Uber Drivers are Employees Rather than Independent Contractors

The test for distinguishing between independent contractors and employees under s 6 was outlined by the Supreme Court in Bryson v Three Foot Six Ltd in 2005.² This test was described by the Court of Appeal as a two-stage approach:

1. Identifying the nature of rights and obligations between the parties (including written terms of employment, and any departure from those terms).
2. Deciding whether the relationship amounts to contract of service by applying the control, integration and fundamental (economic reality) tests.

When considering the legal status of the Uber drivers, Chief Judge Inglis took a purposive approach to s 6, which involved looking at social purpose of the Employment Relations Act 2000 and considering the vulnerability of the workers in question. She considered that the ultimate question was whether s 6, construed purposively, was intended to apply to the relationship at issue when viewed realistically.³

Instead of applying the common law tests directly, the Chief Judge “infused” them into other enquiries such as the impact the business model had on the drivers, and who benefited from their work.

The Court of Appeal held that the Chief Judge had erred in her approach in three respects:

1. The starting point for the inquiry should be the contractual arrangement between the parties.
2. The purposive approach and the focus on vulnerability was incorrect.
3. The common law tests should be applied explicitly not infused into other bespoke questions.

The Court then considered then applied the Bryson test.

It found that many contractual provisions, which appeared to point away from an employment relationship, were actually window-dressing designed to obfuscate the real nature of the relationship.

The Court also found that the control and fundamental tests pointed towards an employment relationship.

1. When logged into the app, Uber exercised a high level of control over its drivers controlling almost every facet of how services were provided for the customer.
2. Regarding the fundamental test, the Court found that the drivers were within Uber’s business rather than their own. Because of the high level of control exercised by Uber over how services were delivered, the drivers had no ability to negotiate terms with Uber, build any business goodwill, or make key decisions on matters like pricing.

Despite disagreeing with the Employment Court approach, the Court of Appeal reached the same conclusion: the Uber drivers were employees when they were logged into the app.

While the Court of Appeal confirmed the orthodox legal approach, it also found that workers in a very non-traditional relationship were employees at law. Following this judgment, workers in ‘platform’ or ‘gig’ roles may be more likely to challenge their legal status.

From a broader perspective, the issue of employee status will continue to be an uncertain area of law. The Supreme Court has granted leave in another employee status case Fleming v Attorney- General,⁴ and Uber has indicated that they intend to appeal this decision, which gives the Supreme Court an opportunity to revisit the Bryson test if it is inclined to do so.

The coalition government has also announced that it intends to introduce draft legislation to amend s 6. It has proposed the introduction of a four-factor “gateway” test to distinguish between independent contractors and employees. Whether or not these amendments will provide clarity for businesses, or introduce more complexity remains to be seen.

1. Rasier Operations BV v E Tū Inc [2024] NZCA 403.
2. [2005] NZSC 34, [2005] 3 NZLR 721.
3. E Tū Inc v Rasier Operations BV [2022] NZEmpC 192 at [17].
4. [2024] NZSC 132.

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