Commentary: Global business lessons for NZ gig economy

Source: MinterEllisonRuddWatts

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Author: Gillian Service, Employment Partner, MinterEllisonRuddWatts

The recent UK rulings against Uber is a timely reminder to businesses to review arrangements with workers as due to the issues which arise if the individual’s working status is not reflective of the reality. Businesses should consider whether their employment models are fit for purpose under existing laws or whether they are exposed to similar risks.

Global awareness is growing in respect of (potential) minimum entitlements gig economy workers may access. Further cases are being taken to the courts overseas involving courier companies (such as Citysprint which engages over 3,500 freelance couriers) and food delivery companies (such as Jinn and Deliveroo). Such cases, along with the USD$20million settlement payment Uber made to its US drivers for misrepresentation of possible earnings as a driver, indicate the spotlight on this issue is only getting brighter.

If a New Zealand business’s contractor model were to be challenged, it is possible that the New Zealand courts could come to a similar conclusion as that in Uber. Like the UK Employment Tribunal, the Employment Relations Authority and the Employment Court will consider the ‘real nature of the relationship’ and take into consideration ‘all relevant matters’; ‘independence’ in the contract is redundant if it does not align with the reality of the relationship.

The outcome of the Uber decision is having a significant impact on Uber as both a business and as a brand. While Uber has been granted leave to appeal, the decision, there are several key points that are worth noting as parallels can be drawn with the position under New Zealand laws:

- the employment model must reflect the reality of the business operations;

- written documentation must reflect the reality of the relationship;

- flexibility alone is not sufficient to establish independent contractor status; and

- the courts will focus on the real nature of the relationship.

To avoid such detrimental impacts as Uber has experienced, New Zealand businesses should start by determining what their business models will be at the outset of any relationship and structure those business models correctly.

Looking beyond the current topic of worker status, the New Zealand Government should consider whether the existing legal framework needs to change as working practices change with the rise of the gig economy. An initial look into key pieces of employment legislation indicates that change in certain areas may be needed, such as whether a new category of ‘worker’ should be created for those working in the gig economy.

New Zealand labour market policies and legislation were largely developed for an industrial era that often does not apply to the world of independent work. The most poignant example in New Zealand is the Holidays Act 2003, which measures minimum entitlements in weeks as opposed to hours or days on which many employment relationships are based.

However, many workers do not follow a working pattern that fits into such a framework. According to McKinsey Global Institute, between 20 and 30 per cent of the working age population in the United States and Europe earn their living through non-traditional permanent employment. The New Zealand employment framework is skewed heavily in favour of permanent, full time employment, which does not reflect the reality of a significant number of employment relationships in New Zealand, let alone the approach to work in the gig economy.

The rise of the gig economy is something that can benefit businesses and individuals alike, if used respectfully. As New Zealand businesses rely more on ‘gig’ workers, the Government will need to turn its attention to whether the employment legislative landscape is supportive of this model, or whether it is hindering it.

ENDS

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