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New Zealand judgment on Uber will resonate worldwide, lawyer says

Uber’s office in Toronto, Canada. Uber operates a ‘brilliant and thorough’ system for controlling its drivers, a New Zealand Employment Court has heard. Photo: RWN

Special to Taxi News – reprinted with permissions by Rebecca Macfie and The Newsroom

by Rebecca Macfie

Uber’s relationship with its 6000-or so New Zealand drivers is one of servility, intense control and oppressive provisions, the court heard in final submissions in a major case seeking to have drivers declared employees of the global rideshare company.

The company’s claims that it had no control over drivers were “fictional”, Chief Judge Christina Inglis heard last week. The idea that it was merely a facilitator and match-maker for drivers and passengers was “bogus”. Its written terms of engagement with drivers were “difficult and obscure” even for experienced lawyers; indeed, the company’s own witnesses in the case didn’t appear to understand the terms, said lawyer Peter Cranney, appearing for First Union and E tū, the plaintiffs in the case.

Uber’s business model had the intention and consequence of excluding and limiting drivers’ entitlement to statutory protections and minimum employment standards, he argued in closing statements to the court.

In response to Uber’s claim that it simply goes about the world creating healthy and efficient markets, Cranney said the case raised “extremely important human rights questions” for New Zealand that went to issues of wage exploitation, as well as rights of association, collective bargaining, leave entitlements and remedies for unjust dismissal.

“It is completely impossible to imagine an agreement which could give Uber more control than this one,” said Cranney of the company’s services agreement with drivers. “You might as well sign a piece of paper with Uber saying, ‘please categorise me however you wish, and do with me whatever you will, and pay me whatever you like, and dismiss me whenever you see fit … And if you don’t like it you can leave’.”

Uber dictates fares and meal delivery fees, can alter the terms of the contract unilaterally at any time by publishing an updated version (which drivers have to accept in order to continue to use the app), and can terminate a driver at any time. It prohibits drivers from contacting passengers after the trip, denying them the chance to build their own businesses. It maintains detailed records of drivers’ exact movements and keeps them for years, and closely monitors the rate at which drivers accept and cancel rides.

The company states in its agreement with drivers that there is no employment relationship, but it includes what Cranney called a “just in case clause”, so that if it turns out that one does exist – perhaps as a result of a court case like the current one – drivers are required to indemnify Uber and hold it “harmless”.

Uber had built an “astonishing, brilliant and thorough method of control,” he said.

The company argued drivers were free to work when and where they liked. But Cranney alleged Uber gets them to work when it wants them to by withholding critical information, and creating inducements through its system of rewards.

“Uber drip feeds information to the driver at each stage of the delivery process, and of course they have to do this otherwise the system would crash. If all the information was made available to the drivers they would know which jobs to reject and which to take. So Uber controls it,” he said.

When a driver accepts a ride, they are only told the estimated amount of time to get to the pickup location, not where the passenger is going. Only drivers on the upper tiers of the Uber Pro reward system (‘gold’ status or higher), and who have a high ride acceptance rate, are told the trip duration and direction.

“Uber knows, but does not inform the driver of, a customer’s destination … until the driver is at the pick-up, the customer is in the car, and the driver starts the trip. The fare is displayed to the passenger, but the driver doesn’t know until the trip is completed,” Cranney told the court.

Drivers earn “points” to get up the Uber Pro pecking order: one point for a ride during off peak times, and five points for peak hours as defined by Uber. To maintain their status, drivers have to keep a high customer rating and a low cancellation rate, or else they will be immediately dropped back to the bottom.

There are also various promotions that reward drivers for working at certain times desired by Uber.

“It’s not a choice,” said Cranney. “You have to do it if you want the income.”

Uber sets various fees, including for passenger cancellation, if the driver has to wait too long for the passenger, if a passenger makes a “substantial” mess in the car, or the driver has to return lost property. The company has “sole discretion” to determine the amount of such fees, and whether the driver is eligible.

Uber argued its technology creates a safe and efficient marketplace for drivers and passengers, just as platforms like AirBnB do for accommodation. But Cranney said that was a false parallel.

In accommodation there was genuine choice, and the offerings were not standardised. “This [Uber] is just the delivery of standardised workers for a standardised transportation service.”

The drivers were “fully controlled and integrated into Uber’s business,” he concluded, referring to two of the key legal tests the courts take into consideration when determining if a person is an employee. “They are entitled to human dignity in the form of employment rights.

