Court of Appeal rules Uber drivers are employees and are not responsible for GST
Uber has lost its appeal against a New Zealand Employment Court ruling that its drivers are employees as Uber controlled the terms of the contracts. This is similar to the UK Uber employee VAT case which is ongoing (Uber won its latest appeal in this case). This means drivers are not responsible for Goods & Services Tax obligations since they are not the contracting principal.
From a tax perspective, the drivers are now subject to payroll tax deductions by Uber, and are no longer subject to GST collections obligation.
Uber started to charge GST on its ride services from 1 April 2024 following the Employment Court ruling as part of New Zealand GST platform deemed supplier changes.
This follows much recent debate about the VAT / GST implications of the gig and sharing economies. The EU’s VAT in the Digital Age reforms includes Pillar 2, VAT on digital economy ride sharing platforms.
Court of Appeal tackles two employment and contract issues
The Court of Appeal addressed two issues in Uber’s appeal against the Employment Court (EC) ruling that declared Uber drivers employees.
- It questioned whether the EC misapplied section 6 of the Employment Relations Act 2000, which defines “employee” by assessing the true nature of the relationship between parties.
- It examined whether the EC’s conclusions were so flawed they amounted to a legal error. The Court of Appeal found that the EC misdirected itself by not beginning with the express terms of the agreement between Uber and its drivers. The EC also failed to properly apply the three common law employment tests:
- control;
- integration; and
- if the driver is in business on their own account.
The Court of Appeal found Uber’s contracts were heavily controlled by Uber, limiting the drivers’ autonomy. Although drivers were essential to Uber’s business, this did not indicate independent contractor status. Drivers were subject to Uber’s control during logged-in periods and had no ability to establish their own businesses. Despite errors in the EC’s analysis, the Court of Appeal concluded that the real relationship between Uber and its drivers was one of employment, meeting the section 6 test. As a result, the appeal was dismissed, affirming the drivers’ employee status.
