Independent contractor or employee – more from the Employment Court

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Closely following the ‘land-mark’ decision from the Employment Court determining that a courier driver, Mr Leota, was an employee of Parcel Express Limited, the Employment Court has released another example of how the employment relationship status of an individual will be determined, this time finding that four commission based taxi drivers were employees.

Southern Taxis Ltd v A Labour Inspector

In Southern Taxis Ltd, the Labour Inspector brought a claim alleging that four commission based taxi drivers were in fact employees and were therefore entitled to minimum wage arrears, entitlements under the Holidays Act 2003, payment for rest breaks, and reimbursement of unlawful deductions for logbooks. The court was “well satisfied” that the real nature of the relationship was that of employer and employee on the following basis:

  • Control - the taxi drivers were subject to significant elements of control, supporting an employee relationship. The drivers worked under a roster which was prepared and maintained by Southern Taxis Limited. Once the roster was agreed, the drivers were required to work those days and hours, and their work patterns did not vary from week to week. Work was organised through a dispatcher and drivers were required to log on and off and maintain radio or cellphone contact with the dispatcher. While drivers could theoretically decline jobs, the reality was they did not if they wished to be remunerated.
  • Integration – the drivers were part and parcel of the business. Southern Taxis Ltd needed drivers to operate its branded taxis which it owned for the purposes of operating an economically viable taxi business. This test supported the conclusion that the drivers were employees.
  • Fundamental and economic reality – the drivers bore an element of risk to the extent of their remuneration as they had a choice as to work. However, this was considered to be no different to employees who worked on a commission basis. The court found that it was clear that the drivers were not in business on their own account, they did not own their vehicles, pay any of the substantial running costs required, and they could not obtain a return by subcontracting.
  • Intention – despite all parties understanding the distinction between an employee and a contractor, there was no common intention as to the status of the relationship. Southern Taxis Ltd understood the individuals were contractors and the individuals believed they were employees.
  • Industry practice – the court noted that industry practice may, or may not, be useful in establishing the intentions of the parties. In these circumstances, the court did not consider it was a useful indicator and it was significant that none of the affected drivers understood that practices used by other companies meant that they were independent contractors.

Conclusion

This decision demonstrates that the true nature of the relationship will always be examined by the court and provides another example of the heightened risks of claims with the potential for such claims to be successful in multiple industries.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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