In a proceeding which may put pressure on the burgeoning gig economy, labour inspectors are taking a case against several Pizza Hut owners, arguing that 28 of their delivery drivers are employees, not independent contractors.

Under current labour laws, independent contractors are not given the same rights such as minimum pay, sick leave and holidays, as employees of a company.

Labour inspectorate regional manager Kevin Finnegan says it is bringing the case against several Pizza Hut franchisees because of an issue with their particular business model, which it says will potentially affect a wide range of workers.

"Non-compliant business models are an identified priority for the Labour Inspectorate because they undermine fair competition between business, may be adopted by other businesses as they try to compete, affect large numbers of workers across industries, and involve significant sums of money," Finnegan said in a statement emailed to BusinessDesk.


Restaurant Brands New Zealand, as the franchisor, is also party to the case. The NZX-listed company said it was unable to comment at press time and the lawyer for the defendant franchisees indicated his clients do not wish to comment while the matter is before the court.

The companies listed as defendants are Gill Pizza and Malotia Pizza, but it is not clear how many pizza stores are involved in the case. When asked which Pizza Huts were involved, Finnegan said "the inspector understands this is the current practice for many Pizza Huts."

The directors of both companies are Sandeep, Jatinder and Mandeep Singh, whose registered address at the Companies Office is in Wellington.

Finnegan would not be specific about how much was claimed in unpaid wages, but said the case followed a pro-active audit.

"The inspectorate believed the workers were employees, who had not received minimum entitlements," he added.

The case is still at a preliminary stage, with the Employment Court ruling last month on the matter of whether the labour inspector could bring proceedings directly to the cheaper Employment Relations Authority.

A panel of judges said in a judgment delivered by chief employment court judge Christina Inglis that the case must begin in the higher jurisdiction.

The distinction between employees and contractors has become more of a hot issue in recent times, with courier drivers represented by First Union bringing an Employment Court case in August last year.


While that matter had settled out of court, First Union's Jared Abbott said another case, against Auckland-based Parcel Express, is set to go before the Employment Court later this year on the issue.

Hesketh Henry head of employment Jim Roberts says in countries with similar laws to our own, there seems to be a steady march towards employment rights for people described as contractors.

While the use of contractors is well-established in the film and construction areas, the gig economy has introduced contracting to different industries.

A recent United Kingdom case known as Pimlico Plumbers had ruled in favour of a plumber who claimed he was in employment, rather than a contractor.

While the UK has a slightly different approach to New Zealand, Roberts said the case is likely to impact app-based companies such as Uber and Uber Eats.

Roberts says in Australia the Fair Work Ombudsman took action against food delivery company Foodora, alleging that misrepresented to workers that they were independent contractors when in fact they were employees.