Working Class.. Independent Contractor
When, in 1985, Jimmy Barnes immortalised the Australian steeltown disciple, blue denim in his veins, a ‘working class man’, he sure wasn’t singing about a bike-riding, point-to-point self-employed food delivery technician.
Two years ago,1 I wrote about the emergence of the gig worker in the Australian labour market. Since then, here at FCB Workplace Law, we’ve been following the developments in business practice and case law in Australia that examine non-standard employment, including workers in the gig economy. Throughout 2018, we saw a noticeable increase in the conversation about this emerging segment of the labour market in the tribunals, political parties and amongst our clients, along with several notable decisions by the Fair Work Commission. Here are some of them…
Can you fire your driver?
In December 2017, the Fair Work Commission (FWC) dismissed an unfair dismissal application by an Uber driver.2 After examining the nature of the relationship and communications between the driver and Uber, and the terms of the written agreement between them (which expressly identified the driver as an independent contractor), the FWC dismissed the unfair dismissal application because the driver hadn’t been employed by Uber and could not, therefore, have been unfairly dismissed. In determining the matter, however, the FWC observed that “Uber does not simply sell software; it sells rides.”
In May of 2018, the FWC heard an unfair dismissal application by another former Uber driver.3 Naturally, Uber objected to the claim on the basis that the driver was not an employee, but this time the driver had been engaged in a partnership arrangement. In examining what the driver brought to the arrangement, the FWC observed:
“The work performed … and the manner in which it was performed (was) relatively high volume, largely unskilled and performed alone with customers. He did not bring anything especially entrepreneurial to the arrangement, merely the provision of things such as his time and his car to deliver a homogenous transportation service to the customer who might rate his performance at the end of the trip, but more often than not did not do so.”
After carefully analysing a range of factors including the control over the work, the ability to work for others, the provision of a motor vehicle by the driver, the inability to delegate the work to others, the absence of paid leave and the mode of remuneration, the FWC concluded that the driver was not an employee and therefore was not protected from unfair dismissal.
A more recent case involving a Foodora rider produced a different result, however. In November 2018, the FWC decided on an unfair dismissal claim brought by an ex-Foodora rider.4 The rider claimed he was dismissed unfairly after he made unfavourable public comments on the rates paid by Foodora to delivery riders. Foodora objected to the claim, saying the rider could not be protected from unfair dismissal because he was a contractor, not an employee. The company said the contract came to an end after it decided not to offer any further contract work to the rider. This decision followed a request from Foodora to transfer a social media chat group that had been established by the rider for the Foodora rider community. It also turned out that the rider had engaged in a practice of allowing other persons to log on to the Foodora app using his details to perform delivery work, in return for a notional 1% fee, and he had not sought or received approval from Foodora to sub-contract out work in this way.
In August 2018, before the claim could be determined, Foodora went into administration. The administrators, however, consented to the claim being heard and determined. As in the earlier Uber decisions, the FWC first had to decide if the rider was an employee or a contractor, and the FWC applied the same criteria in order to do so. In this case, the Commission took into account a number of factors including the following:
The written contract described the rider as a
contractor and not an employee
- Foodora had provided the rider with a range of branded attire, including an insulated box in which to transport food deliveries
- Foodora (via its app) determined the point-to-point locations of each delivery
- The rider was able to work for others, and did so, on a limited basis
- The rider could only subcontract the work to another person with the consent of Foodora.
The Commission concluded that, looking at the overall picture, the rider was an employee and not a contractor, and thus able to claim unfair dismissal. In coming to this conclusion, the FWC clearly recognised that the gig worker phenomenon was stretching the existing tests for defining an employee:
“In my view, there may be a need to expand and modify the orthodox contemplation for the determination of the characterisation of contracts of employment vis-à-vis, independent contractor, as the changing nature of work is impacted by new technologies.”
The Commission ultimately held that the real reason for the dismissal was the making of the adverse public comment, it was unfair, and awarded the rider $15,000 in compensation.
Note: if a Court came to the same conclusion, it may be open for the Foodora rider to make an underpayment claim, if he can establish that the Foodora pay model meant riders earned less than an employed bicycle courier doing the same job. Such a claim may not be practical, given Foodora is in administration, but watch this space!
So – the current state of play is that if you supply a vehicle to transport passengers who contract with you via a third-party app, you are a contractor and not an employee. However, if your task is to collect food and beverages at point A, and deliver those items as quickly as legally possible to a customer at point B, where all three parties engage via a third party app, then you may be an employee and not a contractor. Simple!
The preceding decisions have all focussed on what happens when the work relationship ends, and whether the worker has a right to be protected from unfair dismissal. An equally important issue is whether these types of work arrangements could be characterised as a “sham”. It’s by now a well-established rule of law in Australia5 that a person who misrepresents to a worker that an employment contract is an independent contract arrangement can be found to have breached the Fair Work Act 2009, and be ordered to pay civil penalties and compensation to the worker. A number of powerful Court decisions have upheld this principle, with more claims currently proceeding through the courts.6 A telling signal that can point towards a sham contract arrangement is where the rate paid to the worker is less than what that worker would have been paid as an employee under an Award performing the same work.
In other words, will Jimmy’s working man still be able to save all his overtime for the one love of his life?
In one notable decision, in May 2018,7 a principal contractor was held to have been involved in the underpayment of wages by its sub-contractor to cleaners, because it knew the rate paid by the principal to the sub-contractor was less than the Award rate for that work, and was less than the rate it paid its own employees engaged in cleaning work. Quite separate from the underpayments found to be owing to the cleaners, the Court imposed penalties on the principal of over $130,000 for their involvement in that sham arrangement. It will be fascinating to see how the Court approaches a claim of this type made by, or on behalf of a gig worker – surely a case of when, not if.
At FCB, we’re already working with a number of our clients who are keen to utilise the flexibility and scalability offered by a gig work model. Issues such as termination rights and remuneration models are just two of the significant matters that need to be carefully considered when doing so; others include engagement, branding, image and reputation, IP rights, safety and insurance, to name a few.
If 2019 will be the year where you focus on your labour supply chain or develop your gig worker strategy, then please let the team at FCB Sydney, Melbourne or Brisbane know if we can help you with planning or implementing this activity.