Contractor Courier Driver found to be an Employee – Contractor v Employee

July, 2020

By: Kent Duffy

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Mr Leota was a driver for a courier company, Parcel Express Limited. He asked the Employment Court (“the Court”) for a declaration that he was an employee of the company. Parcel Express said that Mr Leota was an independent contractor, not an employee.

This case involved a dispute about employment status. Namely, the distinction between a contractor and employee. Employee status is the gateway to access various statutory entitlements including holiday pay, minimum wages, KiwiSaver, parental leave and the personal grievance procedures. There are legal tests that allow the Employment Relations Authority (“the Authority”) and the Court to make decisions regarding whether somebody is an employee or contractor. In short, this assessment requires the Authority/the Court to determine the real nature of the relationship.

Mr Leota is a member of the Samoan community in South Auckland. He approached Parcel Express through a contact at his local church. Parcel Express advised Mr Leota that if he came to work for the company he would need to buy his own van, the van would need Parcel Express signwriting (which cost about $2k and was at his expense), that he was required to pay a bond of $2k and that he needed to sign a contract. Mr Leota did not have a GST number and had no idea what one was.

Mr Leota was assigned the Panmure run, the boundaries of which were set by Parcel Express he had no say about the scope of the run. He was required to work where and when directed by Parcel Express under the terms of his contract, and work in Parcel Express’s best interests at all times. Mr Leota was required to wear a uniform specified by the company and comply with the company’s Procedures Manual.  He was prohibited from drinking alcohol during work hours and was required to participate in any in-house briefings or instructions. He was also required to ensure documentation was completed in accordance with the company’s directions and hold insurance approved by Parcel Express, among several other requirements.

Mr Leota worked for Parcel Express for about a year prior to his contract being terminated. An issue arose after the Managing Director of Parcel Express asked him to pick up tyres for a week as a favour, which effectively cost Mr Leota money due to it impacting his courier runs. Mr Leota raised concern about this with Parcel Express and his contract was terminated the next day. 

Parcel Express based much of their argument on the fact that Mr Leota signed an agreement which referred to him as an independent contractor. The Court noted that Mr Leota spoke English as a second language and did not understand the difference between a contractor/employee, nor did he understand the documentation that he signed.

The Court applied the legal tests and relevant legal considerations, including – section 6 of the Employment Relations Act 2000 which provides the meaning of “Employee”, principles established in Prasad v LSG Sky Chefs New Zealand[1], along with other relevant case law.

The essential issue in this case was whether Mr Leota served his own business, or Parcel Express’s business. The Court determined that the evidence strongly indicated that Mr Leota had no business of his own – he was solely in the business of Parcel Express. The Court held that the real nature of the relationship between Mr Leota and Parcel Express was an employment relationship and declared that he was an employee of Parcel Express.

The Court emphasised that the judgment did not mean that all courier drivers in New Zealand are employees. However, Chief Judge Christina Inglis specifically remarked that there is no presumption that whole categories of workers are independent contractors, which is a statement which warrants serious consideration given the fact that certain industries are based on contractor arrangements e.g.– taxi drivers, courier drivers, etc.

While this decision applied to Mr Leota’s status only, it is an important reminder for employers to think very carefully about contractor type arrangements in their business, and this case will no doubt be relevant in terms of future litigation in respect of matters involving contractor and employee disputes.

If you have any doubts about the categorisation of workers in your business, or would like legal advice on your particular scenario because you are concerned about the potential legal implications, then please contact EMA Legal – Liaine.Warneford@EMA.CO.NZ

Leota v Parcel Express Limited [2020] NZEmpC 61

[1] Prasad v LSG Sky Chefs New Zealand Ltd [2017] NZEmpC 150, [2017] ERNZ 835 (footnotes omitted). Not disturbed on appeal by the Court of Appeal: LSG Sky Chefs New Zealand Ltd v Prasad [2018] NZCA 256. 

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