Gig econ­omy un­der scru­tiny

While there are cur­rently no signs of the gig econ­omy be­ing sti­fled in New Zealand, over­seas le­gal cases and en­quiries do raise the ques­tion of whether ex­ist­ing laws are fit for pur­pose in this rapidly-chang­ing em­ploy­ment land­scape, says Gil­lian Ser­vice.

NZ Business - - CONTENTS -

The gig econ­omy is a quickly de­vel­op­ing labour mar­ket, de­fined by short-term con­tracts or free­lance work. Work­ers in a gig econ­omy get paid for the "gigs" they do, such as a food de­liv­ery or a car jour­ney as op­posed to a reg­u­lar salary or wage.

In the United King­dom alone, 2.8 mil­lion peo­ple are es­ti­mated to work in the gig econ­omy and its worth is pro­jected to in­crease from an es­ti­mated £0.4 bil­lion in 2015 to £9 bil­lion by 2025.

In re­sponse to con­cerns of worker ex­ploita­tion, in 2017 the UK Gov­ern­ment launched an en­quiry into the fu­ture of the world of work and work­ers’ rights. Work­ing con­di­tions at a num­ber of high pro­file UK com­pa­nies, in­clud­ing Uber, De­liv­eroo and Ama­zon are be­ing scru­ti­nised fol­low­ing chal­lenges by gig work­ers to their sta­tus as in­de­pen­dent con­trac­tors. The en­quiry has brought is­sues of work and work­ers’ rights to the fore, both in the UK and glob­ally.

As the gig econ­omy gains mo­men­tum and lo­cal busi­nesses start to em­ploy in­di­vid­u­als on short term con­tracts (‘gigs’), the is­sue will un­doubt­edly arise in New Zealand. We al­ready know it’s on the Gov­ern­ment’s radar – in 2017 Labour pro­posed a third cat­e­gory of worker, the "de­pen­dant con­trac­tor", to ad­dress the lack of min­i­mum en­ti­tle­ments for cer­tain cat­e­gories of con­trac­tors.

There have been eight cases in the US and UK since 2017 which cen­tre on whether busi­nesses op­er­at­ing a gig econ­omy work­force are cor­rectly clas­si­fy­ing their work­ers as in­de­pen­dent con­trac­tors. Of th­ese eight cases, three re­sulted in a de­ter­mi­na­tion that the in­di­vid­u­als were con­trac­tors.

The dis­tinc­tion is high stakes be­cause it de­ter­mines whether or not th­ese work­ers are el­i­gi­ble for min­i­mum en­ti­tle­ments un­der lo­cal em­ploy­ment laws. Given that low labour costs is a key fac­tor in the gig econ­omy busi­ness model, re­clas­si­fi­ca­tion of work­ers has the po­ten­tial to sig­nif­i­cantly change op­er­a­tions of th­ese plat­forms – and the tra­jec­tory of the gig econ­omy as a whole.

For the mo­ment, the con­se­quences on the gig econ­omy are yet to be seen due to the in­con­sis­ten­cies in over­seas case law; which may be ex­plained by the va­ri­ety in types of ‘gig’ work, the in­tense fac­tual ex­am­i­na­tion by the courts, and the dif­fer­ent le­gal frame­works and tests for clas­si­fy­ing em­ploy­ment re­la­tion­ships.

How­ever, the grow­ing num­ber of over­seas de­ci­sions demon­strate that New Zealand busi­nesses re­ly­ing on sim­i­lar ‘con­trac­tor’ mod­els may be at risk of com­pa­ra­ble find­ings be­ing made in the New Zealand 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. While the ‘net­work of in­de­pen­dent con­trac­tors’ is only one model, the over­seas de­ci­sions show 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.

The de­mand for in­de­pen­dent work­ers will con­tinue to grow as dig­i­tal busi­nesses or busi­nesses need­ing spe­cialised skills be­come more com­mon, and work­ers are look­ing for greater flex­i­bil­ity in the roles they ac­cept.

The ben­e­fits for busi­nesses in­clude be­ing able to fo­cus on core op­er­a­tions and use con­trac­tors when ad­di­tional ser­vices or par­tic­u­lar ex­per­tise is re­quired.

Con­trac­tors can also be more en­gaged as they ap­ply their par­tic­u­lar ex­per­tise in re­turn for flex­i­bil­ity, ac­cess to an es­tab­lished in­fra­struc­ture and tax ad­van­tages. Th­ese ar­range­ments can boost pro­duc­tiv­ity.

How­ever, while busi­nesses, con­sumers and (some) con­trac­tors are ex­pe­ri­enc­ing the ben­e­fits of the gig econ­omy, it re­mains open to abuse by or­gan­i­sa­tions. Ar­eas of ex­po­sure when op­er­at­ing in the gig econ­omy in­clude a lack of job se­cu­rity and lit­tle to no re­course to a le­gal frame­work that pro­tects the gig worker’s po­si­tion.

There are in­creas­ing re­ports in global me­dia of com­pa­nies us­ing a con­trac­tor model to ex­ploit cheap labour, espe­cially in more labour in­ten­sive in­dus­tries in which con­trac­tors are not in a po­si­tion to ne­go­ti­ate their own con­tracts or re­mu­ner­a­tion. This has led to some con­trac­tors work­ing long (po­ten­tially un­sus­tain­able) hours and are ul­ti­mately paid less than min­i­mum wage. It is not un­com­mon for such con­tracts to in­clude penalty clauses where, if a con­trac­tor can­not work for ill­ness or other rea­sons, the com­pany charges the con­trac­tor for the cost of find­ing a re­place­ment.

Abus­ing this model will give rise to le­gal chal­lenges for busi­ness who ex­ploit the model, as well as those who wish to rely on it. Th­ese chal­lenges will be both to busi­nesses’ rep­u­ta­tions and also le­gal chal­lenges by way of sta­tus dis­putes.

In Fe­bru­ary this year, the UK Gov­ern­ment launched its re­sponse to its 2017 en­quiry. A con­sul­ta­tion was launched, due to end in June 2018 – which seeks views on pro­pos­als in­clud­ing grant­ing work­ers new rights to ad­dress the gig econ­omy and launch­ing an on­line tool to help peo­ple iden­tity their sta­tus.

While there are cur­rently no signs of the gig econ­omy be­ing sti­fled in New Zealand, over­seas de­vel­op­ments do raise the ques­tion of whether ex­ist­ing laws are fit for pur­pose in this rapidly chang­ing em­ploy­ment land­scape.

Gil­lian Ser­vice is the em­ploy­ment part­ner at Min­ter El­li­son Rudd Watts. Her broad em­ploy­ment prac­tice in­cludes ad­vis­ing on all facets of em­ploy­ment law in­clud­ing health and safety mat­ters.

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