This is shaping up to be a definitive year for one of the thorniest issues in employment law – whether ostensibly self-employed workers offering services through tech platform-based providers are employees of the platform provider or independent contractors.
In the most high-profile case, Rasier Operations BV & Or’s v E Tū & Anor  NZCA 216, the Court of Appeal has given leave to appeal a decision of Employment Court Chief Judge Christina Inglis that a group of Uber drivers were employees of the relevant Uber companies.
This and other recent judgments of Chief Judge Inglis have made significant changes to the established tests for distinguishing between employees and self-employed contractors and the definition of an “employee” in s 6 of the Employment Relations Act 2000.
The objectives of s 6 are to prevent exploitative misclassification.
The section provides that an employee is any person employed by an employer to do work for hire or reward under a contract of service. There must be a contract of service, either express or implied/inferred.
In deciding whether a person is employed under a contract of service, the Employment Relations Authority (ERA) or Employment Court must determine “the real nature of the relationship between them”.
In doing so, the decision-maker must “consider all relevant matters, including any matters that indicate the intention of the persons” and “is not to treat as a determining matter any statement by the persons that describes the nature of their relationship”.
Section 6 of the Employment Relations Act was a remedial response to exploitative misclassifications of workers. Abusive employers who engage, say, cleaners or hospitality workers as self-employed contractors for regular work will be found to have engaged them as employees. Section 6 attacks attempts to misclassify workers.
A new touchstone?
Chief Judge Inglis’ decision in E Tū Inc v Rasier Operations BV  NZEmpC 192 (Uber 2) modifies the employee versus contractor criteria. It stands in stark contrast to a previous decision of Judge Joanna Holden in Arachchige v Rasier New Zealand Limited  NZEmpC 230 (Uber 1) that an Uber driver was not an employee.
The Employment Court has also found that male Gloriavale inhabitants aged between six and 15 who were working in various income-generating activities of the Gloriavale community were employees, although whom the employer was has not yet been determined.
The court recently found that female Gloriavale inhabitants doing domestic work (cooking, cleaning and mending) were employees of an as-yet undetermined Gloriavale entity. They were said to be vulnerable and to have had no true choice and were thus employees.
The court has developed a new test for the application of s 6 – “vulnerability and/or lack of choice”.
Section 6 is an unruly horse. The Employment Court and Supreme Court found in Bryson v Three Foot Six Ltd  NZSC 34 that despite industry practice, movie industry contractors might be employees. That decision was adjusted by legislation. Since the Supreme Court’s 2005 decision in Bryson, the law on worker status has not materially changed.
In Uber 2, the chief judge thought that working as Uber drivers did not require special expertise or skill, involved no financial risk and offered no opportunity to increase profit by any means beyond working longer hours. Drivers were not in business on their own account. The chief judge said the relationship was one of economic dependency. She refers to “the impact of the Uber business model and its operation on the drivers” and their “vulnerability”.
The Uber documentation said the relationship was a contracting agreement. It entitled the drivers to use the Uber app and for Uber to collect the fare payable to the driver by the rider, deduct its “cut” and then pay the driver. The app set the fare. There were extensive provisions about service standards.
The chief judge said the documents did not accurately describe the relationship. The context of the relationship and how it operated in practice painted a different picture. There was a clear imbalance of bargaining power between the parties. She pointed to “the subordinate position of the plaintiff drivers” and referred to them as “subordinate vulnerable workers”.
In Uber 1, Judge Holden found the driver was not an employee of any of the Uber entities.
The facts were essentially the same as in Uber 2. The documentation of the relationship between the drivers and Uber was not substantially different from Uber 2.
While the drivers were integral to the Uber business, Uber had little control over the way in which they operated. Arachchige was not directed or controlled by Uber beyond some matters that might be expected, given that he operated under the Uber brand. The agreement reflected the parties’ intention and they acted in accordance with it.
