Introduction

“Gig economy” is an emerging global trend where individuals take up part time jobs or engage in project-based and temporary freelance works on an on-demand and self-employed basis. In recent years, especially during the COVID pandemic, there has been a surge in the number of gig workers. Gig economy companies in Hong Kong usually provide courier and transportation services, where the gig worker couriers will deliver the goods to customers using self-owned vehicles and other tools such as phones.  

Whilst gig economy companies may have intended to hire their gig workers as “independent contractors” (i.e. self-employed persons), whether the gig workers they hired are in fact “independent contractors” or “employees” in the eyes of the law will very much depend on the facts and circumstances. The classification of whether a gig worker is an independent contractor or an employee has a huge impact on the gig worker’s entitlements to statutory benefits and protection, and the duties imposed on the employer. This undoubtedly has a significant bearing on the financial planning, risk management and business variability of the employers.

In May 2023, the Labour Tribunal ruled in favour of 6 gig worker claimants, who formerly worked as couriers for Zeek, a food and parcel delivery company. The gig workers claimed against Zeek for outstanding wages, payment in lieu of notice, unpaid statutory holiday pay and annual leave pay. Their claims would only be successful if the Tribunal ruled that they were “employees” (and not “independent contractors”), which the Tribunal did. This is the first time in Hong Kong when the Labour Tribunal found gig workers are employees.  

Background

Since around November 2022, Zeek was unable to pay its gig worker drivers and warehouse workers. In January 2023, the claimants as “employees” commenced proceedings against Zeek in the Labour Tribunal.

Classification of “independent contractor” and “employee”

The Labour Tribunal has exclusive jurisdiction to determine claims arising from breach of employment contracts and Employment Ordinance (Cap. 57). However, if the gig workers were not “employees”, they could not bring their claims against Zeek in the Labour Tribunal.

There is no hard and fast rule to classify whether a gig worker is an ”employee” or an “independent contractor”. In the leading case of Poon Chau Nam v Yim Siu Cheung [2007] 1 HKLRD 951, the Court of Final Appeal ruled that the modern approach of the question of whether one person was another’s employee is to examine all the features of their relationship against the background of the indicia developed in the case law with a view to deciding whether, as a matter of overall impression, the relationship was one of employment.

In essence, a myriad of non-exhaustive factors and indicia of employment will likely be taken into account by the courts to determine whether there is an employment relationship between the parties, including:

1.       the degree of control over procedures, working time and method exercised by the employer;

2.       who provided the equipment for performing the services;

3.       whether the individual may hire additional helpers for performing the services;

4.       the degree of financial risk borne by the parties;

5.       whether and how far the individual had an opportunity of profiting from sound management in the performance of the task;

6.       the degree of responsibility for investment and management of the parties; and

7.       whether the individual is viewed as a part of the company.

Decision

By applying the legal principles laid down in Poon Chau Nam, the Tribunal held that the claimants were employees. The Tribunal’s main reasons are set out below.

Degree of control over the claimants

In terms of the degree of control that was exercised over the claimants, Zeek determined the delivery routes, work locations and the orders that the claimants had to complete. The claimants would be penalised if they refused to take orders and their contracts might be terminated. Zeek would conduct random checks and those who were not in compliance with Zeek’s internal rules would be placed on a lower priority to receive orders or might be suspended from work.

The claimants were required to log into Zeek’s online platform when they were carrying out their duties. Zeek monitored their delivery routes and starting times. Once they have logged into the platform, they were not allowed to log out at will until they completed the tasks assigned. Zeek determined the amount to be paid to the claimants and they were not allowed to obtain any fees from Zeek’s customers directly.

The Tribunal took the view that Zeek had exercised dominant control over the claimants and it was likely that there was an employment relationship between Zeek and the claimants.

Equipment provided by Zeek

Whilst the claimants provided their own vehicles and phones, Zeek developed its online platform that (i) allowed its customers to place orders; and (ii) was able to track the orders and calculate the claimants’ wages. The online platform was fundamental to Zeek’s business as it would be impossible for Zeek to operate without the platform. These factors pointed towards an employment relationship.

Whether the individual may hire additional helpers for performing the services

The claimants were not allowed to:

1.       hire additional helpers;

2.       drive another person’s vehicles; and

3.       share work accounts with others.

Incomplete work orders would be marked as bad performance on the online platform. These factors pointed towards an employment relationship.

The degree of financial risk borne by the parties

The claimants were paid a fixed amount of wages based on the number of orders they completed. Although the amount might vary, unlike independent contractors, the claimants had no other source of income nor were they allowed to change the method of calculation of their wages.

The Tribunal considered that the gig worker claimants were fundamentally salesmen earning commission based on the number of transactions they completed. The claimants bore no financial risks as all of the transactions between the customer and Zeek were carried out exclusively at Zeek’s online platform. These factors again pointed towards an employment relationship.

Opportunity of profiting from sound management in the performance of the task

The claimants worked in accordance with Zeek’s instructions and did not participate in Zeek’s management. Zeek’s profit and loss were unrelated to them. The claimants were not allowed to establish any relationship with Zeek’s customers nor offer discounts to customers. All of the claimants’ actions had to be done at the online platform and there would be traces of the claimants’ activities. These factors pointed towards an employment relationship.

The Tribunal ruled that the gig workers were employees and ordered Zeek to pay the claimants their outstanding wages, payment in lieu of notice, paid annual leave and paid statutory holidays.

Takeaways

This is the first Hong Kong case where the Labour Tribunal ruled gig workers are employees. That said, it does not mean all gig workers are independent contractors. There is no hard and fast rule on how to distinguish an ”employee” from an “independent contractor”. Indeed, in the Zeek case, the Labour Tribunal applied the principles laid down by the Court of Final Appeal in Poon Chau Nam and determined on the facts that the gig workers concerned were Zeek’s employees.

Zeek has since stopped operations and is being wound up. This has recently sparked a public debate on whether gig workers are independent contractors or employees, and whether new laws are needed to protect gig workers in Hong Kong. For our discussion on whether Hong Kong needs new laws to protect labour rights of gig workers, please click here.