In his second round of policy reprioritisation since becoming Prime Minister, Chris Hipkins announced last week that the Government is ditching contractor law reform from its agenda for the foreseeable future. The reason for this is apparently two-fold, firstly the need to focus on “bread and butter issues” for New Zealanders, and second, the pending appeal of the Employment Court’s decision in which four uber drivers were found to be employees.
The Government initially announced a review of the law relating to contractors in late 2019 with the objective of exploring “better protections for vulnerable contractors”, including whether they should have the same rights and obligations as employees.
Currently employees are afforded significantly greater protections than contractors. They are entitled to minimum employment rights under the Employment Relations Act 2000 and other legislation, ensuring that they are paid at least the minimum wage, receive holiday and leave entitlements, and can bring a personal grievance or dispute against their employer if their rights are not upheld, including if they are unjustifiably dismissed or disadvantaged.
Contractors, on the other hand, are effectively self-employed and are not covered by employment laws. They are not entitled to leave, they cannot bring personal grievances, and they must pay their own tax. The intention is that contractors should have a much greater degree of control over their work than employees and also the ability to manage their business arrangements as they see fit. However this is often not the case in practice.
MBIE undertook public consultation on the proposed reforms in early 2020 and a tripartite working group comprising of the Government, Business New Zealand and the New Zealand Council of Trade Unions produced a Report drawing on that feedback in 2021. The recommendations of the Report included revising the legislative definition of “employee”, creating a legal duty on hiring entities to step through a robust decision-making process when considering worker classification, and extending court determinations on employment status to cover other workers performing similar work for the same hiring entity.
However, it appears that these recommendations have now been shelved, despite the line between employees and contractors becoming increasingly blurred in recent years. In this regard there have been a number of cases over the past couple of years in which workers engaged as “contractors” have been found to be employees in reality. This could be demonstrative of a pattern of businesses deliberately classifying workers as contractors rather than employees in an attempt to circumvent their employment obligations, or a lack of clarity as to where the line should be drawn.
In one notable recent case the Employment Court determined that four uber drivers were employees rather than contractors. This case has been cited by the Prime Minister as a reason to put the reforms on hold as Uber has announced its intention to appeal the decision. Presumably, the Government is waiting to see how the upper Courts approach this issue in the age of the gig economy before moving forward with any legislative reform.
In that case, Chief Judge Christina Inglis considered the “real nature of the relationship” rather than simply how it was described in the contract. She rejected Uber’s argument that it was a “facilitator” in the market, and instead found that Uber exerted a high level of control over its drivers, including managing how and when the work was carried out, setting fares with no driver input, not allowing any ongoing relationship between drivers and passengers, incentivising drivers to work at peak times, and only allowing certain drivers with a particular rating to see where a passenger requesting a ride wanted to go before accepting. These factors all pointed to the four drivers being employees of Uber.
Although the Chief Judge was careful to limit her findings to the four particular plaintiffs in this case, it is clear from the attention paid to the case by the Government that the ultimate outcome will likely have broader precedential impact.
A few months prior to the Uber case, the Employment Court issued another significant decision relating to three ex-Gloriavale members who were also found to be employees and not volunteers, as the community claimed.
Similarly, in 2020, the Employment Court determined that the real nature of the relationship between a courier driver and the company was one of employment.
In each of these cases the Court found that labels were not determinative of the true nature relationship and that it was necessary to look beyond this. Whilst this is entirely appropriate from a legal perspective, it creates uncertainty and also suggests that there are likely to be many other “contractors” in the same position.
The Government’s decision to put the reform of the law in this area is therefore disappointing because the legal position will remain unclear for many people and wrongly classified contractors will continue to be denied employment rights and protections.