Purposive interpretation and vulnerability
The key difference was the chief judge’s emphasis on considerations of “vulnerability”, coupled with her view of the social objectives of the Act.
In Uber 2, there is heavy emphasis on a purposive interpretation of s 6. Chief Judge Inglis spends a significant portion of the judgment discussing the thought that due to new forms of work and associated technology “work is… escaping labour law’s grasp” and noting that the Act and the “minimum code” (Holidays Act 2003 etc) is social legislation, designed to be protective, to regulate the labour market and ensure the maintenance of minimum standards.
Crucially, she asserts that these provisions:
reflect a statutory recognition of vulnerability based on an inherent inequality of bargaining power, that certain workers are unable to adequately protect themselves by contract from being underpaid or not paid at all for their work, from being unfairly treated in their work and from being overworked.
This emphasis on vulnerability is an expansion of the objectives stated in s 3 of the Act. Those objectives focus (inter alia) on building productive employment relationships, recognising the need for mutual obligations of trust and confidence and good faith behaviour, acknowledging the inherent inequality of power in employment relationships but also protecting the integrity of individual choice. The word “vulnerability” does not appear.
The chief judge accepts it is clear that Uber did not subjectively intend to enter into an employment relationship. But (differently from Judge Holden) she does not conclude the drivers did not intend an employment relationship.
Chief Judge Inglis points to the take-it-or-leave-it nature of the contracts and that they were dense and “riddled with legalese”. She considered the drivers had no realistic opportunity to negotiate their terms and conditions and concluded that the way the Uber documentation was labelled did not accurately describe the relationship between the parties.
This elides what is said in previous case law about the relevance of the terms of written documentation.
The written documentation is evidence of the parties’ intentions. It is not conclusive evidence. But it is a “relevant matter” and a “matter that indicates the intention of the persons” which the court must consider.
A purposive interpretation of s 6 does not entitle the court to ignore it. There is no evidence in Uber 2 that the drivers did not understand the documentation or were at a disadvantage language-wise.
Uber 2, compared with Uber 1 and other cases, is a significant extension. The focus on vulnerability as a touchstone of whether the parties can be said to have intended a contract of service, and of the real nature of the relationship and the focus on the “impact” of the Uber business model and its operation on the plaintiff drivers, are new.
Similarly, the focus on the purposive interpretation of s 6 as allowing or driving a holistic analysis of whether the totality of the situation can be viewed as exploitation of “vulnerable” workers is a different approach.
No named employer
“Vulnerability” was a key feature in Courage v Attorney-General & Others  NZEmpC 77 (Gloriavale 1) and Pilgrim and Ors v AG and Ors  NZEmpC 105 (Gloriavale 2).
Courage involved three former Gloriavale members who claimed that, between the age of six and 16, they were employees as opposed to volunteers at the Gloriavale community. All were male and worked progressively from “chores” as youngsters to much more extensive work in income-generating activities (honey, dairy etc) as they grew older.
For the six to 14-year-olds, there was no underlying contract or legal relationship of any kind. So this was not a classification case. The court had to bring a contract of service into being.
The Employment Court rejected an argument that because the work practices were the living expression of a religious set of beliefs that all things should be “held in common” and that all should contribute as they were able, they could not be characterised as being performed under a contract of service.
The key driver was the degree of extensive control, lack of choice and vulnerability the chief judge considered to be characteristic of the Gloriavale community.
She noted the Gloriavale belief that those who would not work should not be given anything to eat. Disobedience could result in attendance at a “shepherds’ and servants’ meeting”, which could involve hours spent berating the person being reprimanded.
If people wished to leave the Gloriavale community, there could be “shunning” where they were cut off from family members who remained. The chief judge refers to this in the context of the “controlling features of the way in which work was organised and the conditions under which it was performed”. So control, here, refers not just to what happened in the workplace itself, but to the whole milieu of the community.
The chief judge sees this as contextually relevant to the assessment of employment status. She also rejects the submission that there is a presumption against the existence of an employment relationship when the parties’ way of life, structures and work are deeply rooted in a set of religious beliefs.
