Edmonds Judd

Are Uber drivers employees and why does that matter for you?

Are Uber drivers employees and why does that matter for you?

A case from the Court of Appeal on Monday acts as an urgent reminder that you can’t contract out of the Employment Relations Act (the Act) and that includes by calling the relationship an independent contract when it is not. The case involved four Uber drivers and the companies that own and run Uber Drive and Uber Eats.

Uber argued that they were not employers but provided an introduction service. Interestingly, adapting to new ways of working, the Court held that the drivers were all employees when they were logged in to the Uber Drive App.

Using an independent contractor rather than taking on an employee is attractive because it cuts out a whole swathe of costs, paperwork, responsibility and inconvenience: holidays, sick leave, termination issues and PAYE to name a few.  If you get the nature of the relationship wrong however, it can have an enormous impact on the employer: investigation, prosecution, fines and penalties, PAYE arrears, holiday pay arrears and much, much more.

So how do we know when a relationship is actually employment if we can’t rely on what the parties themselves agree in the contract? The answer is section 6 of the Act. Section 6 requires the court to focus on the realities of the parties’ mutual rights and obligations. In particular: how is the relationship working in practice (especially if that differs from the contract)?

Three key issues that the Court must weigh up are:

  • the extent of the control over the worker,
  • the degree of integration of the worker into the business, and
  • the “fundamental test” of whether the worker is carrying on their own (independent) business.

 The Uber case in particular emphasised Uber’s control of the workers which included Uber controlling fare setting and performance management, and right to discipline. They looked at the practice as it varied from the contract: even though the drivers could theoretically choose when and where they worked, they were penalised for not working regularly. They were not an independent business as the drivers were restrained by Uber from expanding their business. For example, there was a ban on contacting clients independently.

This situation might not be substantially different from many ‘independent contracts’ on our farms or in a small business setting.

If you have an independent contractor and that worker only works for you (perhaps because you do not permit subcontracting or them taking on other jobs, or simply because the job takes up all available time), if you can dictate what that worker must do from day to day and how they do it, if you can discipline them, if they work on your site and you provide most of the equipment, then it might be time to take a second look and seek independent professional advice.

Nicolette Brodnax
Nicolette Brodnax, Special Counsel

Leave a Reply

Your email address will not be published. Required fields are marked *