Courier Driver is Employee - Not Contractor

08 May 2020

Key Facts

Mr Leota was approached to work for Parcel Express by a fellow member of his church.  Then Mr. Leota met with the Managing Director, Mr. Cole, and was advised that he would need to buy his own van and pay $2000 for Parcel Express signwriting on it. He would also be required to pay a $2,000 bond and sign a contract.  

Mr Cole said he went through the contract with Mr. Leota and gave him an “Owner Driver Information Sheet”. Mr. Leota confirmed that he was given a copy of the proposal, which outlined various financial matters regarding the van, and the fact that he would receive a guaranteed minimum payment for his assigned run of $240 per day plus GST. Mr Leota partially completed the information sheet but omitted the Inland Revenue details and a GST number, because he did not have a GST number or understand what one was. 

There was some disagreement about when the contract was provided but Mr. Cole told the Court that he expected that Mr. Leota would read what he had been given. 

Parcel Express facilitated the purchase of a van for Mr Leota. The vendor of the van said that he would sell Mr. Leota a second-hand courier van in the requisite Parcel Express colours for $17,000. Mr. Leota only had $4,100, which was paid as a deposit. An arrangement for the balance of $12,900 was agreed between Parcel Express, Mr. Leota and the vendor of the van. The $2,000 bond was allowed to be paid by way of deductions of $200.00 per month until paid in full.   

Mr. Leota was assigned the Panmure run.  Parcel Express set the boundaries of the run and Mr Leota had no say in that. He was required to work where and when directed by Parcel Express and to work in the company’s best interests at all times. He was also required to wear a uniform and to observe and comply with the Procedures Manual as amended by Parcel Express from time to time. He was also required to comply with any “directions or requests of the Chief Executive Officer or any other manager or officer of the company”.  Any documentation was to be filled out “in accordance with Company procedures, policies and specifications”, and his insurance had to be through a provider approved by Parcel Express. The insurance cover was to be for an amount and for such risks as Parcel Express decided. 

Mr. Leota was not free to exercise any control over the times and days he could work and he was not allowed more than 20 working days’ holiday in any 12-month period without the prior approval of Parcel Express. 

The agreement contained a restraint of trade clause (preventing him working for competition) for six (6) months after termination of the contract and within a 100-kilometre radius of the Auckland central business district. 

The agreement contained a clause entitled “Relationship”, that provided amongst other things that the “Relationship of the Contractor with the Company shall be that of an independent contracting party and not as an agent or employee…” 

Mr Leota worked for Parcel Express for about a year but the relationship soured after he was asked by Mr Cole to pick up tyres from another company as “a favour” for a week. Mr Leota said that pickup effectively cost him money.   This request continued until Mr. Leota raised a concern about payment and then his contract was terminated the following day. 

Parcel Express then started raising a number of issues with Mr Leota’s performance, including customer complaints, which were said to have been received by it.  The complaints gave rise to deductions from Mr. Leota’s final payment. 

Court’s Analysis

The agreement, which Mr. Leota signed described him as an independent contractor. Other terms of the agreement, reinforced this position, such as in relation to financial matters.  The Court said that objectively the relationship as described in the agreement, and the associated documentation, suggests that the relationship was one of an independent contractor. 

The Court traversed the established principles and addressed the need to establish the real nature of the relationship. 

Regardless of the fact that the Agreement described an independent contractor relationship, there were a number of factors in the Agreement that undermined this: 

• The run Mr Leota was given was predetermined by Parcel Express.
• Parcel Express retained the right to change the run whenever it wished and did not need to consult with him.
• Mr Leota was required to perform the run full time, from Monday to Friday. He could not change his days of work and he was required to be back at the depot at specified times during the day.
• Mr Leota could not take more than 20 days’ holiday a year.
• A high level of control was exerted over Mr Leota by Parcel Express, including the requirement to comply with company procedures and any directions and requests of any officer of the company, attend training, set the parameters of the run, determine who the customers were and how they were to be serviced, wear a specific uniform, provide a specific type of vehicle and the restrictions on its signage, the extent to which he was to be contactable by the company, the type of insurance cover he was to have and with whom and for how much, and so on.

Despite being described as “his own boss”, Mr. Leota did not exercise any real degree of autonomy over his work with Parcel Express. Rather, the Company exercised a significant degree of direction and control over Mr Leota’s day-to-day work. 

The Court also looked at industry practice and noted that the Supreme Court in Bryson v Three Foot Six, made it clear that industry practice may be relevant to a consideration of the real nature of the relationship. However, the Court said that the mere fact that an industry considers that its workers are engaged as independent contractors cannot, of itself, be enough. It may simply reflect a mistaken understanding as to the actual legal status of some or all of its workers. The point is that if Parliament had intended those working within a whole industry to be categorised as independent contractors , it is likely it would have said so (such as is the case with real estate agents and others), rather than imposing a fact-specific, case-by-case test which the Court must work through to determine the matter. 

The Court said that the totality of the evidence strongly suggests that Mr. Leota had no business of his own; he was solely in the business of Parcel Express. While there are some factors, which are neutral, and others which point towards an independent contractor relationship, the combined weight of all relevant factors favoured a finding of an employment relationship. The Chief Judge said “I do not have any difficulty concluding that Mr Leota was not in business on his own account. Mr Leota was an employee of Parcel Express throughout his time with the company and I make a declaration accordingly”. 

Conclusion

This case does not mean that all courier drivers are employees.  However, it will add weight to calls for change in this area; and inform the Government’s final decisions around its consultation document on “Better Protections for Contractors”. We also understand two unions intend to initiate bargaining for collective agreements for certain courier drivers, but that is unlikely to proceed very quickly unless the parties agree the drivers are employees, or the ERA or Court rule accordingly.

You can access the full judgement here 

You can refer to our earlier article on the Government’s consultation document here.