parties. The CA first looked at the agreements as written (“in theory”), and then the agreement “in practice”.
The documents were complex and sophisticated, and reflective of Uber’s preferred view of the relationship including that it would provide services to drivers, with drivers paying Uber for those services via a service fee, and that drivers are not paid by Uber, but provide transportation services to riders who pay the driver for those services with Uber being a payment intermediary.
In practice, the CA found that “although the driver agreement [had] been crafted to avoid the appearance of an employment relationship, many of the provisions designed to point away from employee status [were] window-dressing”. For instance, control over when, where and how drivers carry out work, was found to be exercised by Uber through its incentive schemes.
The parties’ intentions were then assessed, with the CA confirming that the labels a party places on the relationship is not determinative of intention of the relationship. The Employment Court’s consideration of evidence relating to the subjective intentions of the drivers was considered irrelevant, as the test is what would be “known to a reasonable person observing the parties’ dealings”. The key indicators of the parties intention were found in provisions that:
a) precluded drivers from ultimately building up any form of personal business goodwill while driving for Uber; and
b) reserved a high level of unilateral control to Uber.
2 Common Law Tests
The second stage of the inquiry is to consider the common law tests identified by the Supreme Court in Bryson, including:
1. Control – there are sanctions for a driver declining requests once they are logged into the app and this resulted in a high level of control from Uber. This was found to be consistent with an employment relationship.
2. Integration – the only people working for Uber in New Zealand are the approximately 6,000 drivers (plus one policy representative). However the CA didn’t see the Employment Court’s finding that the drivers were integrated into the business when they were driving, as a strong indicator of employment status.
3. The Fundamental Test (whether the person is working on their own account) – It was found that drivers were not in business on their own account. Uber unilaterally determines the terms of the driver agreement including performance standards and pricing, and exercises full control over the terms when a driver is logged into the app. They therefore have no opportunity to establish any business goodwill of their own while logged on which was considered “critical”.
After considering all relevant matters under the guidance of Bryson, the CA found the real nature of the relationship was that the drivers were employees. They were not carrying on their own independent transport service businesses.
Result and Significance
The Appeal was dismissed.
Whilst the Employment Court’s decision that the drivers were employees was upheld, the CA decision clarified the test to be taken in determining the true nature of a working relationship, including that the test as outlined in Bryson has not been extended. This is important guidance for both business owners and workers in determining rights and obligations.
For further information on this case or similar issues, please contact Brigitte Morten, Director
