Case law update: Independent contractors

A recent Employment Court decision, Leota v Parcel Express Ltd, has ruled in favour of Mr Leota, a courier driver for Parcel Express, finding that he was in fact an employee of the company and not an independent contractor.

Section 6(5) of the Employment Relations Act (‘the Act”) allows any person to seek a declaration as to whether they are an employee under the Act, and therefore entitled to the rights and protections pursuant to it. When making a declaration, the Court must determine the real nature of the employment relationship. This is analysed on a case by case basis and specific to the facts of each situation.

Importantly the Court in Leota considered whether Mr Leota served his own business or the business of someone else. This required a thorough analysis of the factual matrix of the relationship between the parties, including the wording of the agreement, the circumstances around its signing and the level of control the company exerted over Mr Leota in his role.

A number of factors helped to persuade the Court that Mr Leota was in fact an employee of the company, with particular emphasis on the considerable control Parcel Express exerted over Mr Leota, including that:

• Mr Leota was required to comply with company procedures, directions and requests from any officer of the company and to attend trainings and in-house briefings;
•  Parcel Express dictated the parameters of his run, with no input or consultation with Mr Leota, while also restricting his ability to work for any competitors;
• The company controlled who the customers were, the type of vehicle he had to drive, restricted the signage permitted on that vehicle and the uniform that Mr Leota was expected to wear; and
• The company controlled the extent to which Mr Leota had to remain contactable, the type of insurance cover he was required to obtain (including with whom and for how much) and the extent to which he was allowed to take leave.

The distinction between a contractor and employee is an important one. Where an employment relationship is determined to exist, a set of mutual obligations arise between the parties and an employee will have access to a range of statutory entitlements, including minimum wages, holiday pay, redundancy, parental leave, KiwiSaver contributions, as well as legal recourse to pursue personal grievances, and seek remedies, under the Act. Notably, employees are also able to access other rights, such as the right to unionise and collectively bargain.

The Chief Judge made it clear that this decision was not one that applied to all courier drivers in New Zealand, and that each assessment will be fact-specific. However, it has potentially opened the flood gates for workers across a range of industries to seek a declaration on their employment status. If you have any concerns regarding the status of your relationships with any employees or contractors, please get in touch with someone in our team.