Uber seeking leave to challenge Employment Court determination
In October last year, the Employment Court held four Uber drivers were employees of the company, not independent contractors. In the landmark decision, Chief Judge Inglis noted the finding was confined to the four specific plaintiffs, however, she noted the decision may impact others within the company and other businesses that run similar arrangements.
Uber has now sought leave to appeal the decision to the Court of Appeal, claiming they were “disappointed by the Employment Court’s decision, particularly considering the same Court in 2020 ruled a rideshare driver using the Uber app was not an employee.” The issue brings to the fore the need to ensure workers are properly classified when they are being engaged to perform work.
Employee vs Contractor - the tests
In deciding whether a worker is an employee or independent contractor the Court assesses the ‘real nature of the relationship.’ It does this by generally working through four separate tests.
The Court first considers the intention of the parties by way of any written documentation or other evidence to show what each party intended. However, written terms or agreed intention is not determinative. Even where both parties agreed the relationship would be a contractor relationship, the Court will look at how the relationship works in practice and whether it is consistent with that of an independent contractor or employee.
Traditionally this involves an assessment into the degree of control exercised over the worker by the company (the "Control test"), the worker’s level of integration into the business (the “Integration test”) and whether the worker is truly in business on their own account (the "Fundamental test").
An employment relationship is one where a large amount of regulation and control is exerted over the worker, whereas a higher degree of independence points towards the worker being an independent contractor. The more a company controls how, when and where the work is performed, the more likely the worker will be an employee.
If a worker is ‘integrated’ into the business, they are more likely to be an employee. Consideration is given to the role and the actual work the worker performs. Are they doing work commonly completed by employees? Is the work being done integral to the company and part of its core work or is it merely ancillary to the core business of the company? If ancillary, this will factor in favour of a contractor relationship.
Finally, the Court will consider whether the worker is truly in business on their own account. Do they provide their own equipment and tools of trade? Do they have the opportunity to profit from the manner in which they carry out their tasks? Are they responsible for their own expenses and taxes? If so, these factors all tend to point towards a contractor relationship.
In all disputes over the status of a worker there will be factors for and against each finding. As a result, the Court must balance these factors and decide whether they weigh more in favour of an employment relationship or an independent contractor relationship.
The Present Case
In the Uber case, in determining the ‘real nature of the relationship’ between the four Uber drivers and Uber, Inglis CJ and the Employment Court considered the following factors:
- The nature of Uber's business and the way it operated in practice;
- The impact of Uber's business model and its operation on drivers;
- Who benefitted from the work undertaken by drivers;
- Who exercised control over drivers' work, including the way in which control was exercised, when and how;
- Any indications of the parties' intentions including in the documentation signed by the parties; and
- The extent to which the drivers were identified as part of the Uber business.
In essence, whilst the drivers could choose to work whatever hours they pleased, were often engaged in arrangements outside of Uber, had their own equipment and didn’t wear uniform, the Court held it was clear they were not in business on their own account.
Uber controlled everything relating to the business including but not limited to the marketing, the terms and conditions and the implementation of rating systems which directly impacted the drivers. The driver’s flexible working regime was subject to Uber’s overarching direction and control and therefore, on balance, the Court held the arrangement was one of an employment relationship.
Importance of this Decision
Ensuring you correctly identify the status of a worker is important because employees have a number of protections and entitlements that contractors do not have, such as holiday pay, sick leave, and the protection from being dismissed without cause.
In the event an employee is misclassified as an independent contractor and their contract is terminated the company could be liable for: damages for an unlawful dismissal, unpaid holiday pay, annual leave, sick leave, superannuation contributions and PAYE tax obligations for the worker for the period of their employment. In declaring the Uber drivers’ employees, Uber is liable to pay six years of backdated wage entitlements.
It will be interesting to see whether the Court of Appeal allows Uber's appeal and then what the ultimate outcome will be if considered by the Court of Appeal. What is clear is that the determination, as it currently stands, will have significant implications on businesses that engage in contractor arrangements.
If you have any questions about whether your workers are indeendent contractors or employees, please get in touch with our employment law team.