Employment Court considers courier driver an employee

Under Section 6 of the Employment Relations Act 2000, any worker has the statutory right to make an application to the Employment Relations Authority or the Employment Court to determine whether they are a contractor or an employee. This is an important right, as there is a vast distinction between the benefits and rights attached to employees and contractors.

In their determination  of the real nature of the relationship, the Authority or the Court, per Section 6(3):

• 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 who describes the nature of their relationship.

Recently, Mike Leota, a courier driver for Parcel Express Ltd, asked the Employment Court for a declaration that he was an employee of the company. The Court held that Mr Leota was an employee, not an independent contractor. This decision hit the papers and attracted the attention of both unions and other industries that operate on a similar basis.

The “judgment [did] not find that all courier drivers in New Zealand are employees”. The findings were restricted to the question of Mr Leota’s status. However, given the similarity of Mr Leota’s contract to other contracts in the industry, the case could have industry-wide ramifications.

In determining that Mr Leota was an employee, not a contractor, the court analysed both the contract for service and Mr Leota’s personal characteristics.

Contract

The service contract was very restrictive. It stipulated that Mr Leota had to purchase a van with a prescribed colour and size and was required to attach decals. He also had to lease a scanner from Parcel Express. He was further required to work in the best interests of Parcel Express at all times, comply with the requests of managers, and attend meetings. The parameters of his work were also set by Parcel Express, as they assigned Mr Leota with a regular route and set the boundaries of that route.

Chief Judge Inglis determined that the key issue in these cases was “whether the worker serves their own business or someone else’s business”.

Despite the contract clearly stipulating that Mr Leota was engaged as an independent contractor, Judge Inglis considered that Mr Leota had “no real business of his own” and no real autonomy. Ultimately, Parcel Express reaped the benefits of Mr Leota’s work, not Mr Leota.

Personal characteristics

Mr Leota’s lawyer described him as “naive”, which Judge Inglis considered an “apt description”. English was his second language, he did not have a GST number and initially did not understand what one was. Judge Inglis considered that Mr Leota did not understand his “real status” in working for the company. These characteristics exacerbated the power imbalance between Mr Leota and Parcel Express.

Given that other independent contractor contracts in the courier business are very similar, this case could have industry-wide ramifications. As the intention of the parties when entering into a contractual arrangement is relevant for the Court’s consideration under section 6, a good test case to see whether this is so would be if a contractor without Mr Leota’s vulnerabilities, asked to be declared an employee.

This case is a wake-up call for the courier industry, who will need to consider making industry-wide changes to ensure that industry practice reflects the law.

Whether a worker is a contractor or an employee is fact-dependent. If you are concerned about your contracting arrangements, a helpful exercise could be to consider the factors below.

Factors pointing to the worker having employee status:

• The hirer has the right to exercise detailed control over the way the worker performs their work.
• The worker is integrated into the hirer’s organisation.
• The worker is required to wear a uniform and/or display material that associates them with the hirer’s business.
• The hirer deducts tax from the worker’s pay.
• Business goodwill from activities benefits the hirer.
• The work receives paid holidays or sick leave.

Factors pointing to the worker having independent contractor status:

• The worker must supply and maintain their own tools or equipment.
• The worker is paid according to task completion, rather than wages based on time worked.
• The worker bears the risk of loss and has a chance of making a profit from the job.
• The worker is free to work for others at the same time.
• The worker can subcontract or delegate the job to others.
• The agreement describes the worker as an independent contractor.

For personalised employment advice, including employment status, contact Bell and Co at (04) 499 4014.