Employment Law: Rise of the gig economy

Increasingly, workers are abandoning the traditional nine-to-five working week to venture out independently as contractors or freelancers. While going out to work for yourself is not a new phenomenon, it has significantly increased both in Aotearoa and around the world. Jack Rainbow, from Dundas Street Employment Lawyers, looks at the rise of the gig economy and where the line between a contractor ends and an employee begins.

Advantages versus disadvantages

Some independent contractors opt to go out on their own because they desire a more flexible and autonomous working life, assisted by advancements in technology that allow them to work anywhere and at any time.

Many independent contractors are highly sought-after subject experts skilled in their field, which allows them to negotiate higher pay, work flexible hours, and obtain a higher level of autonomy.

The trade-off for these individuals is that, as independent contractors, they do not receive the same legal protections and entitlements afforded to employees, such as annual holidays, sick leave or personal grievance procedures.

For businesses, engaging independent contractors can provide the business with access to specialist skills or equipment, without employing someone on a permanent or full-time basis. The result can be a mutually beneficial commercial arrangement, negotiated between fairly positioned bargaining parties.

With that said, the gig economy and independent contractor arrangements are also vulnerable to exploitation, where businesses engage workers as independent contractors to circumvent paying minimum statutory entitlements, notwithstanding that those workers are really employees. Such situations are particularly concerning where the workers have no real bargaining power and are in low-paid work.

Employee or contractor?

While a label on a written contract may help determine the intention of the parties, the only way to distinguish between an employee or a contractor is to determine the real nature of the working relationship.

Courier drivers versus Uber drivers

In Leota v Parcel Express Limited [2020] NZEmpC 61, the Employment Court analysed the distinction between an employment relationship and an independent contractor arrangement.

Mr Leota was ostensibly engaged as a courier driver by Parcel Express in an independent contractor arrangement. Following the termination of his contract, Mr Leota asked the Employment Court to make a declaration that he was, in fact, an employee.

Mr Leota was:

• assigned set runs, within set boundaries. He was also directed where he had to be and when by the company, with no ability to change the days or hours he was required to work

• required to attend company meetings, wear a company uniform, comply with reasonable directions of the company and act in the company’s best interests at all times

• required to purchase his own van, but the van had to meet company specifications, display signwriting of the company name, and it had to hold insurance by an insurance provider approved by the company

• unable to adequately comprehend the legal arrangement he was signing up to, because English was his second language

• prevented from working for any competitor and subject to a six-month restraint of trade within 100 kilometres of Auckland Central.

Considering the above factors, the Court determined Mr Leota did not have any of the autonomy or agency in his work that you would expect in a true contractor–principal relationship. The Court found that the significant level of control that the business had over Mr Leota meant the true relationship was one of employee and employer.

In Arachchige v Raiser New Zealand and Uber BV [2020] NZEmpC 230, Mr Arachchige, an Uber driver, also sought a declaration from the Employment Court that he was an employee.

Mr Arachchige entered into a Services Arrangement with Uber in 2015, after he satisfied certain conditions, such as being over 21 years of age, holding a full licence, and passing a criminal history check. He drove for Uber until 2019 when Uber deactivated his access to its Drivers app following the investigation of a complaint against him.

In Mr Arachchige’s case, the Court noted that:

• he was not required to sign in and undertake any trips on any set days, times or locations and was free to pick and choose when he wished to take trips

• Uber did not direct him in connection with the provision of transport services

• he was responsible for all the necessary equipment to perform the work, including a smartphone, mobile data, a vehicle and insurance, all of which he was free to determine himself

• he was not restricted from undertaking other work, including work in competition with Uber

• he did not display any Uber signage on his vehicle

• he had accepted over 5,000 trip requests, while also rejecting 448 requests and not accepting a further 242 requests. Additionally, he cancelled 156 requests that he had initially accepted.

While Mr Arachchige was not able to negotiate the terms of his agreement with Uber, he was not at a distinct disadvantage or unable to comprehend the terms of the agreement, as Mr Leota was found to be.

In concluding that Mr Arachchige was a contractor, the Court noted that while the drivers were integral to Uber’s business model, unlike the Leota case, Uber had little control over the way its drivers undertook their work.

Conclusion As more New Zealanders work from home or consider taking the plunge into freelancing, the lines between an employee and an independent contractor become increasingly important.

The Leota and Arachchige cases highlight that the Court will closely scrutinise the facts of each case to determine the real nature of the relationship. While on their face the cases seem similar, the facts reveal that, in reality, the level of control and autonomy exercised varied greatly and was ultimately determinative in finding whether an employment relationship existed.

Jack Rainbow, Ngāti Tūwharetoa, Te Arawa (Tapuika), is a solicitor at Dundas Street Employment Lawyers. He provides legal advice to both public and private sector clients, including in relation disciplinary processes, investigations and dispute resolution. Jack also volunteers at Community Law and previously worked at a law firm specialising in Māori legal issues, particularly Waitangi Tribunal claims.