Last week the Employment Court issued a decision confirming that a courier driver operating as an independent contractor was in fact and in law an employee of the courier company. Although this case could potentially have wider implications for the courier driver business model, the Court was clear that its findings are confined to the facts of this particular case. In particular, it is likely that some of the facts in this case are specific to this employment relationship and may not be present in other situations. However, given the consequences for the courier company, it is a timely reminder for all organisations who engage contractors to make sure that their written contracts and day-to-day working relationship is genuinely and consistently one of principal/contractor and not an employment relationship.

The case concerned Mr Leota who was a courier driver for Parcel Express Limited (Company). Mr Leota drove courier vans for the Company for approximately one year when his contract for services was terminated. Mr Leota sought a declaration from the Court that would set aside his contractor’s agreement and declare that he was an employee. He succeeded. This was on the basis that the Company exerted a high level of control over Mr Leota, and that control went beyond what was mutually necessary or beneficial to both a hirer and worker’s business interests. The factors influencing this decision are set out here.

The Court canvassed well established legal principles of control and integration when assessing the real nature of the relationship. It described the essential issue in the case as “whether the worker serves their own business or someone else’s business”. The Court also summarised some key indicators of what the real nature of the relationship might be, which can be viewed here.

The Court held that Mr Leota did not exercise any real autonomy over his work. Day-to-day, the Company exercised significant control over his work. The Court held that the Company controlled the what, when, where, how and by whom his work would be done.

When asked about what the benefits were of self-employment, the relevant Company witness stated: self pride, the ability to learn taxes and finances, and the ability to take time off when he wanted. However, the evidence showed that the Company looked after the taxes and any time off had to be taken with advance notice, was limited to 20 days per year, and required a relief driver to take over the work (approved by the Company).

The Court considered industry practice and referred to previous cases relating to courier drivers that have been decided the other way. However, the Court cautioned that when considering industry practice, it is important not to “let the tail wag the dog”. The fact that an industry considers that its workers are not employees is not sufficient to be determinative of the matter.

The Court also considered the economic reality of this case, which was that Mr Leota had very limited ability to grow his revenue when operating in the confines of the agreement he had with the Company.

This case is a useful re-statement of the relevant legal tests when assessing status of workers. However, the Court is clear in this decision that it is limited to its precise factual background and should not be read as applying to whole categories of workers. As an example, much was made of the fact that Mr Leota had a limited level of English comprehension. The decision appears to put less weight on the wording of the agreement on the basis that Mr Leota is unlikely to have had a deep understanding of its implications.

Now that Mr Leota’s worker status has been confirmed to be that of an employee, Mr Leota has access to the personal grievance regime in the Employment Relations Act 2000. Time will tell whether Mr Leota exercises his new found rights to pursue an unjustified dismissal claim arising out of the termination of his employment by the Company.

If you wish to discuss any worker status issues in your business, please contact any of our experts.