Uber Supreme Court Decision: Are You an Employee or Contractor?

The Supreme Court recently delivered a win for Uber drivers in New Zealand, by unanimously ruling that they are to be classified as employees and not independent contractors. This has closed the case on a nine year court battle to get the global ride  share company to come to the table and recognise its drivers as such. 

To be clear, this judgement has not changed anything within the current laws that exist around determining if someone is an employee or an independent contractor. It has simply shone a light on the test that already exists and when used correctly will ensure that the right entitlements are afforded to all workers. This case will ripple out beyond Uber and into the gig economy with what can only be the best outcomes for anyone who is currently being deemed to be an independent contractor when they are in fact an employee. 

The Supreme Court looked at how drivers were unable to set or negotiate their own fares, had no capacity to build a customer base and were not able to send a substitute in their place if they were sick and unable to work. They determined that Uber controls the allocation of jobs, implements performance standards, monitors a drivers ratings and can deactivate a driver at will. And while drivers supply their own car and fuel, they bear little or no business risk, they simply trade hours for money, most of which ends up in the coffers of Uber. Essentially the courts are integrated into Uber's business and are economically dependent on it. Under New Zealand employment law that makes these drivers employees.

This is a huge win, transformative even, for workers who can now seek back-pay going as far back as six years for annual holidays, sick leave, public holiday pay, minimum wage shortfalls (after expenses), and employer KiwiSaver contributions.

This case is an example of the severe risks and consequences businesses and platforms can end up paying for misclassifying their workers. As well as the financial debts, companies will also be exposed to arrears of PAYE tax and ACC levies, KiwiSaver contributions and penalties of up to $40,000 per worker.     

If you are working in an independent contractor role but you are required to available at particular times, are paid by the hour for the work done rather than a commercial outcome, you’re not able to subcontract your work out, use the company’s branding or systems and face disciplinary processes or deactivation for poor performance, there is a genuine likelihood that you are an employee. 

In short the Supreme Court highlighted the following indicators that determined the employee status of the drivers:

• Uber controls fares, routes and acceptance requirements

• Drivers cannot negotiate prices or build their own customer base

• Drivers cannot subcontract or send a substitute

• Uber sets detailed standards and can deactivate  drivers for low ratings

• Drivers bear little genuine financial risk (no ability to profit beyond working longer hours)

• The work is fully integrated into Uber’s business

Now let's take a deeper dive into each of these indicators to see if you can apply it to your own situation.

1. Uber Controls Fares, Routes, and Acceptance Requirements: The control test is a primary factor that determines whether a worker is an employee or an independent contractor. When an employer is able to exert control over how, where, when and what work is done the higher the chance is that they are an employee. The Ministry of Business Innovation and Employment (MBIE)  guidelines state that control over these factors indicates an employment relationship and not genuine independence. For Uber drivers this control meant that they were not free agents but workers subject to the platform's directives which mirrored traditional employee supervision. 

2. Drivers Cannot Negotiate Prices or Build Their Own Customer Base: The economic rea;lity test focuses on whether or not a worker is in business for themselves. A genuine contractor can set prices for themselves, market their services and develop independent client relationships to profit or absorb losses. MBIE says that the inability to negotiate terms or build a customer base signals economic dependence which is a factor in an employee/employer relationship. Uber’s fixed fares and app-exclusive customers meant drivers could not operate as entrepreneurs. They were therefore paid per task in a controlled ecosystem and not as independent traders.

3. Drivers Cannot Subcontract or Send a Substitute: Under New Zealand law this is a big red flag for contractor status. One of the classic tests the courts use is whether the person can delegate the work or hire someone else to do it. Real contractors usually can – they’re running their own little business and can scale it by bringing in help. Employees, on the other hand, have to turn up and do the job personally. Uber’s rules were crystal clear: no substitutes, no subcontracting, ever. That requirement to perform the work personally lines up directly with employee status and knocks out one of the main things that would have pointed towards the drivers being genuine independent contractors.

4. Uber Sets Detailed Standards and Can Deactivate Drivers for Low Ratings:  This is all about the control test. The Employment Relations Authority and the courts look at how much the business controls the way the work is done – and having the power to set rules, monitor performance, and sack someone (or “deactivate” them) for not meeting standards is about as close to employment as it gets. A rating system which leads to penalties or deactivation works the same way as an employer’s disciplinary process. Uber wasn’t just a platform connecting drivers to passengers; it laid down page after page of conduct rules and could end the relationship more or less instantly if ratings dropped. That level of day-to-day control and unilateral termination power is exactly what you see with employees, not with a client dealing at arm’s length with an independent business.

5. Drivers Bear Little Genuine Financial Risk: The economic reality test asks a simple question: is the person running a business with the usual upsides and downsides, or are they just swapping hours for dollars? True contractors take genuine commercial risks – they might under-quote a job, invest in equipment that doesn’t pay off, or negotiate better margins. Employees get paid for the time or the output, but there’s no real downside if things go quiet. In the Uber case the drivers’ income was completely tied to how many hours they logged on the app. There was no ability to set their own prices, no chance to mark up jobs, and all the big costs (fuel, vehicle wear and tear) sat with them while Uber took its fixed cut. The courts and MBIE have said many times that “trading hours for money” with no genuine profit opportunity beyond working longer is a very strong sign of employment. That’s exactly the position Uber drivers were in.

6. The Work is Fully Integrated into Uber’s Business: The integration test looks at whether the worker is part and parcel of the organisation or running a separate enterprise of their own. If the person is wearing the branding, using the systems, and forming a core part of how the business delivers its service to the public, the courts lean heavily towards employment. Uber drivers weren’t off to the side offering an independent service – they were the service. Passengers booked through the Uber app, paid Uber, rode in cars that carried Uber branding, and the drivers were locked into Uber’s pricing, mapping, and rating systems. That deep level of integration into the operational chain is another classic marker of an employment relationship under New Zealand case law and MBIE guidance.

If you’re a gig worker (Uber, other ride-share, food delivery, whatever) and you think you’re in a similar situation – no ability to set prices, locked into the app’s rules, ratings that can get you deactivated – get in touch with us. We can have a look at your specific setup and let you know whether you have a viable claim for back-pay and the other employee entitlements. Remember we’re here to help everyday workers sort this stuff out. Drop us a line at tautoko@gmail.com, phone 027 296 5276.