Same destination, different route: How far can Uber go?

This case, Rasier Operations BV v E Tū Inc [2024] NZCA 403, originated from an application by two unions, E tū Inc and First Union Inc, seeking declarations of employment status on behalf of four Uber drivers. The Employment Court, in a decision that differed from an earlier ruling (Arachchige v Rasier New Zealand Ltd), found that the drivers were indeed employees of companies in the Uber group. Uber appealed this decision, leading to the Court of Appeal's examination of the Employment Court's methodology in applying Section 6 of the Employment Relations Act 2000 (Act).

How Far Should the Law Reach?

The Employment Court had framed its decision around the Act's purpose of providing protection to employees, recognising the inherent inequality of bargaining power in employment relationships.

The Chief Judge had stated that the task for the court under Section 6 was to find out if the drivers in question fall within the group of vulnerable workers that Parliament intended to protect with this “social legislation”. To make this decision, it needed to look at the real relationship between Uber and interpret Section 6 with the Act’s social purpose in mind.

The Court of Appeal, however, found this approach problematic. While acknowledging that it is legitimate to consider the protective purpose of the Act when interpreting Section 6, the Court cautioned against applying the purpose too broadly. The Court of Appeal emphasised that the function of Section 6 is to clarify which workers are employees for the purposes of the Act, not to extend its protections to all vulnerable workers.

It warned that focusing on broad concepts such as vulnerability could distract from the well-established tests for determining employee status and risked expanding the reach of the Act beyond workers properly classified as employees.

Despite this difference in approach, the Court of Appeal ultimately reached the same conclusion as the Employment Court about the status of Uber drivers.

Why employees?

Despite its criticisms of the Employment Court's methodology, the Court of Appeal ultimately upheld the conclusion that Uber drivers are employees while logged into the Uber app. The Court of Appeal's decision was based on a detailed analysis of the real nature of the relationship between Uber and its drivers, considering both the contractual documents and the practical realities of how the relationship functions.

Key findings of the Court of Appeal include:

1. Control: The Court found that Uber exercises significant control over drivers when they are logged into the app, including control over fares, ride acceptance, performance standards, and even the routes drivers take.  The reasons why a company exercises control (e.g., regulatory compliance) are irrelevant; what matters is the nature and extent of the control exercised.

2. Economic Reality: Drivers were not truly operating their own independent businesses. They cannot set their own prices, build direct customer relationships, or meaningfully grow their business independently of Uber.

3. Integration: The Court noted that drivers are integral to Uber's business model and are essentially the public face of the Uber brand in New Zealand.

4. Contractual Provisions: Many of Uber's contractual clauses were dismissed as "window-dressing" that did not reflect the reality of the working relationship.

5. Payment: Uber's reward systems and incentives were viewed as mechanisms of control rather than evidence of driver independence.

6. Limited to "Logged In" Time: Importantly, the Court specified that drivers are considered employees only when logged into the Uber app, creating a unique situation where a person's employment status can change moment to moment.

The Court was critical of many provisions in Uber's contracts, describing them as "window-dressing" designed to avoid the appearance of an employment relationship.  They found that while drivers have flexibility in choosing when to work, this was not incompatible with employee status during logged-in periods.

Back to basics?

This decision is another chapter in how gig economy work is classified in New Zealand. By rejecting the Employment Court's wider purposive approach while still upholding the classification of Uber drivers as employees when logged into the app, the Court has demonstrated that the current legal tests have sufficient flexibility to address modern work arrangements. The Court of Appeal’s approach aligns more closely with previous case law while acknowledging the complexities of technology-driven work models.

As the nature of work continues to evolve, with increasing expectations of flexibility and growing integration of technology, this decision is likely to influence how similar cases are approached. The ongoing challenge will be to balance worker protections with innovative business models.  With this in mind, it may be that certainty in this area is illusive.  It would be unsurprising if Uber considers a further appeal to our highest court.

Disclaimer

The above information is of a general nature only.  The information in this article does in no way constitute legal advice and all readers should contact a law firm for advice relating to their specific circumstances.