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The Court of Appeal recently upheld the decision of the Employment Court in a ruling that Uber drivers should be treated as employees and not independent contractors (or simply, contractors). The decision looks at the degree of control Uber has over their drivers in line with New Zealand’s current employment laws.

Uber has indicated that they will be taking the decision of the Court of Appeal to the Supreme Court to see if a different outcome can be reached.

But what’s the big deal? Why does it matter if the drivers are employees or contractors? How does this determine the way issues are sorted in the relationship?

Independent Contractors or Employees?

Contractors

Key characteristics of a contractor are:

• invoicing the principal (or the boss) for time worked and materials purchased for the job;
• paying their own taxes and ACC levies;
• not accruing any leave;
• providing their own equipment to do their job- both directly and/or indirectly; and
• the ability to work with (or for) other businesses.

Generally speaking, contractors have control over what they do and how they do it and “work for themselves”. Contractors set the terms of their role. Things like pay, duties within the role and when the contractor will be available to the “boss” (being, the principal or business hiring them) are usually points of negotiation.

Contractors should also keep their own records of finances and contracts. Ideally, these records should be kept for no less than seven years but there are different rules that apply to different documents so always check the rules before getting rid of any paperwork.

Employees

Employees have less control over what they do. The employer (or “boss”) usually takes care of everything from paying the employee’s taxes and ACC levies, providing all the tools and equipment for the job (this might be different based on the industry) and the work hour scheduling. Employers are also responsible for keeping any records on the employment relationship- including wage records and employment agreements. Like contractors, employers should also keep records for at least seven years (depending on the various rules). However, we also suggest that employees keep their own records for the same amount of time (including requests for leave or anything touching on changes to the contract or around performance).

Naturally, there can be some negotiations on the terms of employment- but these are usually limited to what the employee gets paid and when they are to be available for work.

Employees are also integrated into the workplace in a different way- employees usually have the expectation to attend work events like Christmas dos or team building… while contractors are usually invited as a courtesy (with limited expectation to attend the events). Employees may also be required to wear a uniform or use particular products for their work- and contractors would ordinarily not have the same obligations.

What’s the test to find out what you are?

When looking at whether a person is an employee or contractor, the realities of the relationship are highlighted.

Like with the Uber drivers, the questions are around who sets the hours, rate of pay and expectations of availability… and then comes things like how hours are paid to the person (like, wages or invoicing) and who is responsible for paying taxes and levies.

In some circumstances, the realities of the relationship can even look at who carries the liabilities if something goes wrong (as well as the parties’ expectations on who does what when something goes wrong).

Why does it matter if you’re a contractor or employee?

Fundamentally, it comes down to the obligations between parties in the relationship.

If you are a contractor, the terms of the relationship should be clearly set out in a contract. The terms should indicate things like:

• how and when you get paid;
• what work you will be doing;
• what happens if you become unavailable (like if you go on holiday or get sick);
• a firm statement that you are responsible for taxes, ACC levies and the like; and
• if work can be done by anyone else (like if you subcontract the work out or have employees of your own).

As above, even with a comprehensive contract, it will still come down to the realities of the relationship.

Employees are different because the relationship is founded around obligations and rights that are set out in a series of legislation, including the Employment Relations Act 2000, Minimum Wage Act 1983 and Holidays Act 2003. This series of legislation is regularly reviewed with cases that come about (like the Uber case) or changes in society.

In comparing contractors and employees: 

Minimum wage

• Employees have minimum wage entitlements which are regularly reviewed in line with New Zealand’s economy and differ depending on the phase you are in within the work force.
• Contractors do not have minimum wage obligations (except to their own employees) and can set their rates at whatever they can negotiate.

Annual Leave

• Employees: accrue annual leave and get paid differently if they work on public holidays.
• Contractors are responsible for managing their own time off and what that may look like- but there is usually no responsibility on the boss to pay the contractor differently if they work on a public holiday and there is usually no expectation for a contractor to be paid if they are not working (keeping in mind, a contractor invoices for the time they work).

