While most have been focused on the implications of COVID-19 on employment relationships, the Employment Court has released what has been described as a “land-mark” decision with respect to the classification of employment relationships, determining that a courier driver ostensibly engaged as a contractor was in fact an employee.

Although determining the legal status of a worker will always be an intensely fact-specific inquiry, the decision has quickly been identified as having huge implications, not only for courier drivers, but for many industries whose contracting arrangements may be vulnerable to challenge.

Leota v Parcel Express Limited

Mr Leota was a courier driver for Parcel Express who brought a claim in the Employment Court in relation to his status as an independent contractor. Mr Leota challenged this status and claimed he was in fact an employee. Chief Judge Inglis did not “…have any difficulty in concluding that Mr Leota was not in business on his own account…” and a declaration was made that Mr Leota was an employee throughout his time with Parcel Express.

The legal position – independent contractor or employee?

From the outset, Chief Judge Inglis identified that employee status is an important issue given that it is the gateway to providing an individual with access to a range of statutory entitlements, including minimum wages and holiday pay, redundancy, parental leave, KiwiSaver contributions, personal grievance procedures and remedies provided for under the Employment Relations Act 2000.

Additionally, employee status provides the mechanism to accessing other rights, such as the right to collectively bargain.

Chief Judge Inglis succinctly summarised the essential issue in any assessment of a worker’s status as whether the worker serves their own business or someone else’s business, stating:

An employee works for the employer, within the employer’s business, to enable the employer’s interests to be met. An independent contractor is an entrepreneur, providing their labour to others in pursuit of gains for their own entrepreneurial enterprise.

To this end, the Chief Judge restated previous law that has determined the court’s inquiry relates to determining the real nature of the relationship between Mr Leota and Parcel Express Limited and that employment relationships are not to be viewed through a conventional contractual lens.

Mr Leota’s relationship with Parcel Express

From the outset of Mr Leota’s engagement, Parcel Express attempted to make clear, through their communications and wording of the agreement, that Mr Leota was an independent contractor and would not be an agent or employee of Parcel Express. However, the Chief Judge looked beyond these expressions and statements and identified that the actual agreement involved Parcel Express exerting a great degree of control over Mr Leota. This included requiring Mr Leota to:

• follow company policy;
• comply with directions of senior managers or officers of the company;
• attend training;
• undertake the run required by the company; and
• comply with company requirements in relation to any time he wished to take off.

Additionally, the Chief Judge considered that Mr Leota had no real understanding of his legal status when working with Parcel Express, noting his vulnerability given that English was his second language, and that any ‘agreement’ from him to being a contractor therefore meant little.

The determination

Chief Judge Inglis placed significant weight on the control Parcel Express had, as well as the economic reality that Parcel Express was asking Mr Leota to help build its business – not his own.

Industry impact

This decision reignites the argument that many individuals are incorrectly classified as independent contractors and are inappropriately losing out on statutory entitlements and protections. More than ever, and particularly where ‘vulnerable’ workers may be engaged, businesses will need to consider the true nature of the relationships they have with their workers. Whatever the industry practice to this point, contractors who may ‘look’ like employees are now much likelier to be able to establish employment rights.