The Employment Court has recently issued an important decision (Leota v Parcel Express Ltd) regarding a courier driver for Parcel Express Limited. This is the latest in a trend of cases dealing with individuals engaged on contracts as independent contractors but who are in fact employees. The distinction is critical because an employee will have legal entitlements to rights such as holiday pay, sick leave, and access to personal grievance procedures that are not available to independent contractors.
The fact situation was as follows. Mr Leota is Samoan, with English as a second language. He was approached by Parcel Express to be a courier driver via a member of his church.
To be engaged by Parcel Express, the company required Mr Leota to buy his own van (the company sold him one for $17,000), which had to have the company’s signwriting (at his expense), pay a bond of $2,000, and sign an independent contractor agreement.
Mr Leota received a minimum sum of money per day. He was expected to undertake deliveries during particular hours set by the company and only within the area that his assigned route covered. His hours were long, which effectively meant he could not work for himself or for others in addition to Parcel Express. He was expected to have any leave approved by the company, and was unable to provide a substitute driver without that person also being approved. The company prepared a monthly tax invoice of payments due to Mr Leota, and made various deductions.
Matters came to a head when Mr Leota refused to undertake additional work at the request of the company, for which he was not going to be paid. His contract was terminated immediately. Mr Leota sought a declaration from the Employment Court that he was an employee, to enable him to challenge the termination.
In cases of this type, the Court is required to consider the real nature of the relationship between the parties, regardless of the way the parties may have described it in their written arrangements.
The Court found that, while there were some indications of independent contracting, the reality was that Mr Leota was not in business on his own account. He had little to no ability to run his own enterprise or to profit from that enterprise. The Judge was confident Mr Leota was in fact employed by Parcel Express.
The Court was at pains to state that the case turned on its own facts, and did not apply generally to the courier driver industry. However, this case follows closely on the heels of an earlier case (Prasad v LSG Sky Chefs) in which individuals contracted by a labour hire company successfully obtained a declaration that they were actually employees of the company their labour was supplied to.
Individuals like Mr Leota are effectively “dependent contractors”; those who are entirely dependent on another party for their income, and who are not really in business on their own account.
It is clear that the issue of “dependent contractors” is not going away. This decision is a timely reminder for many industries to look carefully at their contracting models.