Courier driver was an employee despite agreement being styled otherwise | Employment Law Update May

In a case that may have substantial repercussions in both the courier business and, conceivably, other environments in which conditions have the characteristics of employment despite being called “contracts for services”, the Employment Court was resolute in its opinion that a driver for Parcel Express was an employee.

In a judgment surveying previous case law on the question, particularly in the light of the current ethos that “employment relationships should not be viewed through a conventional contractual lens”, Chief Judge Inglis considered the requirement of s 6 of the Employment Relations Act 2000 to determine “the real nature of the relationship” between the hirer and the worker.

A witness for the courier company struggled to demonstrate what the “freedom and flexibility” that the driver, L, allegedly possessed actually brought him. And even those alleged benefits of the autonomy enjoyed by L — an acquisition of business acumen and liberty to take time off — were not real, in the view of the Judge. Balanced against those were some very substantial restrictions on how L conducted his work. He:

  • was assigned a run, the boundaries of which were set by the company and in which he had no say (even as to changes in the run)

  • performed the job full-time from Monday to Friday and had to be back at the depot at three specified times during the day

  • worked where and when he was directed by the company and was required to work in Parcel Express’s best interests at all times

  • had to wear a uniform specified by the company and observe its procedures and the commands of its managers

  • had to attend in-house briefings

  • had to maintain a telephone link at his home, and provide another vehicle if his own vehicle — required to carry the Parcel Express colours and insignia and to be otherwise free of all other information, even L’s name — was not in good order and condition

  • had to take out insurance with a company approved by Parcel Express, and for an amount and for such risks as it decided

  • could not take more than 20 working days’ holiday in a year without the prior approval of the company and had to organise a relief driver, who had to be approved by the company, during any period of leave, and

  • was subject to a restraint of trade (for six months post-termination and within a 100 km radius of Auckland’s CBD) and to confidentiality requirements.

Few of these elements could be said to be mutually beneficial, the Chief Judge considered.

She was not swayed by protestations about industry practice. As she said [54]:

“While I accept that industry practice may be relevant to assessing whether a worker is an employee in some cases, I consider that it is a factor best approached with caution. That is because it may lead to the tail wagging the dog. 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 rather than imposing a fact-specific, case-by-case test which the Court must work through, applying s 6. In this regard it is notable that Parliament has not chosen to make special provision for courier drivers, unlike sharemilkers and real estate agents (s 6(4)), volunteers (s 6(1)(c)), and certain persons engaged in film production (s 6(1)(d)).”

Nor was the Chief Judge swayed by arguments that L, a man who spoke English as a second language and was “naïve” when it came to business, could be assumed to have known that he was engaged as an independent contractor because it was widely accepted that this was the model prevailing in the courier business. It was improbable that L would have known about this, and in fact, he did not know it.

When she reviewed the “economic reality” of the relationship, the Chief Judge was not drawn to evidence that L had the capacity to build his own business. He had neither the time nor the contractual freedom to cultivate new and potential customers for his own business. Parcel Express expected him to assist it in building its business. Had L used his van in the evenings for other work, he might have had to get approval and it could have pushed him over the maximum allowable driving hours limitations.

The tax position was only neutral when considering the economic reality of L’s situation. L did not have a GST number and in fact, did not know what one was or why it might be required. Parcel Express generated buyer-created invoices which it provided to L under an agreement with Inland Revenue.

While the ownership of expensive equipment such as a van could be a significant indicator that a worker is in business on their own account, the facts did not support it being more than a neutral factor in the balancing exercise before the Court. L had not owned such a van before this was made a condition of his work with Parcel Express; the van had to meet the company’s requirements as to colour, size and type; it had to have signwriting in the company’s name, and he had to pay for its running costs and insurance. However, its purchase was facilitated via the company, through a third party who retained ownership of it while L paid it off through regular deductions from his pay. The signwriting was arranged by Parcel Express.

So far as the ability to substitute another driver during periods of annual leave was concerned, it did not advance the company’s case. Chief Judge Inglis noted that “[w]hile the ability to substitute labour will generally point away from an employment relationship, a constrained ability to do so, framed as a prohibition without consent, may point the other way. The present case falls within the latter category.”

The Chief Judge concluded that “the combined weight of all relevant factors tilt[ed] the scales firmly in favour of a finding of employment status.”

Source document:

Leota v Parcel Express Ltd


Information reproduced with permission of Wolters Kluwer

employment law, employment lawyer, contractor, employee, employment contract, contract for service, case of interest, hr advisor, er advisor,

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