NZ businesses warned over gig economy risks

by Sol Dolor22 May 2017
Businesses in New Zealand that employ workers of the gig economy, which features contractors and freelancers working on short-term contracts, may be in for as rough a ride as Uber has had in the UK, a top lawyer says.

Gillian Service, employment law partner at MinterEllisonRuddWatts, said that the decision of the UK Employment Tribunal last year could be mirrored in the country. The decision, which said that Uber drivers in the UK are employees rather than self-employed contractors, is being appealed by Uber.

Regardless of the outcome of the appeal, businesses in the country that also rely on a “contractor” model may be at risk of similar findings in NZ courts.

“This is because the current legal framework in New Zealand permits a similar outcome if the facts align. Judges may set aside the written agreement if the real nature of the relationship in practice is different to that which is documented between the parties,” Service said.

“While the ‘network of independent contractors’ is only one model, the Uber decision shows that it can be difficult for businesses to achieve the balance between flexibility, autonomy, and limitation of financial risk while maintaining control over working practices,” she added.

The warning comes as the gig economy continues to explode around the world. In the UK, government data shows that the gig economy has more than five million workers. It is poised to skyrocket from an estimated £0.4 billion in 2015 to £9 billion by 2025.

The UK has launched an enquiry into the future of the world of work and workers’ rights as a result of the expected boom. High profile companies like Uber, Deliveroo, and Asos are being scrutinised in the UK, which will likely find its way on to the NZ government’s radar, Service said.

The gig economy offers several benefits for companies, Service said. It enables businesses to focus on core operations and use contractors as needed. Contractors can be more engaged and productive as the arrangements usually come with more flexibility, good pay, and tax advantages.

However, the gig economy is also open to abuse, Service noted. Reports note that the model is used to exploit cheap labour, which has led to workers being on unsustainably long hours for pay that’s ultimately less than minimum wage.

“Abusing this model will give rise to legal challenges for businesses that exploit the model, as well as those who wish to rely on it,” Service said. “These challenges will be both to businesses’ reputations and also legal challenges by way of status disputes. While these issues will not stifle the Gig Economy in New Zealand, it does raise the question of whether existing laws are fit for purpose in this rapidly changing employment landscape.”

Related stories:
UK court rules Uber drivers are company employees
Top firm says cybersecurity risk procedures now a must