Blog |Left Behind: The Story of New Zealand’s Gig Workers

By Avinash Govind

Left Behind: The Story of New Zealand’s Gig Workers

Earlier this year, amid the unveiling of the government’s COVID-19 economic response packages, many individuals in a small but growing section of our workforce were left without the ability to access the wage subsidy scheme. While the government programs were designed to ease the burden faced by workers and businesses across the country; New Zealand’s gig workers were left with little help. Though the causes of this issue have to do with an understandable oversight in the implementation of the scheme, given that it took place during the government’s response to a global pandemic. The episode was still reflective of a larger discrepancy which has arisen within New Zealand’s employment framework in recent years.

The Rise of a New Economy

During times of economic change, an unfortunate consequence of the growth of new employment structures has often been the dilution of the protections offered to workers. The causes of these dilutions often relate to either an absence of adequate regulations or the creation of industrial norms which shift power away from our nation’s workforce.

Throughout the 1990s, the simultaneous rise of New Zealand’s service sector and fall of its industrial core saw the proliferation of individualised contract negotiations across our economy. As such contracts became the status quo, our economy began to observe the decline of organised labour, with union membership falling to an estimated 10% of the workforce in 2019, from a peak of over 45% in 1986. While this fall was largely driven by shifts in the attitudes of employers, few policy measures were taken to prevent this decline from occurring. 

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Union Membership NZ 1906-2006. Source: Teara.govt.nz

The consequences of the decline in union membership have been significant, with the portion of New Zealanders making less than 120% of the minimum wage rising to nearly 25% of our workforce in 2015. Despite this, most New Zealanders employed in the service sector maintained the right to receive a minimum standard of employment throughout this period of our economic history. 

However, beginning in the mid-2000s and continuing into the 2010s, technology start-ups from around the world began designing systems to link those providing services with those requiring those services. These include apps like Uber and Ola!, which function as a medium which drivers can use to reach potential passengers. Throughout their history, these companies have framed the relationship between the platforms and their workers as being one where workers are entirely separate from the platform itself. It appears that in the eyes of these firms, workers are merely using the platforms to advertise their services and find customers

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Ola and Uber, some of the largest ride-sharing apps in New Zealand

Though this framing may seem innocuous, it has had the effect of creating a grey area in New Zealand’s labour law, where workers in our gig economy find themselves outside of the frameworks used to govern our labour market.

Under the current legislation governing New Zealand’s labour market, workers are segmented into two categories: employees and contractors. Employees generally receive specific protections surrounding their working conditions, such as the right to collectively bargain, receive sick leave and receive a minimum wage. Conversely, while contractors receive some protection from unfair business practices, they do not receive the same level of protection around working conditions. 

This system is based on the idea that contractors can afford fewer labour protections than employees due to the level of independence which they maintain. Indeed, contractors can control their working hours, their wage for any given job, and have the ability to move between employers easily. 

While this system provides an adequate framework for regulating much of our workforce, the growth of services such as Uber, UberEats and Ola!, have given rise to a segment of our population whose working conditions fall somewhere in between employees and contractors: our nation’s gig workers. Gig workers often maintain a relatively high degree of control over their working hours, while their ability to determine their employment conditions and wages are set by the platforms on which they provide their service. Besides this, the relatively low number of widely used gig economy platforms offer challenges to the ability of workers to move between services. 

Despite the nature of gig work falling outside of the traditional employment paradigm, workers in the gig economy are often classified as contractors and thus left in a position where they lack the independence of contractors and the protections afforded to employees.  

The fears of the forgotten:

Going back to the issue with the government’s wage subsidy; the difficulties faced by gig workers related to the scheme’s eligibility requirements. To qualify for the subsidy, a contractor needed to show that they had taken steps to mitigate the impact which Covid-19, and the resulting responses, would have on their ability to work. While this may be a reasonable requirement for contractors who maintain the independence to move between employment providers and advertise their services in a range of ways, the dependence which gig workers have on large platforms limited their ability to take the necessary steps to qualify for the wage subsidy. 

Given the rapid need to address the sudden loss in income which individuals and businesses across the country faced, the government’s decision to base the requirements of the wage subsidy scheme on the current categories of employment was understandable. However, the issue did reveal the urgent need for reforms to our system of regulating labour which account for the interests of gig workers.

