Uber drivers classified as employees: Court of Appeal dismisses Uber’s appeal

The Court of Appeal has dismissed Uber’s appeal and upheld the 2022 Employment Court decision that four Uber drivers were employees rather than independent contractors. This case provides valuable insights into how employment status is determined under New Zealand law, with potential implications for businesses relying on contractor models.

In its recent judgment, the Court of Appeal agreed with the Employment Court’s conclusion that during the times the drivers were logged in to the Uber driver app, they were employees of Uber. However, it disagreed with the Employment Court’s approach and commented that:

• The Employment Court had placed too much emphasis on the vulnerability of the drivers, as vulnerability cannot be equated with employment status.
• The Employment Court’s question, “Who was working for whose interests?”, was materially different to, and more expansive than, the traditional question: ‘Are the workers in business on their own account?’

Court of Appeal’s approach to determining employment status

In the Court of Appeal’s view, the correct approach was to:

1.      Determine the true nature of the parties’ relationship by analysing their contractual rights and obligations and any deviations from those in practice.

2.      Assess whether that true relationship is an employment relationship, by applying:

• • The control test (to what extent does the principal control the worker?);
  • The integration test (to what extent is the worker integrated into the principal’s business?); and
  • The fundamental test (is the worker carrying on their own, independent, business?).

Court of Appeal findings

After carrying out its own analysis, the Court of Appeal found that:

Contractual documents did not reflect practices in reality

The contractual documents did not reflect how the relationship between Uber and the drivers operated in practice. For example:

• While the drivers were required to provide their vehicles at their own cost, Uber set requirements regarding the suitability of those vehicles.
• While the agreement suggested that the drivers had freedom to determine when and for how long they would work, when to accept, decline, or ignore a ride request, and to cancel a ride after accepting it; in reality, Uber could (and did sanction the drivers for not meeting Uber’s desired standards.
• While the driver agreement suggested that drivers could set and charge fares to riders, they were prohibited from charging any more than Uber’s “recommended” fare, and Uber reserved the right to change any fare calculations at any time. If a driver charged less than Uber’s “recommended” fare, this would come off the driver’s share.
• While the driver agreement permitted drivers to work in other businesses, including for competitors; in reality, the drivers could not do so while working for Uber, because Uber would log them out of the app if they failed to accept three consecutive ride requests.

Control test findings:

• Although Uber had limited control over the drivers when they were not logged in, Uber exercised a high degree of control over the drivers when they were logged in. The Court acknowledged there were regulatory and commercial reasons for this, but noted that this was irrelevant, as it is the nature and extent of the control (rather than the reasons for it) that matter. Examples of this control include:
• Uber unilaterally determines all contractual terms, provides these to drivers on a ‘take it or leave it’ basis, and can (and does) unilaterally vary these terms.
• Uber has full control over a driver’s access to its platform and can remove access if a driver receives low ratings.
• Unless a driver has ‘Diamond’ status, Uber withholds information regarding the destination and the duration of the trip, which limits the drivers’ ability to make informed decisions about whether to accept a ride.
• Uber has control over drivers’ status within the Uber app, and can demote them if they do not maintain a minimum acceptance rate and minimum average rating.
• While a driver is logged on, Uber records their location at all times.

Integration test findings:

• Although there were limited ‘traditional’ signs of integration into Uber’s business, the drivers were integral to Uber, because without their services, Uber would have no business to offer. The drivers are the face of Uber, are known as “Uber drivers”, and other than one locally employed person, are the only people working for Uber in New Zealand.

Fundamental test findings:

• It was clear that the drivers were not in business on their own account, because:
• They were not bearing the risks or enjoying the returns of their ‘business’ decisions.
• They were prohibited from contacting riders or using information obtained via Uber other than for providing transport through Uber, and therefore could not build any goodwill of their own.
• The driver agreement is personal to the drivers, and they are prohibited from assigning or transferring it to any other party.
• Uber has full control over marketing and pricing decisions.
• While a driver is logged into the driver app, they have no real opportunity to influence the quantity or quality of work they receive, or their revenue from that work.

The Court therefore found that the drivers were employees of Uber at the times they were logged in to the Uber driver app.

Proposed legislative change: the “Gateway Test”

However, legislative change may be on the way. The government has proposed a new ‘gateway test’ to provide businesses and workers more certainty in this space. Under the current proposal, if the four following criteria are met, this would be determinative of the worker’s status as a contractor; but if one or more of the criteria are not met, then the existing test would apply:

• There is a written agreement between the principal and the worker, specifying that the worker is an independent contractor; and
• The business does not restrict the worker from working for another business (including competitors), and
• The business does not require the worker to be available to work on specific times of day or days, or for a minimum number of hours OR the worker can sub-contract the work, and
• The business does not terminate the contract if the worker does not accept an additional task or engagement.

This will come as welcome news for many businesses, but until new legislation is passed, the status quo remains. If you require specific advice or assistance in this space, or would like to find out more, get in touch with our team.