The New Zealand Court of Appeal has delivered a significant ruling in the case of Rasier Operations BV v E Tu Incorporated that employers and businesses should heed when engaging independent contractors. The Court upheld a previous Employment Court decision, which determined that four Uber drivers should be classified as employees rather than independent contractors, contrary to their agreements with Uber. While Uber has indicated it will appeal to the Supreme Court, the decision offers important lessons for businesses regarding employee versus contractor classifications.
The Court applied well-established tests to differentiate between contractors and employees, focusing on the practical realities of the working relationship rather than just contractual labels. Central to this determination were the “control,” “integration,” and “fundamental” tests.
Control Test: The Court found that despite Uber drivers having the freedom to choose when to drive, Uber’s control over drivers while they are logged into the app aligns more with an employment relationship. Uber’s restrictions on ignoring ride requests, which could lead to warnings or terminations, were deemed indicative of an employment relationship. The Court emphasized that the nature of control is crucial, not the commercial rationale behind it.
Integration Test: Although Uber drivers do not wear uniforms or use branded vehicles, the Court concluded that they are integral to Uber’s operations. The drivers were deemed to be the public face of Uber, though this integration alone was not enough to establish an employment relationship.
Fundamental Test: The most revealing aspect of the case, according to the Court, was whether drivers were operating within Uber’s business or running their own. The Court noted that drivers were not running independent businesses but were instead working within Uber’s framework, with Uber setting terms, controlling pricing, and dictating performance metrics. Drivers also had no control over business decisions and had no ability to develop business goodwill independently.
Based on these tests, the Court of Appeal concluded that the four Uber drivers in question were, in fact, employees. This ruling underscores the importance of a holistic view when classifying worker relationships and reinforces the longstanding principle that simply labelling workers as independent contractors is insufficient if their actual working conditions reflect an employment relationship. This case serves as a reminder that the legal classification of workers depends on the practical realities of their work situation, not just their contractual designation.
The full implications of this case will become clearer once the Supreme Court weighs in, but it is evident that New Zealand’s judicial system demands a comprehensive assessment of the real nature of work relationships. Businesses operating in New Zealand should seek expert advice on their contractor relationships to avoid misclassification risks. The employment team at Harmans can help draft appropriate agreements and offer ongoing guidance to ensure compliance with employment law.
