Landmark Ruling by the Supreme Court and How This Impacts NZ Contractors

The Supreme Court released their decision on the Rasier Operations BV v E Tū Incorporated (the Uber case) on the 17th of November this year. At the heart of the judgement was a defining question for New Zealand’s employment landscape: are Uber drivers “employees” under section 6 of the Employment Relations Act 2000 (ERA), or are they independent contractors? This is an important distinction because only employees receive the protection of the ERA, including minimum wage, minimum hours of work, rest and meal breaks, holiday pay, parental leave and the ability to pursue a personal grievance, while contractors do not.

The Supreme Court had to determine whether the four Ubers Drivers were genuinely running their own independent businesses, using the Uber app, or whether they were in fact working for Uber under a contract of service.

Looking Past the Label: What Section 6 Requires

Section 6 states that to decide whether a person is employed by another person under a contract of service, the court must determine the real nature of the relationship between them. This means looking beyond the labels in written contracts to examine how the relationship operates in in practice.

An earlier court decision states that answering this question requires an analysis of a wide range of considerations that cover all the relevant factors. This does include the written and oral terms of the contract, which will usually indicate the common intention, but importantly includes divergence from these terms which are found by analysing the way in which the relationship actually operates day-to-day. All relevant matters include features of control, integration and whether the contracted person has been effectively working on their own account,

Notably in the Uber case, the Supreme Court agreed with the Court of Appeal who had described their standard terms as “window-dressing” and “fiction” and gave no weight to the contractual language describing contract work, which was said to “disguise the real nature of the relationship”. The Court took particular note of the imbalance of bargaining power, thus focusing on the substance of the arrangement over the form, which is consistent with the ERA’s purpose of preventing employers from misclassifying workers to avoid obligations.

Supreme Court’s Decision

After a thorough analysis the Supreme Court unanimously held that the four drivers were employees of the Uber companies and not independent contractors.  Uber’s appeal was dismissed.

Despite Uber’s argument that it simply acts as a neutral digital marketplace, the Court found that, in reality, Uber engaged the drivers to deliver services to passengers. From a customer’s perspective, it is Uber, not the individual driver, who is responsible for the ride. Furthermore, Uber’s tight control over key aspects of the work supports this view: for example, Uber set fares, dictates the routes, monitors driver performance, and can unilaterally impose policy changes which all point to an employment relationship rather than an autonomous contractor scenario.

Even though the drivers had some degree of freedom such as choosing their own hours, and owning their own vehicles, the overall picture is one of integration into Uber’s business. Taken together, the drivers were “employees” within the meaning of section 6 and are therefore entitled to full employment protections.

Implications for Contractors in New Zealand

This is a landmark decision for New Zealand and will have implications for other workers engaged as contractors. Previously there was a grey area surrounding the distinction between contractor and employee, but the Supreme Court’s ruling underscores that the true nature of a working relationship will prevail over contractual labels, which means businesses across all industries must carefully consider how they engage contractors. The test reaffirmed by the Court to determine an employee from a contractor includes an analysis of the:

·      the degree of control,

·      the degree of integration and

·      the economic dependency.

For example if an independent contractor works exclusively for one company, with no freedom to work for another company, follows that company’s directions, using the company’s tools and systems, and they are effectively indistinguishable from an employee in the company’s workflow, then under the “real nature of the relationship” test, that person may be held to be an employee despite contractual wording saying otherwise.

We expect to see more cautious drafting of contracts, and possible structural changes. Such as engaging contractors through other companies, or allowing more flexibility to contractors, to avoid inadvertently creating an employment relationship.

Looking into the Future

The Supreme Court’s broad interpretation of employee is likely to provoke pushback from businesses and may prompt legislative action. This was the case after the Bryson v Three Foot Six Ltd (2005) decision; after the courts held a film contractor to be an employee, Parliament swiftly passed the “Hobbit Law” (Employment Relations (Film Production Work) Amendment Act 2010) to exclude most film industry workers from the definition of “employee”, effectively reversing the Bryson decision.

We may be in a similar dynamic here, even as the Uber case was being argued, policymakers were already contemplating reforms to clarify the employee/ contractor boundary. In fact, an Employment Relations Amendment Bill 2025, wrote about here, would introduce a “gateway test” to provide greater certainty on contractor status. Under this proposal, if a working arrangement satisfied five specified criteria:

1.        a written agreement stating the worker is a contractor,

2.        freedom for the worker to work for others,

3.        no obligation to accept extra work,

4.         flexibility in working hours, and ability to subcontract,

5.         and a chance to get independent advice before signing.

then the worker would be presumed a contractor and barred from challenging their status in court. Failing any one of these criteria would mean the worker’s status can be tested using the control/ integration/ economic reality factors as affirmed in the Uber case.

This legislative intention to carve out genuine contractors more clearly now takes on heightened relevance in the face of this Uber decision. This signals a period of adjustment and conversation between the judiciary and Parliament as they work toward a clearer, more predictable framework that balances companies concerns of increased costs and uncertainty, contractors genuine will to be contractions, and the union and worker advocate interest in protecting worker rights.

Final Thoughts:

The Supreme Court’s decision in Rasier Operations BV v E Tū Incorporated is a significant milestone, but is unlikely to be the final word on the matter of contractor vs employee debate. As the law evolves, businesses will need to ensure their contractor arrangements truly reflect the working reality, both to meet legal obligations and maintain strong, transparent relationships with their workforce.

At Gambit, we’re keeping a close eye on these developments as we expand into the contractor space. We’ll continue to share updates and insights to support NZ businesses, and contractors navigating this changing landscape.

Thomas Hoksbergen | 09 355 8324 | thomas@gambitrecruitment.co.nz