Supreme Court decides that Uber drivers are employees, not contractors…

The Supreme Court has upheld the Court of Appeal’s decision that Uber drivers are employees rather than independent contractors as argued by Uber.

It was determined that Uber drivers meet the definition of ‘employee’ under New Zealand law, as they are “employed by an employer to do any work for hire or reward under a contract of service”

Initial decision of Employment Court

In the first instance, the Employment Court decided that Uber drivers meet the criteria of an employee, because of the power that Uber possesses over its drivers.

Uber drivers are required to sign on to Uber’s terms and conditions, which they cannot negotiate or vary in any way. The fares charged for a ride are also fully dictated by Uber, and Uber has the sole discretion to cancel a trip or refund a passenger.

This, coupled with the fact that Uber manages the full transaction between drivers and customers, with no ability for drivers to directly contact customers to manage their provided services led the Employment Court to decide that drivers are the employees of the Uber business.

Court of Appeal decision

Uber then appealed this decision, claiming that the Employment Court did not focus enough on the terms and conditions that specifically states that Uber drivers are contractors and not employees of Uber.

The Court of Appeal then examined Uber’s terms and conditions and decided that because Uber drivers have minimal control over transactions between themselves and customers, the relationship between Uber and its drivers was that of an employment relationship.

The Court of Appeal determined that whilst Uber had drafted its terms and conditions to avoid the appearance of an employment relationship, the way Uber structures its relationship with its drivers allows it to maintain full control over the way their rides operate and the method by which drivers provide their services through the app.

The Court of Appeal upheld the Employment Court’s decision by agreeing that Uber drivers are employees, and not contractors.

Supreme Court decision

Uber then appealed this decision to the Supreme Court, claiming that it merely facilitated their driver’s ability to form their own business relationships with their passengers. Uber also claimed that Uber drivers use their own cars, and that fares are paid directly to drivers, with Uber deducting a service fee. These arguments were used by Uber to again claim that Uber drivers are contractors and not employees.

The Supreme Court considered that:

• Uber prohibits its drivers from subcontracting their work;
• Goodwill from customers accrue to Uber as a company, rather than the drivers themselves;
• Uber’s control over its drivers is far more than is ordinary for a contractor arrangement;
• Uber control’s the prices charged for each ride;
• Drivers have no way of contacting passengers to further any business relationship; and
• Uber’s disciplinary procedures are consistent with an employment relationship.

These factors led the Supreme Court to determine that the Court of Appeal was correct in its decision that Uber drivers are employees, as the level of control Uber has over its drivers is consistent with that of an employer’s level of control over an employee.

Other rideshare platforms will have to scrutinise their own operations to determine whether they too are employers. Whilst the Supreme Court did not confirm that any other rideshare providers are employers, it is likely that if they operate in the same way as Uber, they may have to adjust their operations so that they don’t breach any employment law obligations that they may have.

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Alan Knowsley and Matthew Binnie