CHRISTINE DE LEE: The Uber Case

The Supreme Court has just ruled that the 4 Uber drivers who brought their case to court are employees, not contractors. While this decision affects only the 4 drivers involved, it opens up the floodgates to many other contractors, working for Uber and other organisations, to chance their luck with the courts, and be recognised as employees.

Becoming an employee can be attractive. Employees are paid at least minimum wage, have annual and sick leave entitlements, have guaranteed work hours and can bring personal grievances against employers. Contractors can’t do any of those things.

I have come across a number of ‘employee versus contractor’ cases, and mostly, they do not end particularly well. Taking your employer to court is not usually a way to achieve long term, harmonious working conditions. All trust between the employee and employer is gone, the workplace is no longer a pleasant place to be, and the employment relationship is destroyed.

However, such cases are small. The Uber case is potentially huge. This ruling may have a disastrous outcome for the gig economy in NZ and may make Uber drivers and food delivery services much more expensive, or more likely, impractical.

Prior to the Uber case, probably the best known ‘employee versus contractor’ cases involved the film industry, but they were mostly unsuccessful. One case involved a ‘contractor’ who had worked on a permanent basis for Weta Digital for some years. In that case, the complainant could easily be seen to be an employee, and his claim was probably justified. However, someone working as a crew member on a movie is clearly a contractor.

In New Zealand, the vehicle used for a single movie production is usually a company,  set up to produce a single movie only. The crew working on it sign contracts that restrict their hours and conditions to that one movie. (It can apply to related movies – for example, the 3 Lord of the Rings movies were produced using one company.) Once the movie is complete, the crew go elsewhere, the company is wound up and even if they work on a subsequent movie with the same directors and producers (as often happens with the Peter Jackson movies), the next movie will operate through a separate new company.

Employees do not generally work on short term contracts. Most employees sign contracts that are open ended, whereas movie crews know right from the start that their working period is finite, and depends entirely on the production of that one movie – and nothing else.

Contractors are often required to use their own equipment – vehicles, technical equipment and the like – whereas employees are generally not required to do this. Some employees use their own vehicles for work purposes, and are paid a mileage rate, but generally, if extensive use of a vehicle is required, the employer will provide the vehicle.

The issue with the Uber case seems to be that the Supreme Court found that the level of integration and control built into Uber’s systems, pricing, rating and management tools meant that passengers ‘could not reasonably be expected to think that they were contracting with the driver’ rather than Uber itself.

That argument is fallacious.

Many Government departments use contractors on fixed term contracts, often in areas such as IT. The only difference between those contractors and employees in the department is their working conditions. For external users, there is no discernible difference between employees and contractors.

Sometimes, these contractors work for the same department for years. They have fixed term contracts that may be renegotiated when the term comes to an end, but they have no right of grievance if a contract is not renewed.

Therein lies the crux of the matter, and it is nothing to do with ‘contracting with the driver’ himself. Just about all other contractors have agreements that limit the work period. Uber drivers do not. To me, this is probably the fundamental difference between employees and contractors, and the Uber case falls short in this regard.

Other than that, though, Uber drivers are clearly contractors. They choose their own hours, work for other employers and provide their own vehicles – things which employees are rarely able or required to do.

The biggest problem I have with this particular court case is the question of intent. These drivers – and the many other claimants of such cases in the past – entered into a contractual relationship with the party paying for their services in good faith.

Contractors are usually paid a higher hourly rate, to compensate for a lack of the rights of being an employee. They have more flexibility than other employees. But often, the ‘contractor’ wants it both ways. This is invariably why so many of these cases end up in the courts – and the courts often back the employee, without considering the position of the employer.

The ‘employer versus contractor’ argument has gone on for years, and clearly there needs to be some proper definitions established. The Government is proposing legislation that will clarify the situation, which is not before time. There are advantages and disadvantages to either scenario. Many people like the flexibility of contracting. Others want the security of a job with no end date. Some would rather have a higher pay rate now and forego leave payments. Some – as is the case with many Uber drivers – have a full-time job elsewhere and use the opportunity to earn some extra money. Many employees, as a condition of their employment contract, are not allowed to work for anyone else.

TVNZ claimed that this case could change the definition of Uber drivers worldwide.

That is a ridiculous claim. Every country has its own employment rules. It is not Uber’s fault that NZ has nebulous rules around employment of contractors. It is more likely that this case will result in NZ losing its Uber facility. I doubt if a worldwide organisation like Uber will miss our small contribution to its coffers. But the cities will feel the loss. The small towns and rural areas in NZ don’t have an Uber service anyway, so will not miss it. But the option to take a relatively inexpensive ride to the airport, or to a night out, is very useful in NZ cities.

It may well be true that Uber drivers often end up earning less than minimum wage, but they accepted those terms and conditions when they signed up. If they feel they are not earning enough, then the answer is to find employment elsewhere. This decision may rob many Uber drivers of the opportunity to supplement their incomes by working a few extra hours every week. The flexibility and advantages of such services, for both customers and contractors, are significant. I hope the Government does come up with a solution that works for both parties. 

Christine de Lee BA (Hons) CA is a Chartered Accountant