Employees have benefits other workers (e.g., contractors or volunteers) do not, such as minimum leave entitlements, minimum wage, rest breaks and the right to raise grievances with their employer. As technology changes the nature of work and business structures, an increasing number of workers are operating outside the traditional paradigm of an employment relationship, leading to disputes concerning entitlements.
What is an ‘Employee’?
Under the current law, an “employee” means any person of any age employed to do any work for hire or reward under a contract of service. In deciding whether a worker is an employee, the Employment Authority or Court must determine the “real nature” of the working relationship, meaning a person may be found to be an employee even if their contractual arrangements describe them as another type of worker.
Factors relevant to whether a working relationship is employment include the degree of control the hiring party exercises over the worker, the degree of integration of the worker into the hiring party’s business, and fundamentally whether the worker is carrying on their own independent business.
The Uber Driver Case
In the first New Zealand case to consider whether an Uber driver was an employee or a contractor, the Employment Court found the intention of the parties was that the driver would operate his own business in the manner and at the times suitable to him, so he was a contractor.
Are They Contractors or Employees?
More recently, the Employment Court and subsequently the Court of Appeal found that four Uber drivers were in fact employees. While the contract between Uber and the drivers presented them as contractors, it was held the actual control Uber exercised over drivers was characteristic of an employment relationship, and the drivers were fundamentally working in Uber’s business rather than on their own account. Uber appealed to the Supreme Court, which has not yet released its decision.
New Bill Will Clarify the Law
The Employment Relations Amendment Bill (175-1), which passed its first reading in Parliament on 15 July 2025, will ensure workers engaged as contractors will not be classified as employees provided:
- A written agreement specifies the worker is an independent contractor;
- The worker is not restricted from working for other businesses;
- The worker is not required to be available to work at specified times or for a specified period of time, or the worker is able to sub-contract work to others; and
- The business does not terminate the arrangement for not accepting an additional task.
Will it Work?
If passed into law, this will provide greater certainty to businesses like Uber, and workers like Uber drivers, as to the nature of their working relationship. It will also allow businesses more flexibility to engage workers outside the terms of an employment relationship. However, there are concerns businesses will structure relationships with workers so as to sidestep the obligations that would be owed to employees while still exercising a high degree of control over workers, resulting in increasingly precarious work conditions for a greater number of workers.
