Uber Driver Not Employee

18 December 2020

In Arachchige v Rasier NZ Ltd and Uber BV, the Court made a finding that Mr. Arachchige is not an employee, and therefore not entitled to bring a personal grievance against Rasier NZ Ltd. and / or Uber. This case highlights the importance of weighing up all factors of the relationship to determine the employment status of a party; the Court saying that its “inquiry is intensely fact-specific and only deals with Mr. Arachchige’s situation”.

Key Facts

Rasier NZ, is a member of the Uber group. Its operations in New Zealand are regulated by the NZTA. Uber BV is in the Netherlands and is also a member of the Uber group. The Court treated both companies as “Uber” for the purposes of its consideration and decision.

Uber operates two smartphone Apps, one for passengers (the Uber App) and one for drivers (the Driver App) and refers to itself as a “technology business”. Amongst other things it says that the Uber App “connects people who need transport services with people who provide transport services”.

The Apps can be downloaded by anyone, but before a driver can use the Driver App they must enter into a services agreement with Uber. The standard services agreement with Uber agrees to provide drivers with lead generation services and related services to enable them to receive on-demand requests for transportation services; and provides a licence to use the Driver App.

Mr. Arachchige, a former Alert taxi driver, was an early adopter of the Uber system. There were certain conditions to be satisfied before he could become an Uber driver, such as being over 21 years of age, holding a NZ drivers licence, a certificate of fitness for the vehicle and so on. In addition, he also had to pass a criminal probity check.

Mr. Arachchige attended a short session with Uber and was shown through the Apps. He entered into a services agreement with Rasier NZ and Uber BV which included the following:

(a) Mr. Arachchige would be “an independent provider of peer-to-peer passenger transportation services”.

(b) By providing transportation services to passengers a legal and direct business relationship would be created between Mr. Arachchige and the passengers.

(c) Rasier NZ’s provision of the Uber services would create a legal and direct business relationship between Rasier NZ and Mr. Arachchige and Uber BV’s licence to him of the Driver App would create a legal and direct business relationship between Uber BV and him.

(d) Neither Rasier NZ nor Uber BV would be deemed to direct or control him generally in his performance under the agreement, including in connection with his provision of transportation services.

During the period from 16 May 2015 to June 2019, Mr. Arachchige did the following:

(a) Logged into the Driver App at varying times of the day, on different days of the weeks.

(b) Logged into the Driver App for varying periods.

(d) Provided varying numbers of trips when he was logged into the Driver App, including providing no trips on some occasions.

(e) Accepted 5,623 of the trip requests sent to him via the Driver App.

(f) Rejected 448 of the trip requests sent to him.

(g) Did not accept a further 242 of the trip requests sent to him.

(h) Cancelled 156 of the trip requests that he had received and accepted.

Uber deactivated Mr. Arachchige’s access to the Driver App in June 2019 after a complaint was received from a passenger. Uber said that it investigated the complaint. Mr. Arachchige said that he did not have any knowledge of the details of the complaint, nor was he given any opportunity to provide a response. The deactivation ended the relationship between Mr. Arachchige and Uber and he claimed to raise a personal grievance for unjustifiable dismissal.

Court’s Analysis

Mr. Arachchige accepted that when he was an Alert Taxi driver he was in business on his own account. He paid a franchise fee to Alert Taxis monthly for the right to use their brand and had Alert Taxis’ signage on his vehicle. He generally worked full-time, although that was by choice. His taxi jobs typically came through the Alert Taxis dispatch system, he did however, on occasion pick up passengers from a taxi rank.

He developed a clientele of regular passengers. Some of the passengers were businesspeople who routinely took trips out of town and needed to be taken to the airport, others were people who had trips to appointments paid for, for example, by the Accident Compensation Corporation. These passengers would pay him directly and there was a degree of discretion to what he charged them.

