In this long-awaited decision, the Court of Appeal (CA) has affirmed the Employment Court’s 2022 decision, by finding that four Uber drivers were in fact employees and not independent contractors.
The distinction between an employee and an independent contractor is an important one because employees are afforded significantly more protection than contractors. These protections include leave entitlements, the minimum wage, holiday pay, and the ability to bring a personal grievance.
Employee vs contractor?
At the crux of the issue was whether the Employment Court had misapplied the meaning of “employee” as defined in section 6 of the Employment Relations Act 2000.
The test under section 6 requires an examination of the “the real nature of the relationship” between a person and the would-be employer. A key element of this test in the Uber decisions has been the level of control Uber exercised over its drivers.
Control
Interestingly, the CA distinguished between the level of control Uber had over drivers when they were logged in on the app, versus when they were not logged in. The CA considered that Uber exercised a high level of control over drivers when they were logged in on the app, while drivers retained a high level of control over whether, how, and when they drove for Uber when they were not logged in.
While a driver is logged in, they cannot repeatedly ignore requests for rides, as this results in them being logged out, thereby “effectively terminating that period of engagement”. When drivers repeatedly declined requests they received warnings, suspensions, and eventually, termination of the relationship.
The CA further noted that: “once a request is accepted, Uber reserves to itself the ability to control — and does in practice control — almost every facet of the manner in which the driver provides services to the rider, and of the payment for those services.”
This meant, in the CA’s view, the level of control exercised while a driver is logged in is “consistent with an employment relationship during those periods”.
Fundamental Test
The CA considered that the “fundamental test” was whether the drivers were carrying on a business on their own account or working in Uber’s business. Certain factors indicated that the drivers were operating their own businesses, namely that they decided when and where to work and were required to provide their own car and phone and meet associated costs such as data and insurance.
On the flipside, Uber unilaterally determined the terms of the driver agreement and exercised full control over the terms on which a driver provides transportation services, while logged into the Uber app.
For the CA, it was clear that: “when one focusses on the realities of the relationship… it is tolerably clear that drivers are not in business on their own account, making the types of decisions that an independent business operator would normally make, and bearing the risks and enjoying the returns of those choices.”
This meant that, despite signing a contract with Uber which described them as independent contractors, the Uber drivers were in reality, employees.
Where to next?
While the decision applies only to the four plaintiff drivers, this development has implications for businesses who rely on contractor workforces, especially where these involve highly flexible arrangements. Flexible working arrangements are becoming increasingly common in what is often described as the new ‘gig economy’. As such, it will be important to retain people’s ability to engage in these flexible arrangements, while at the same time ensuring these arrangements are not exploitative.
Despite the CA’s decision, it is likely too soon to consider the issue as one of settled law – Uber has stated that it intends to appeal the decision in the Supreme Court. Before it has a chance to do so, it may be that the Government will introduce its proposed legislation to prevent independent contractors from challenging their employment status. To read more about this, see our earlier article here.
If you have any questions about these changes, or any other employment-related matters, Lane Neave’s Employment Law team is more than happy to assist.
Author: Stella Smith