Taxes

• Employees have their taxes, ACC levies and Kiwisaver (unless opted out) paid for by their boss.
• A contractor is usually responsible for making these payments on their own.

Breaks

• Employees: have minimum paid breaks times set by law.
• Contractors, on the other hand, are responsible for making sure they take breaks as and when they feel it’s needed (again, keeping in mind they invoice for the time they work so breaks would usually be unpaid).

Good Faith obligations

• In addition to the above, the paramount difference is the duty of good faith between parties. Employers (or bosses) and employees must always act in good faith with one another. This duty applies to everything in the workplace- from providing and maintaining a safe work environment, following fair and reasonable processes in the workplace (for everything from deciding if a request for leave is appropriate, restructuring the business or following a disciplinary process with an employee).

What can I do if I think I’m an employee and there’s an issue with my boss?

If you are an employee and something goes wrong in the workplace- this could be anything from feeling bullied or thinking something is wrong with your pay- the first step should be to chat to your boss. In this conversation, be clear on the concerns you are raising and confirm if anything further is to come from raising your concerns.

In some circumstances, if you feel a there is a breach of obligations or that a fair process has not been followed and raising these concerns has not resolved matters, raising a personal grievance may be appropriate. You should raise a personal grievance within 90 days of the incident- unless your grievance relates to sexual harassment. Personal grievances for sexual harassment should be raised within one year from the date of incident.

Personal grievances can be raised for:

• unfair dismissal- like if you have been fired without a fair and reasonable process being followed. This process is usually set out in your employment contract.
• unjustifiable disadvantage- like if you are purposefully put in a position where you cannot complete the duties of your role. This could be anything from not having enough training or being placed in a role without clear parameters on what you are meant to be doing (so being “set up to fail”).
• breaches under your contract or in law- like if you have not been paid correctly or not been given some benefit in law or under your contract. This also includes circumstances where your health and safety may have been compromised.
• discrimination, harassment and/or bullying- personal grievances of this type look at repeated patterns of behaviour and the disadvantages faced as a result. This covers everything from racism to your manager sending you abusive texts while you’re on holiday.

In deciding if the circumstances are “enough” for a personal grievance, the usual test is “what would a reasonable employer do in the circumstances”. In working through this test, we look at what any contracts, case law and legislation says and then how that related to what your boss and you have done in the circumstances.

What can I do if I think I’m a contractor and there’s an issue with my boss?

Contractors don’t usually have the option of raising a personal grievance. Contractors’ options are usually down to civil processes;

If there is a dispute between a contractor and the boss, we look at a few things- including what the contract says about resolving disputes, what type of dispute has arisen, and what options are available in law.

As with employees, the first step is usually to chat to your boss. Nine times out of ten, disputes can be resolved by just chatting them through when the issues are molehills and not yet mountains.

If chatting doesn’t work, we usually look at what’s caused the dispute. Is it a dispute about:

1.   Unpaid money?

If so, depending on the value, it might be appropriate to follow a simple debt recovery process which includes writing a “demand” to your boss setting out what’s owed and when payment is now to be made. If payment still isn’t made, an application to the Disputes Tribunal (for claims less than $30,000), District Court (for claims less than $350,000), or High Court (for claims more than 350,000) might be appropriate. Negotiating matters outside of formal proceedings is usually best- from both a time and cost perspective, but we appreciate this may not always be possible.

2.    Terms of the contract?

If so, we might look at whether providing a new contract is appropriate, or if the relationship is at an end and what that might look like. If termination provisions or provisions around changing any terms of the contract are not clear in any existing paperwork, we usually look at how we can find a solution that works for everyone (whether in law, through case examples or direct negotiations)- and this usually requires some compromising by everyone involved.

What’s the upshot?

1.    The paperwork around the relationship should be clear and easy to understand.

2.    The realities of the relationship should be mutually understood and clear (having regular meetings to confirm where things stand if things could go one way or the other can help- but keep notes).

3.    If there is a dispute, have a chat with your boss first.