Indeed, being ineligible for certain benefits is just one of the issues faced by workers in the gig economy. According to a 2019 study of Canadian workers, individuals employed in the gig economy were 50% more likely to experience helplessness and 40% more likely to feel as though they lacked control over their lives, when compared to those employed in the traditional labour market. Similarly, the same study found that gig workers experienced higher levels of anxiety and depression than other Canadian workers. 

While the flexibility of gig work may provide some benefits to those employed in the area; the Canadian research on the reality of gig work reveals the immense harm caused by an absence of adequate protections in this segment of the labour market. 

Modernising employment regulation

Understanding the need to expand New Zealand’s employment framework to address the needs of gig workers; in November of 2019, the Ministry of Business, Innovation and Employment (MBIE) released a set of proposals to address the issue, with the endorsement of Iain Lees-Galloway, the Minister for Workplace Relations and Safety.

Among the proposals by MBIE were the following:

  • Increase targeting by labour inspectors to detect the misclassification of employees as contractors.
  • Give labour contractors the ability to decide workers’ employment statuses.
  • Penalise businesses which misrepresent an employment relationship as a contracting relationship.
  • Introduce disclosure requirements for firms when hiring contractors.
  • Reduce costs for workers seeking employment status determinations.
  • Put the burden of proving a worker is a contractor on firms.
  • Extend the application of employment status determinations to workers in similar conditions.
  • Define some occupations of workers as employees.
  • Change the tests used by courts to determine employment status to include a wider group of workers.
  • Extend the right to bargain collectively to some contractors.
  • Create a new category of workers with some employment rights and protections.

The proposals made by MBIE can largely be broken down into three categories: policies to prevent companies from misclassifying employees as contractors, policies to expand some labour protections to contractors, and policies to create new categories of employees. 

Given that many of the policies suggested by MBIE have been implemented in developed economies such as Canada, the European Union (EU), and the United States, with varying levels of success; it is worth examining these cases to get a better idea of the ways in which these policies could be implemented as well as their potential consequences.

When examining strategies to regulate with the gig economy, a key point of difference between many of the different approaches involves a debate of whether to reclassify gig workers as employees, or whether to create a new category of workers to describe those employed in the gig economy. Both approaches carry a unique set of benefits and challenges in terms of balancing the extension of labour protections to gig workers with the maintenance of the flexibility desired by many of those workers.

Canada: The creation of a new category

In February of 2020, in a decision welcomed by Canadian labour activists such as the Canadian Union of Postal Workers (CUPW), the Ontario Labour Relations Board (OLRB) ruled that drivers for the food-delivery service Foodora were to be classified as ‘dependent contractors’, a Canadian labour category in-between employees and independent contractors.

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Foodora workers protesting in Toronto on Labour day. Source: Toronto Star

The OLRB decision, which was reported to be the first of its kind in the province, stems from Ontario’s Labour Relations Act 1995, which gives dependent contractors the ability to unionise and collectively bargain with employers, as well as the right to receive reasonable notice of termination. However, under Ontario’s labour regulations, dependent contractors receive few benefits with respect to severance pay, sick leave or a range of other protections afforded to employees. While many Canadian labour activists supported the legislation as a step in the right direction, the law was criticised for not instituting protections equivalent to those of employees.

In a statement released about the ruling, the CUPW National Vice-President Jean-Phillippe Grenier noted that the verdict was “a critical decision towards better worker rights in the gig economy” while pointing out that “progressive legislation that will protect all precarious workers” were still needed. Conversely, Foodora Canada released a statement in which it argued that the classification of couriers as independent contractors “provided flexibility for couriers, allowing them to dictate when they work and for how long, to accept or decline orders, to choose when to take time off, to use their own equipment and to provide services to multiple delivery clients concurrently”, while noting that they “respect the Board’s process”.

The potential pitfalls associated with the legislation adopted by Ontario’s government were made clear a few months after the OLRB handed down its decision in the Foodora dispute. In late April, at the height of the Covid-19 pandemic, Foodora announced that it would be suspending its operations in Canada on the 11th of May. In a statement announcing their decision, Foodora cited the “highly saturated [Canadian] market for online food delivery” and an “inability to reach a level of profitability … that’s sustainable enough to continue operations”. The organisation did not draw any linkage between the OLRB’s ruling and their decision to end Canadian operations. 