In Mr. Arachchige’s view, the key difference as an Uber driver was the inability to develop a personal relationship with customers or negotiate a fee.

Uber’s evidence was that the fare quoted to a passenger is calculated based on time and distance estimations, which are published online. This may also reflect dynamic, or “surge” pricing that adds a premium where there is a greater demand for trips than available drivers using the Driver App in that area and at that time.

Uber also said that it was open to drivers to charge a lesser fare than the estimate the passenger had been given on the App, and that was stated in the Services Agreement. Mr. Arachchige however, seemed to be unaware of that possibility.

Another feature of the Uber charging process is that there is a cancellation fee for a passenger that cancels a trip request five or more minutes after making the request and after the driver has accepted the request and is on their way to the passenger’s location. It also is payable where the driver arrives at the pick-up location and the passenger is a “no-show”.

After the ride, the passenger is invited to rate the driver, and the driver also is invited to rate the passenger. Uber operates a five-star rating system and if a driver continually falls below the average city minimum for the city in which they operate, they may lose access to the Driver App. At the relevant time, the average city minimum for Auckland was approximately 4.5.

Both parties acknowledge that the legal position in New Zealand is to be determined under s 6 of the Employment Relations Act 2000 (the Act), which has no equivalent in other common law jurisdictions. Uber submitted that other common law decisions are useful and referred to several decisions in Australia that found that Uber drivers were not employees.

The Court said that “while the cases in Australia and the UK have some similar facts and identify factors that likewise would be relevant in New Zealand, ultimately Mr. Arachchige’s case falls to be determined on the evidence before the Court and pursuant to New Zealand law”.

Section 6 has been previously been considered in New Zealand by its top Court, the New Zealand Supreme Court. Section 6 defines an employee as: …any person of any age employed by an employer to do any work for hire or reward under a contract of service. It then goes on:

In deciding for the purposes of subsection (1)(a) whether a person is employed by another person under a contract of service, the court or the Authority (as the case may be) must determine the real nature of the relationship between them.
For the purposes of subsection (2), the court or the Authority— (a) must consider all relevant matters, including any matters that indicate the intention of the persons; and (b) is not to treat as a determining matter any statement by the persons that describes the nature of their relationship.

The leading decision on s 6 is Bryson v Three Foot Six Ltd, in which the Supreme Court held that “all relevant matters” in s 6(3)(a) includes:

(a) The written and oral terms of the contract, which usually contain indications of the parties’ common intention concerning the status of the relationship.

(b) Any divergences from, or supplementation of, those terms and conditions, which were apparent in the way in which the relationship had operated in practice.

(c) The behaviour of the parties in implementing the agreement between them – how the relationship operated in practice is crucial to a determination of its real nature.

(d) Features of control and integration, and whether the person has been effectively working on his or her own account; and

(e) Industry practice.

The Employment Court noted that it recently considered s 6 in two cases, the Leota case referred to above, and Southern Taxis, where in both these cases, based on the evidence before the Court, the drivers involved were found to be employees.

The Court reviewed the Services Agreement between the parties and considered that it does not suggest an employment relationship between them. The agreement expressly states that the parties agree that it is not an employment agreement and that it does not create an employment relationship.

While the Services Agreement is personal to the driver signatory, it did not require exclusivity; drivers are not to display any Uber logo or other signage and Uber drivers are able to undertake other activities, including in competition with Uber.

It did however view some aspects of the agreement that could denote an employment relationship, including qualification requirements and performance expectations. However, these are not the mutual preserve of employment agreements. They also exist in franchise agreements for example, where the performance of the contract may reflect on the reputation of the principal. The Court considered that overall, the Services Agreement is not in the form of, and does not operate as an employment agreement. It is consistent with the assertion by Uber that it is a technology business that connects drivers with Uber’s lead generation service to enable drivers to receive requests for transportation.

