The Gig Economy: blurring the lines?

15 June 2018

The contentious issue of employee v contractor in the gig economy is again front and centre with food delivery platforms Uber Eats, Foodora and Deliveroo in the spotlight concerning the engagement of their delivery riders and drivers.

Recent backlash has been evident with Jack Cowin the owner of one of the largest privately owned businesses in Australia, Competitive Foods, voicing his concern about gig economy platforms not being required to pay delivery workers the same rates as companies like Domino’s Pizza of which he is the chairman.

Speaking recently on the ABC he called on the Federal Government to launch an investigation into the employment practices of food delivery operators including Uber Eats, Foodora and Deliveroo. In arguing for a level playing field, he opined that there should be standardised pay and conditions across the food delivery sector and that operators engaging delivery workers as contractors should have to pay award rates.

His position may however be somewhat contentious as Domino’s previously unsuccessfully sought to negotiate an enterprise agreement, which the Retail and Fast Food Workers Union argued contained conditions which caused it to fall foul of the Fair Work Commission’s ‘better off overall’ test. Domino’s subsequently resorted to the award as the basis of its terms and conditions of employment.

Is Foodora the real deal or a sham?

Delivery juggernaut Foodora was the subject of scrutiny when an apparently leaked internal email cited ‘a manager’ as querying whether contracts provided to delivery riders blurred the lines between employment and their engagement as independent contractors, and therefore risked being deemed sham contracts.

The email reportedly highlighted the potential exposure and the risk faced by Foodora should claims be made against it by delivery workers. Citing experience in Italy, where the workplace regulator had made adverse findings against the company, it cautioned as to problems that could potentially be encountered here should the engagement of its delivery workers be challenged. The communique also queried whether existing contracts were suitably clear and recommended their review.

Responding to recent accusations by the Transport Workers’ Union that riders were being contracted so as to deny them their entitlements, Foodora countered with a statement that it engaged its delivery workers legitimately as independent contractors. In doing so the company highlighted the key points of its platform of independent engagement; being, the flexibility afforded to its delivery workers, the choice they have of accepting or rejecting orders, and not being precluded from engaging with other operators.

Most recently, in a media release on 12 June, the Fair Work Ombudsman reported that it has taken Federal Court action against the company for alleged sham contracting and underpayment of three workers, two bicycle delivery riders in Melbourne and one delivery driver in Sydney. The action alleges that the workers were engaged as independent contractors when they were in fact employees.

The Ombudsman reported that having examined the nature of the relationship between Foodora and the workers and applied the multifactorial test, it alleges the workers were actually employees who were entitled to receive minimum wages and entitlements under the Fast Food Industry Award 2010.

Should it be found to have engaged in sham contracting and underpayment as alleged Foodora faces penalties of up to $54,000 per contravention.

The Uber question

Uber was also in the frame concerning the vexed question of contractor or employee when the Fair Work Commission handed down another decision in relation to a driver’s claim for unfair dismissal on 11 May. The driver, Mr Pallage, made the claim in December last year following his ‘deactivation’ for breaching community standards.

Uber argued that the case was indistinguishable from the previous decision of Deputy President Gostencnik, in Michael Kaseris v Rasier Pacific VOF (21 December 2017). In finding the driver to be an independent contractor, the Deputy President observed that ‘the wages work bargain essential to an employment relationship was missing’.

Commissioner Wilson, in determining Mr Pallage’s claim, said there was a need to test the ‘characterisation’ of the relationship between Uber and the driver. He surmised as to whether the driver was in business for himself or not and he rejected Uber’s argument that the relationship was tenuous and limited to access to a partner app and payment remittance. In concluding, that contrary to Uber’s argument, the relationship between the parties was not about the development or use of technology, but the provision of transportation services, Commissioner Wilson pointedly observed that ’the technology has no purpose without the provision of transportation services by people such as Mr Pallage’.

Applying the multifactorial test, Commissioner Wilson determined however that while elements of the contract appeared to be more consistent with an employment relationship – in particular, delegation and the capacity to dismiss, the majority and weight of the indicators to be applied satisfied him that Mr Pallage was an was an independent contractor rather than an employee.

The defining issues in the Commissioner’s findings were:

  1. it was the intention of the parties that there be a direct legal relationship between the driver and the passengers to whom he provided services;
  2. there would be only a business relationship between the driver and Uber, and Uber would not ‘be deemed’ to direct or control the driver in the provision of the services;
  3. the agreement was explicit to the extent that Mr Pallage was not an employee, and that he would indemnify Uber if subsequently he was found to be;
  4. Mr Pallage had control over the hours he wanted to work and he was able to accept or refuse trip requests; and
  5. he did not have to wear a uniform or display branding, he provided his own motor vehicle, he was able to work for others and his irregular remuneration pointed away from an employer-employee relationship.

These are just some examples of the growing scrutiny of the practices of gig economy operators, led to date by disenchanted delivery workers who believe they should be considered employees and not independent contractors.

Of note, the Senate Inquiry into the future of work is underway and recent academic commentary supports the questioning of flexibility, minimum standards and entitlements.

It is therefore vital that employers understand and can differentiate between direct employment and the ability to engage independent contractors; not to mention the nuances of the multifactorial test.

Watch this space.