Given that Foodora was made to file for bankruptcy shortly after their announcement, reporting over $4.7 million in debt, and that no other delivery service followed the organisations lead; aside from the timing of the two incidents, there is limited evidence to suggest that Foodora’s decision was linked to the OLRB’s ruling. Indeed, despite some Uber drivers in Toronto having unionised earlier this year, the company hasn’t signalled any desire to leave the Canadian market.

Foodora’s decision to exit the Canadian market did highlight the disparities between the protections afforded to dependent contractor’s and other Canadian workers. While most Canadian workers are allowed up to 6 months of severance pay, the couriers at Foodora weren’t legally entitled to those benefits. It is worth noting that this would likely not be an issue within the context of New Zealand, given that no workers in New Zealand are entitled to severance pay. 

France: Recognising Gig Workers as Employees 

In contrast to the Canadian regulatory model, which created a new category of employment to account for the nature of gig work, many other nations have chosen to pursue an alternate path: treating gig workers as employees.

The rationale for treating gig workers as employees largely stems from the argument that despite gig work falling somewhere in between traditional notions of employment or independent contracting, the nature of gig work is similar enough to traditional employment to justify treating it as such. 

In March of 2020, France’s highest court of appeals affirmed a ruling which recognised an Uber driver as an employee who was entitled to all protections afforded to other French workers. These protections include receiving paid leave, sick leave and minimum compensation. Beyond this, classifying Uber drivers as employees would require the company to pay employment-related taxes, which they have previously been exempted from. 

In their ruling, the French court noted that “When the driver goes online on Uber’s digital platform, there’s a relationship of subordination between the diver and the company … the driver isn’t providing a service as a self-employed worker but as an employee”. Further, in their ruling, the French court highlighted that the ability of Uber to set the rates charged by drivers, evaluate driver’s performances, through user ratings, and penalise drivers with low ratings are indicative of the relationship between Uber and its drivers being an employment relationship.

While the French court’s ruling did not apply to all Uber drivers, over 150 French Uber drivers were reported to have requested that courts recognise them as employees.

An Uber spokesperson later suggested that “[the company has] made changes to give drivers even more control over how they use Uber” since the case was initially filed. The same spokesperson also noted that the ruling was not reflective of “the independence and freedom [of drivers] to work if, when and where they want”. However, the attorney for the driver in the case suggested that the ruling “will impact all platforms inspired by Uber’s model”.

California: A Word of Caution

In September of 2019, the Californian State Legislature passed an expansive piece of legislation, known as AB5, which held that all Californian workers would be considered employees unless three conditions were met:

  • The person is free from the control and direction of the hiring entity, both under the contract for the performance of the work and in fact.
  • The worker performs work that is outside the usual course of the hiring entity’s business.
  • The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

While this legislation was successful in recognising the rights of gig workers, such as those who perform services for ride-sharing services, the law had some unintended consequences. By creating a standard of employment which was overly broad, AB5 also resulted in many genuine independent contractors, such as freelance writers, being left with some uncertainty over their future employment prospects. In the case of writers, this was partially because the bill required that any freelance writer contributing more than 35 articles each year to a publication be considered as an employee. 

Shortly after the bill’s passage, Vox Media announced that they would be replacing around 200 freelance writers with a team of about 20 full-time and part-time employees. However, it is worth mentioning that many other outlets continued to hire California-based freelance writers in the aftermath of the law’s passage.

Around the same time, groups representing both journalists and photographers joined together to sue the Californian government over its passage of the legislation. Both groups in the lawsuit argued that limiting the number of articles a journalist could publish for a given outlet would violate the journalist’s right to free speech. 

Conclusion

Examining the array of policies implemented to extend labour protections to workers in the gig economy; it appears that regardless of the strategy the government chooses to take when regulating the gig economy, extending non-equal protections to such workers would likely raise issues surrounding the fairness of such legislation. Similarly, laws which are overly broad may unintentionally impact genuine independent contractors across the country.

However, what is clear is that if we allow our gig workers to remain outside the realm of labour law as we move into a period of economic distress, when vulnerable workers are likely to turn to temporary work, we risk allowing the gig economy to reshape New Zealand’s labour market in ways which are likely to further entrench the economic and social inequalities which can be found throughout the country.

 

 

 

 

 

 

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