‘Dependent contractors’ say they are forced to fight numerous battles against corporates like the Australasian company owing to New Zealand’s lack of regulation, reports Maria Slade

There are those who can’t face the day before they’ve had their Vogel’s toast. Maybe you want your Molenberg. Or perhaps your kids refuse to eat bread with “bits” in it so the only way to avoid a riot is white fluffy Nature’s Fresh.

The brands keeping Kiwi mealtimes harmonious may be local icons, but their maker is a corporate giant. Asia-Pacific conglomerate Goodman Fielder is a major player in the New Zealand food industry, responsible for supplying a host of emblematic brands from Chesdale to Edmonds.

It in turn relies on an overnight army of bread run drivers to ensure the nation’s supermarket shelves are stacked with its freshly made loaves. The truckies work seven days a week, 363 days a year (bar Good Friday and Christmas Day), starting at around midnight and working well into the next day. Like many in the transport industry, drivers own their runs and operate them as a small business including hiring in-store merchandisers and relief drivers so that they don’t drive longer than they’re legally allowed.

Despite their key role in its distribution chain Goodman Fielder has had a fractious and ungentle relationship with its New Zealand bread run truckers. Since the early 2010s it has fought numerous cases against drivers who have variously had their businesses summarily dissolved, been forced to work illegal hours to make their runs pay, and had their cost models slashed to an unsustainable level.

The latest conflict is with a group of longstanding Coromandel drivers whose contracts it is preparing to rip up, including one who has served the company for 30 years. A number of other drivers in Auckland and Hamilton face a similar fate.

The cancellations will wipe out the drivers’ businesses, an asset they are supposed to be able to buy and sell. “In one fell swoop they are taking away the value of these contracts which would otherwise be traded,” says Ben Upton, a partner with law firm Simpson Grierson who is representing the drivers pro bono.

Goodman Fielder is offering lump sum “exit payments” but the amounts are not what the contractors would have ordinarily been able to sell their runs for, Upton says.

The bread run drivers’ current battle is being fought as the government gears up to take action over unfair commercial practices, including one-sided contracts. There is clearly a gap in existing legislative protections, the Ministry of Business, Innovation and Employment (MBIE) says. In a survey it conducted last year nearly half of small businesses reported being stung by onerous conduct or contract terms in the previous 12 months. The ministry has just collected submissions on a discussion document that suggests a range of remedies, including banning “unconscionable” and “oppressive” conduct, and/or extending protections against unfair terms in consumer contracts to businesses.

The Goodman Fielder drivers are in a class of Kiwi workers now known as ‘dependent contractors’, Upton says – self-employed people who supposedly have bargaining power but who serve one customer that holds all the cards. “Arguably a lot of these contractors are very similar to employees, but because they are strictly speaking not employees they then fall into a category of being a contractor where there is little protection.

“It’s actually quite a big chunk of SME enterprises these days, your little delivery man is one of these SMEs.”

New Zealand’s paltry law in this area is not on their side, he says. “We’re fighting this,” he says of the Coromandel bread drivers’ situation. “It could be a bit of test case.”

“Just so tired.”

Auckland truckie Charlie Rian keeps repeating the phrase as he describes his first 18 months driving for Goodman Fielder.

Rian did his homework when he was offered a bread run contract in 2006. The numbers looked good as far as his accountant and banker were concerned, and although there was no room for negotiation on the conditions Goodman Fielder was a blue chip company with blue chip brands, he reasoned. He remortgaged his Mt Eden home and stumped up $113,000 to buy the run.

Within a week it became clear something was wrong. Despite the numbers the previous driver had shown him the company had cut the pay rates without discussion or notice. “Essentially what this meant was the thick end of $1000 wiped off every week,” he says.

He talked to everyone he could think of in the company. “I said, ‘this is a mistake, it needs to be put right. With operating costs and everything, I’m actually losing money here’.”

He got nowhere, and eventually hired a lawyer who wrote to Goodman Fielder on his behalf. Next thing he was called to a meeting with several managers.