There was extensive reference in the hearing to the mounting international case law rejecting Uber’s argument that it is merely a technology platform and that it has no employment relationship with drivers. But Uber’s lawyer, Gillian Service of Minter Ellison Rudd Watts, argued the international rulings have no bearing. She said the case must be determined solely in relation to Section 6 of the Employment Relations Act, which defines the meaning of “employee” and instructs the courts to consider the “real nature of the relationship”.

The plaintiff unions had lumped the various Uber subsidiaries into one, but Service said there were different relationships between drivers and the Uber companies – including the “separate legal entities”, Rasier Operations BV, Rasier New Zealand, Uber Portier BV, and Portier New Zealand, which are defendants in the case along with the Netherlands-based owner, Uber BV.

The court’s focus had to be on the specific relationships that each of the four driver witnesses in the case had with “some or all of the defendants” at different points in time, argued Service.

Chief judge Inglis asked Service whether the specific employer had to be identified for the purposes of declaring the drivers were employees.

Yes, said Service, “because obligations flow from any declaration”.

The judge pointed to the recent case in which children in the Gloriavale community were found by the Employment Court to be employees, but the question of who was the employer within a “complex web of companies” had been adjourned.

“Are you saying someone wishing to obtain a declaration of employment status within the context of… a complex web of company structures needs to identify specifically who within that complex company structure is the employer, in order to obtain a declaration from the court?” she asked Service.

Yes, said Service, “for the principle of certainty”. Without some certainty there would be “an intolerable position for any entity that could be on the other end of that [employment] relationship.” If it could be any number of “entities”, what would they need to do “to deliver on what the declaration means in law? Because once someone is declared to be an employee they will have their entitlements to minimum wage, holidays, sick leave and all the rights and entitlements that flow.”

Referring to another leading New Zealand employment case, in which courier driver Mika Leota was found by the court to be an employee rather than an independent contractor, Service argued that the level of control there went far beyond anything exercised over Uber drivers. Leota had to buy a particular type of van, have it painted a specific colour, and brand it with the company logo. He had to pay a bond, lease a company scanner, wear its uniform, and work only in the area he was told to. He couldn’t take more than 20 days leave, and had a six-month restraint of trade.

Uber drivers, by contrast, could drive whatever car they liked as long as it wasn’t not too old, could drive for other rideshare platforms (as all the driver witnesses in the case did), choose their own phone plan, and quit whenever they liked. There were low barriers to entry, and the driver witnesses – who were well-educated – were “not vulnerable”.

“The level of subordination in Leota simply doesn’t exist here,” said Service. For his part, Cranney argued the controls exercised by Uber over drivers were “far more intensive” than that experienced by Leota.

Service said drivers didn’t have to respond to Uber’s incentives and promotions if they didn’t want to. “It’s their choice.” Uber exercised “very limited control, and only what was necessary and beneficial for an attractive and efficient marketplace.”

The court needed to keep the “network effect” of platform businesses front of mind, she said. “Because a broader network of users provides more opportunities for a platform to match and facilitate the supply and demand of its users … The more riders and the more drivers, the more attractive the platform.”

Uber’s standards – depicted by the plaintiffs as instruments of control and employer-like discipline – were for “mutual benefit”. Drivers and riders both had to meet minimum standards, and this helped maintain the quality of the experience when they “interact using the platform”.

They were to everyone’s benefit, including the drivers’ businesses and Uber’s platform business. “Everyone would suffer if the guidelines suffered,” said Service.

She told the court the law relating to employment status was “simple”, and the case was clear. “They [drivers] are not employees.”

Chief Judge Inglis reserved her decision, saying she aimed to deliver it within the next three months.

Whichever way it goes, the judgment will be of international significance, coming as it does on top of a raft of challenges to Uber’s business model in the EU, France, Australia, the UK, California, and the Netherlands.

Until last month, Uber had been banned from the streets of Geneva after Switzerland’s highest court agreed its drivers should be considered employees and not independent contractors. Under a new agreement, drivers will now be employed by Uber’s Swiss partner companies and will receive the Geneva minimum wage, and the employer will have to pay social security charges.

And in Australia, Uber and the Transport Workers Union inked a deal last month to regulate the rideshare and food delivery industry. The agreement has four goals, including an earnings floor, the right to collective bargaining, the resolution of grievances through an independent umpire, and enforcement of standards.