Roger Partridge: Parliament takes the wheel on contractor rules

The gig economy is driving a revolution in work, but our laws sometimes seem stuck in reverse. This week, Parliament finally took the wheel.

On Sunday, Workplace Relations Minister Brooke van Velden unveiled the Government’s plans to amend the Employment Relations Act 2000. The changes will provide greater certainty for contractors and businesses, particularly those in the rapidly evolving gig – or ‘platform’ – economy.

Most readers will be familiar with the gig economy’s ride-sharing platforms like Uber. But the platform economy extends far beyond ride-sharing. It encompasses food, grocery and goods delivery, freelance task-based work, and accommodation services. The gig economy now provides job opportunities for thousands of Kiwi workers and offers low-cost services to more than a million consumers.

Uber complicated

The Government’s announcement comes in the wake of recent court decisions that threaten to upend the gig economy’s flexible work arrangements. Most recently, the Court of Appeal ruled late last month that four Uber drivers should be classified as employees rather than independent contractors.

The decision has caused alarm for platform workers and businesses alike. If allowed to stand, the difficulties created by the decision threaten the development of the gig economy model in New Zealand.

As ride-share users will know, drivers are allowed to use competing ride-sharing apps simultaneously. This permits them to pick the best-paying jobs. But if drivers are employees, which app would be their employer? Which company would be responsible for paying their minimum wage and holiday pay?

The flexibility enabling drivers to monitor the app at home and work only when it suits them would also likely vanish if they were deemed employees. Instead of being able to respond to market signals and jump in their cars when prices surge, drivers could be confined to working set shifts. That would reduce income opportunities for drivers and lead to longer wait times and higher costs for passengers.

Until the Government intervened on Sunday, the Uber case seemed destined for a Supreme Court appeal. At issue would be whether the lower courts had fully grasped the implications of the non-exclusive platform-driver relationship.

Central to the employment relationship is the duty of loyalty, which requires employees to act in good faith towards their employer and not compete with their business. Arrangements that allow drivers to work simultaneously for rival companies clash with this concept. Yet the Court of Appeal simply brushed aside this obstacle to the Uber drivers’ claims to be employees.

If it is to hear an appeal, the Supreme Court will need to consider head-on whether the multi-platform engagement model is compatible with employee status.

Quick fix

The Government’s proposed changes offer a quicker fix than waiting – possibly more than a year – for the outcome of a Supreme Court appeal. They also provide certainty for a wide range of businesses and contractors.

The proposals set out a new “gateway test” to determine whether someone is a contractor. The proposed test has four requirements:

1. There must be a written contract stating the person is a contractor.
2. The business must not restrict the worker from working for other companies, including competitors.
3. The business must not require the worker to be available at specific times or for a minimum number of hours OR it must allow them to subcontract their work.
4. The contract must not be liable to be terminated if the worker declines additional tasks beyond the existing agreement.

While not explicitly stated, the test is clearly beneficial for gig economy platform arrangements. Its criteria align closely with the working relationships of ride-share drivers, food delivery workers, and similar platform-based contractors. It acknowledges the realities of gig economy arrangements. But, it still offers protection against misclassification of genuine employees.

The new gateway test will also apply to more conventional independent contractor relationships, such as those between courier companies and their drivers. Provided companies allow drivers to work for other businesses, use substitute drivers, and decline additional tasks without penalty, these traditional contracting arrangements should also meet the new criteria.

The new test will operate alongside the existing tests developed by the courts to determine contractor status. These tests consider factors like control over work, integration into the business, the fundamental nature of the relationship, and industry practice. These factors will remain relevant because some established contractor arrangements may not meet all four requirements of the new gateway test.

However, for platform workers – and other contracting relationships that meet the gateway test’s requirements – the new test will provide a helpful framework for distinguishing between ‘contractor’ platform workers and employees.

The Government’s proposals demonstrate an encouraging willingness to grapple with the complexities of modern work arrangements.

The gig economy, with its emphasis on flexibility and autonomy, represents a significant shift in how we conceptualise work. Our laws must reflect this new reality, balancing worker protections with flexible arrangements that benefit businesses, workers and consumers. They must also provide the certainty businesses and workers need to thrive and innovate in the gig economy.

By addressing the issues raised by the Uber court case, Parliament is fulfilling its role as the ultimate arbiter of our laws. When court decisions create widespread problems, it is Parliament’s job to fix them.

This legislative intervention shows Parliament taking its role seriously. By steering our employment laws into the 21st century, Parliament can ensure New Zealand remains at the forefront of balancing innovation with worker protection.

Roger Partridge is chairman and a co-founder of The New Zealand Initiative and is a senior member of its research team. He led law firm Bell Gully as executive chairman from 2007 to 2014. This article was first published HERE