An Uber big mistake: why correctly defining worker status is essential

Understanding the distinction between employees and contractors has become a vital consideration for business leaders. A recent high-profile case involving four Uber drivers has once again highlighted this issue for employers. This case emphasises the need for accurate workforce classification, as missteps can lead to serious legal and financial consequences.

Here, we unpack this case, review the Employment Court’s 2022 decision, and explain why it serves as an important reminder for all Kiwi businesses.

Back to the beginning: the Employment Court’s 2022 decision

In an Employment Court determination in 2022, it was held that four Uber drivers who had challenged their worker status were, in fact, employees. This decision upheld the Employment Relations Authority’s previous decision. The case was again challenged, and the appeal went to the Court of Appeal.

What did the Court of Appeal find?

The Court of Appeal had to assess the dispute regarding the relevant test imposed on worker identification by section 6 of the Employment Relations Act 2000. The first step, confirmed by the Court of Appeal, was to assess the parties’ agreement governing the relationship. However, this wasn’t to be defined by the label the contract used, simply calling a worker a contractor wouldn’t be the definitive factor for consideration. For the assessment regarding the four Uber drivers, the Court of Appeal had to review different contractual documents issued by Uber.

It was determined that the contracts alone didn’t create an employment relationship. However, it was found that in practice, various clauses were found to be mere ‘window-dressing’ as they didn’t reflect the true application of the relationship. Firstly, the drivers had the right to charge less than Uber’s calculated fare but doing so wouldn’t be able to build a relationship with particular riders or create their own business goodwill. Secondly, the contracts suggested that the drivers operated their own businesses and could make their own pricing decisions. However, in practice, the fares were solely determined by Uber. Furthermore, the agreement portrayed that the driver had flexibility in using various other ridesharing apps. The Court of Appeal found that using multiple apps at the same time wasn’t a realistic option for the four drivers.

Upon assessment, the Court of Appeal also found that the level of control Uber exercised whilst a driver was logged into the Uber app was much more consistent with that of an employment relationship. The drivers didn’t have the option of repeatedly ignoring a request as this would result in them being logged out which would effectively terminate their period of engagement until they logged back in. Another consequence of the repeated declining of requests would result in warnings, suspensions, and ultimately the termination of the relationship.

Additionally, though the Uber drivers didn’t have uniforms to wear or have Uber signage on their vehicles, they were considered to be the public face of the Uber brand, which integrated them into Uber’s business.

The Court of Appeal then assessed whether the four drivers were really in business on their own account or in support of Uber. The practicality of the Uber app meant the drivers had no opportunity to establish their own business goodwill or be able to influence the quality of work they received, they were largely unable to assert the revenue from the work other than the extent to which Uber agreed to give preference with access to ride requests or supplementary payments. They couldn’t bargain with Uber for any of this. The Court of Appeal held that the four drivers were supporting Uber’s business rather than being in business on their own account.

The result: worker identification determination

Ultimately, the Court of Appeal unanimously dismissed Uber’s appeal, determining that the true nature was that of employment when the drivers logged into the Uber driver app.

How does this impact businesses that rely on contractors?

This case is crucial regarding the assessment of contractors or employees. Though it only applies to the four Uber drivers, the case will have significant implications for industries depending on contractors as this confirms that employment relationships could exist for other gig workers. It also confirms that other contracting relationships could be open for challenge.

The Government has been actively seeking feedback on a plan to limit employment challenges from contractors who have explicitly signed up for a contracting relationship. This potential Government reform may or may not provide further clarity regarding this legal topic. Regardless, until further clarity is provided by future cases or legislation, at present this case will generate continuing uncertainty for businesses who are or will engage with contractors.

How can Citation HR help?

We know that this case may worry some businesses as worker identification is key regarding whether a worker is entitled to minimum employment standards such as leave entitlements, minimum wage, agreed hours, and rest and meal breaks. This should serve as a reminder to review the true application of your workers’ relationships.

If any of the information in this article has raised any questions or concerns about worker status, or if you have another workplace matter you need assistance with, don’t hesitate to get in touch with our employment relations experts via our 24/7 HR Advice Line.

Not a Citation HR client? To learn more about how Citation HR can help your business streamline its people management practices and ensure compliance, reach out to our friendly team for a confidential chat today.

About our author

Jessica Husband is an Employment Relations and Health & Safety Consultant at Citation HR. She assists clients with a range of employment relations and compliance matters via the 24/7 HR Advice Line. She has been helping businesses and employers with employment relations for over four years and counting.