The provision of food, necessities of life and the ability to participate in the community was a “reward” within se 6. The chief judge concludes that this is a “particularly vulnerable group of workers” and that s 6 should not be read as carving out this group.
But who was the employer? The chief judge reserved making a declaration as to the identity of the employer/employers within the Gloriavale structure – that is, she did not identify their employer or employers.
It might be asked how there can be a finding that there is a contract of service when the identity of the employer party has not been determined.
This is what has sometimes been called the “women’s case”. The key difference with Gloriavale 1 is that the plaintiffs are women who worked in the “teams” who cooked, cleaned, mended, did laundry and similar domestic tasks.
All this was obviously necessary to the ongoing functioning of the communal life of Gloriavale and in that sense supported the various commercial operations.
The chief judge found the women were employees. The question of the identity of employer was, as with the men’s case, adjourned.
This case will be the subject of intense analysis, beyond the scope of this article. Key features are as follows.
The court rejects the argument that there must be some sort of legal relationship, or at least some intention to enter into legal relations, before a contract of service can be found to exist. The chief judge concludes that under s 6, the court is required to assess the real nature of the relationship, having regard to a range of common law indicia (including any matters indicating the intention of the parties) to determine whether a contract of service is deemed to exist.
This is especially significant, given a specific finding by Chief Judge Inglis that it is “tolerably clear” that neither the plaintiffs nor the Gloriavale leadership thought themselves to be in an employment relationship.
There is again a focus on a purposive approach to the application of s 6, given that status as an employee is a “gateway” to the minimum code.
There is an extended discussion of the impact of “lack of free choice” as a contextual factor driving a conclusion that the women were employees.
After an extended examination of the evidence about how the Gloriavale community worked, the chief judge finds that the women were “close to the no-or-very little real choice end of the spectrum in terms of work”. This was based on such things as the belief system of the community that all should work as they were able, that failing to comply with these beliefs put one “out of unity” with the community, the consequences of disobedience – ranging from public shaming to expulsion and shunning (in rare cases) and the belief that one would “go to hell” if not an obedient member of the community.
The lack of free choice is compared by the chief judge to some of the more extreme situations reported for migrant workers
The Employment Court is going down a pathway of focusing on vulnerability, control and choice/ability to choose as a basis for determining whether a contract of personal service exists, even in a context where there is no underlying contractual/legal relationship
The court considers that “the key point [is] that ascertaining the true nature of working relationships is not susceptible to conventional contractual analysis, and the task is not to be approached in that way”.
Modern technologies are facilitating casualisation of work and the expansion of the “gig” economy, in turn resulting in new opportunities for exploitation and driving down the incomes of some workers.
But the recent decisions, in my view, are trying to get the existing legislation to do work it was never intended to do. If Uber driving or work in cult religious communities are exploitative social evils, different legislative solutions are required.
“Lack of choice” as a touchstone for determining the existence of an employment relationship is an extremely unruly horse. Not entirely facetiously, what of all closed religious orders? What of gangs? What of work by children on family farms?
A test of “lack of choice” wrestles with difficult philosophical and psychological issues about “agency” which I suggest are not the court’s purview, at least in this context.
The court has reversed the process suggested nearly 150 years ago by Sir Henry Maine that progressive societies move from ”status-based” relationships (tribe, marriage, caste, occupation and feudal roles) to relationships based on free association, or “contract”.
In the court’s view, the question of whether a person was capable of exercising agency in a work context is to be determined by the court, and (legal) status determined accordingly. This is apparently so even for adult drivers of vehicles who are capable of obtaining a passenger endorsement on their licence, in the case of the Uber drivers.
Tests of “vulnerability” and “lack of choice” for whether a contract of service should be called into existence – even where there is no existing legal relationship of any kind – are beyond what the drafters of s 6 contemplated.
John Hannan is a barrister at Bankside Chambers and a member of the ADLS Employment Law committee