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):
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.
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.
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:
Factors pointing to the worker having independent contractor status:
For personalised employment advice, including employment status, contact Bell and Co at (04) 499 4014.