The Court noted that while it is a standard form agreement, and Mr. Arachchige had no power to negotiate terms, he was not particularly vulnerable or lacking comprehension of what he had agreed to, as was found to be the case with the driver in Leota. He made a considered decision to move from Alert Taxis to Uber. He understood the business model and it was satisfactory to him while his contract was on foot. It was only after Uber terminated the relationship that he sought to claim an employment relationship.

The parties’ relationship aligned with the Services Agreement. Uber did not direct Mr. Arachchige in connection with the provision of the transport services. He determined whether and for how long he undertook services and provided all the necessary equipment and tools to undertake the work, including the vehicle, smart phone, a data plan and insurance. He also was also responsible for his tax obligations.

Apart from Uber’s basic licensing requirements and requirement for a COF, Mr. Arachchige was free to determine what vehicle to use, when he would carry out the services, and where he would do so. None of that is consistent with an employment agreement. The Court contrasted this with the situations in Leota and Southern Taxis where the drivers worked as directed.

Whilst there was no evidence that Mr. Arachchige was undertaking other work or services, including transportation services, that was his choice. The agreement expressly allowed for this and there was no suggestion that he had been told that he was not able to do so.

The Court said that whilst he could not build a client base, he could make other business decisions. The principal argument for Mr. Arachchige to be an employee was the lack of control that he had over building a customer base and determining what fare to charge. The two are inter-related. There was however, an ability for a driver to charge a passenger less than the quoted price, but without the ability to establish a relationship with passengers, and thereby attract future work, this was of no value to Mr. Arachchige.

This was the principal difference between the Uber model and the arrangements Mr. Arachchige had with Alert Taxis. Nevertheless, there were other ways Mr. Arachchige could improve the profitability of his business, such as where and when he carried out driving work, so he could choose to make the most of peaks in demand, and what car, phone, data plan, insurance, and other business support he might use. Mr. Arachchige could also share the vehicle with another person to reduce his costs.

The Court noted that whilst driving was integral to Uber’s business, it had little control over the drivers. Whilst Uber tried to define itself as a technology business, the reality is it is a transportation business. The drivers are integral to the way in which Uber operates – without drivers there is no business. However, the way the business has been structured separates out the services that Uber provides, both to passengers and to drivers, from the way in which the work is then undertaken. Uber had very little control over the way Mr. Arachchige carried out his part of the undertaking. The Court again distinguished this from the situation in both Leota and Southern Taxis, where the drivers had little autonomy over the way they carried out their business activities.

The Court looked at industry practices but found this to be of little help. Whilst there are some similarities between the work of Uber drivers and taxi drivers operating under a franchise agreement, it is the differences between them that mattered in this case. Ride-sharing businesses use a different operating mode the Court noted, and as case law overseas demonstrates, there is no established industry practice that assists in determining the status of drivers.

Overall, the Court noted that whilst aspects of the relationship between Uber and Mr. Arachchige may point to employment, the intent of the parties throughout their relationship was such that Mr Arachchige would operate his own business in the manner and at the times he wished. His work was not directed or controlled by Uber beyond matters that expected to be allowed to operate using the Uber ‘brand’.

The agreement between Uber and Mr. Arachchige reflected their intention, and the parties acted in accordance with the agreement. Ultimately, Mr. Arachchige was not employed by Rasier NZ and/or Uber BV and he could therefore not claim a personal grievance.

Conclusion

This case is another example of how closely the Court’s will look at the unique facts of the situation in front of them. It does not mean that all Uber drivers are contractors and cannot bring a claim before the Court to determine their employment status. As we can see in other jurisdictions, the issue of the employment status of Uber drivers is being raised with mixed results.

Similarly, as we saw in Leota and Southern Taxis, drivers can be employees where there is direct control in the relationship. Ultimately, these cases will continue and is an area under close government scrutiny, as it forms its decisions on “Better Protections for Contractors”, and as it moves further towards providing greater protection for people performing work under contracts for services.