There was no mention of the lawyer’s letter but one of the managers issued “a word of caution”, Rian says. “I’ll never forget it. He said ‘around here people that make waves tend to have the termination portion of their contract activated’.

“It was a huge wake up, it was fear. I had 100-and-something thousand at stake. I went out of there like a pup.”

He felt th company “had him”, he says. “There was no way out. I couldn’t sell [the run], it was non-viable. In fact I tried and virtually got laughed at.

“From that day on I was to all intents and purposes a slave of the company. I was making no money. Anything that came up, a new tyre for the truck, a certificate of fitness… all went on the credit card, I couldn’t pay a thing.”

It also meant he worked seven days a week, 13 to 14 hours a day – in breach of the law.

“On a Friday I would start at midnight, and get home at 5pm the next day.

“I was just a zombie. I blacked out on the way home at an intersection, [got] hit by a car. I blacked out again, went up on the curb, smashed the front wheel.

“Then one day I just couldn’t move. I was at work, and I had to take bread off the back of the truck. I just physically looked at it, and just couldn’t move. I was that weak, that run down.”

His wife Susan forced him to go to the doctor, who made a startling discovery. Rian had continued to work with a broken toe, and the untreated injury had led to blood poisoning and a life-threatening bacterial infection.

“This is the frightening thing: He said to me, ‘another day Charlie, I couldn’t have done anything for you’.”

Rian took a powerful course of antibiotics and struggled on. Ironically a restructuring of the bread run contracts 18 months later worked to his advantage: While other drivers had their runs dissolved, Rian’s was reshaped to work as it was supposed to in the first place.

“I should have sold right then and there,” he says. Hindsight is a wonderful thing.

Instead he continued for another two-and-a-half years, this time driving just 11 days a fortnight and even able to employ his youngest daughter as a merchandiser.

Then in 2010 his contract was axed. “What they did, basically, is they wound back my hours (and) said, ‘your round’s no longer viable, so under such-and-such clause we’re dissolving the run’.”

To this day he has no idea why. What’s more, the company subsequently handed the run to another contractor and put the hours back up, he says.

“It doesn’t make sense. It’s the same as winding back my commissions. Okay they save some money short term… but here’s a guy now dying, who can’t operate, who can’t do the job he’s meant to be doing.”

The experience cost Rian his house. Including the eventual dissolution of the contract he was out of pocket by about $200,000, so he and Susan made the hard decision to move out of Mt Eden and “down-sell” to Papatoetoe.

With Ben Upton’s help Rian was eventually able to reach a confidential settlement with Goodman Fielder. “The decency in that guy. Eternally Susan and I will be so grateful for him,” he says.

Rian is still working as a truck driver, but this time as an employee of a company that treats its people well, he says. “I get well paid, get holidays, I get all of the things owing to me.

“The reason [companies] want independent contractors is so they can get out of all of their obligations, holiday pay, ACC, uniform, phone, anything else that are legitimate payments to an employee.”

Ben Upton and Peter Gallagher are an unlikely pair. While Upton is a high-flying commercial lawyer, Gallagher is a former truckie who set up the New Zealand Professional Drivers Association ProDrive and now spends his days advocating for the country’s owner-drivers.

They first met when Gallagher’s Goodman Fielder bread run was dissolved in the 2008 restructure that initially improved Charlie Rian’s situation. With apparently no hint of irony Goodman Fielder dubbed the project ‘Operation Tonka’.

“I don’t know what they were drinking that Friday afternoon,” Gallagher says. “For a nationwide restructure, the reduction of 30 or 40 per cent of their contracting staff, I mean what’s that got to do with a Tonka toy?”

Gallagher spoke out against the restructuring, and believes that’s why he was one of those axed. During the Tonka project he was driving 15 to 17 hours a day, largely because of inefficiencies which meant Auckland drivers had to wait for bread to be delivered from the Huntly bakery before they could go out on their runs.

“I had incident after near-miss incident, I got put off the road by the police for driving erratically at four o’clock in the morning up the Dairy Flat Hill,” he says.

