The gig economy

Jessie Lapthorne3 November 20194 min read

Jessie Lapthorne

The gig economy has seen the introduction of a widescale labour market characterised by short-term contracts or freelance work (as opposed to permanent jobs). Instead of a regular wage, workers in the gig economy get paid for the ‘gigs’ they do, such as food delivery or transportation (eg. Uber and Ola).

The employment status of workers in the gig economy remains unclear, both in New Zealand and internationally. Here, there are currently two recognised classes of worker: an employee who is afforded employment rights and minimum entitlements under employment related legislation, and an independent contractor who has no minimum entitlements or employment rights protection.

‘Employee status’ is determined by the real nature of the relationship, taking into account all relevant circumstances. The contractual documentation and label given to the relationship is just one part of that. A court will look at the degree to which the person is integrated into the business and the level of control the organisation has over the person. As well as that, a court will consider whether, fundamentally, the person was in business on their own account.

As many businesses look to operate in ways that allow greater flexibility and agility, the gig economy has seen a dramatic increase in the number of workers who don’t fit neatly into the traditional moulds. This has led to calls, both locally and overseas, for a new category of worker to be recognised. The ‘dependant contractor’.

While there was initially some suggestion that the Government planned to introduce statutory support and legal rights for dependant contractors, it has yet to announce if, and when, legislation defining, and providing for, this category of worker will be put forward. Until then, the test for who is afforded statutory employment related rights and entitlements remains as it is.

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That said, the changes in working arrangements and societal expectations may well be reflected in the application of tests by the courts. The most recent example of this are proceedings that have been commenced by First Union in the Employment Court, seeking a determination as to whether courier drivers are employees or independent contractors. This is significant because, in 1993, the Court of Appeal in TNT Worldwide Express (NZ) Ltd v Cunningham considered this very issue and held that the courier drivers in that case were independent contractors, not employees. This has therefore been the understanding of similar arrangements ever since. Seemingly, First Union considers times have changed to a degree that it is worth challenging this position and it appears that First Union has some high-level support for this, in the form of supporting comments from the former Chief Judge of the Employment Court, Graeme Colgan (as reported by Stuff).

If First Union is successful in obtaining a determination that courier drivers are employees, this would rock the long-standing precedent on which numerous other cases have been determined. This could have significant ramifications for businesses operating within the gig economy, as well as other organisations that routinely engage independent contractors.

Uber is one of many companies in the gig economy where the business model is based on the drivers being independent contractors. This premise has been progressively thrashed out in courts around the world with varying outcomes. The claim against Uber Eats brought by Australian driver Santosh Gupta after she was allegedly sacked for showing up 10 minutes late, looms as another critical case for the rights of workers in the gig economy. Gupta lost her case in the Fair Work Commission, who held that she was technically an independent contractor (not an employee).

The Transport Workers’ Union has since taken up Ms Gupta’s case and has lodged an appeal, which focuses largely on the power imbalance between the two parties and the degree of effective control in their relationship. Given the similarities between the tests applicable in Australia to those here, the appeal decision has the potential to provide a persuasive line of authority, when similar issues are being considered here.

Those operating modern business models that challenge traditional labour arrangements should be aware of these potential changes and ensure that they plan for the possibility of either legislative change, or case precedent, which could see rights and entitlements for dependent contractors being established.