Upton took on Gallagher’s case as an individual. “That got me and Peter talking, and this led to the Olsen case,” Upton says.

The ‘Olsen case’ involved 11 Auckland contractors whose cost models had been arbitrarily cut.

The Goodman Fielder contracts allowed the company to alter the payment mechanisms at will, Upton says. These guys had signed up to bread runs in 2008, and “two years later a very over-enthusiastic executive went through and altered all the inputs to the cost model”, he says. It resulted in around a 25 per cent pay cut on one week’s notice.

It was no coincidence that Goodman Fielder had just had to announce a A$300m impairment charge on its baking division, he argues. “Suddenly the company’s looking for ways to make that money good and one way was to cut people’s pay.

“We literally had a meeting where the executives on the other side of the table were staring us down saying ‘oh well we have to make these cuts because some of us on our side of the table may not be here next week’,” he says. “That really sheeted it home.”

With Upton’s help the drivers took Goodman Fielder to the High Court. The relevant clause in the contract was vague, and after trying various unsuccessful tacks they finally achieved a surprising victory.

The judge’s decision was “a bit of a stretch”, Upton says. “What the court did was to apply a duty on Goodman Fielder.”

It said when a company has this type of power it has to give notice if it is going to make a material change to the contract, then consult, and if it still goes ahead with the change it has to give sufficient time for the other party to adjust. The result was that Goodman Fielder undertook a review in discussion with each contractor and 50 per cent of the cuts were removed.

“I thought the court would at least be open to having a pretty strict view of the contract, but no,” Upton says. “So the only technique it then applied was this vague concept of implying some sort of duty into the contract, which of itself is actually quite a fragile concept.”

It highlights the fact that “there is no legislative protection for this type of behaviour, which in my view was pretty abhorrent commercial conduct”, he says.

Despite losing the Olsen case Goodman Fielder continued to pursue similar tactics, Upton says.

For example, he says, the company had a method of payment for merchandising — the task of stocking and displaying the products on the shelves appropriately. Goodman Fielder would work out that it took something like 20 minutes at each supermarket, and that’s all it would pay for. But the merchandiser may have to drive around five stores each night and couldn’t possibly do the task in an hour and 40 minutes.

“So we’d have debates like that where they’d just apply this quite senseless methodology, which was all very logical from their perspective… yet you have the contractor sitting there saying ‘well actually you just can’t do it that way’.”

The Spinoff sent a written request to Goodman Fielder seeking comment on the Charlie Rian case and the ongoing series of disputes with bread run drivers following the Olsen decision. “This matter was resolved seven years ago,” a spokesperson said in a one-line response.

The Coromandel drivers’ case is Upton and Gallagher’s 12th against the corporate baker. Meanwhile in his ProDrive role Gallagher deals with plenty of other cases of vulnerable contractors facing unfair conditions, particularly in the courier industry.

The pair are now hellbent on affecting some kind of legislative change, and the issue is far from new.

Upton points out that the Law Commission looked at the issue in 1990 and came up with suggested legislation that fits with the problems MBIE is looking into today.

In 2015 they put in a submission on a bill proposed by the then opposition Labour Party aimed at guaranteeing a minimum wage for contractors. The bill was scuppered.

ProDrive has duly submitted on the latest MBIE discussion document.

“Corporate advantage prevails in the transport industry and within many other independent contractor relationships where there is a visible imbalance between the contractor and the principal,” it says in its submission.

“Very few rights including those of collective representation are retained by contractors.  Business risk and precarity is high, however remuneration rates and returns to business owners are correspondingly low.

“This, coupled with inadequate regulatory protection, results in a fundamentally distorted marketplace, where transport operators post millions of dollars in profit on the backs of contractors whose incomes permanently ‘hover’ between (at best) minimum and living wage.”

The vast majority of contractors in the transport industry are poorly educated about contracts, health and safety and transport law, and new immigrants often have English as a second language, it points out.

“This conduct is not acceptable in a society like New Zealand,” Gallagher says. “At heart we’re not a society that stands by and watches people get destroyed.”