The recent ruling by the Fair Work Commission that Deliveroo rider Mr Diego Franco was an employee, not an independent contractor, represents a seismic shift in the Australian gig economy.
Until now, online food delivery platforms have classified their workers as independent contractors and in so doing avoided obligations arising from the employment relationship such as minimum wage and leave entitlements, protection from unfair dismissal and vicarious liabilities for any damage they may cause.
On the back of rival delivery service Menulog committing to trial an employment model for its Sydney riders, the ruling could have huge implications for the contractual arrangements of gig-economy platforms. The ruling also comes in the context of increasing pressure on food delivery providers to offer greater protections for its workers, after several riders were killed on the road in the past year.
Background
After delivering food for Deliveroo since April 2017, Deliveroo terminated Mr Franco’s contract in April 2020 on the basis that he had delivered orders too slowly. Mr Franco, with the assistance of the Transport Workers Union, lodged an unfair dismissal claim following the termination.
Under s 382 of the Fair Work Act, to be a person protected from unfair dismissal Mr Franco needed to be classified as an employee of Deliveroo. The case turned on whether Mr Franco was an employee of Deliveroo. If he was held to be an employee, he would therefore be protected from unfair dismissal.
The Test
Commissioner Cambridge considered decisions in the United Kingdom where gig economy workers challenged traditional concepts of employment, namely Uber BV v Aslam and Independent Workers Union of Great Britain v Roofoods Ltd t/a Deliveroo. However, the Commissioner applied the normal ‘multifactorial test’ which is well-established in Australian common law to determine ifd a person is an employee or contractor. The test reflects the principle that the nature of a worker relationship should be determined by looking at the substance and totality of the relationship, with the description given by the parties not any other single factor being decisive.
Commissioner Cambridge considered a range of factors as important, including the following:
The Level of Control and Independence
The Commissioner pointed to the capacity of Deliveroo to exercise a significant level of control. Although it appeared that Mr Franco had the freedom to choose when and where to work, the reality was that Deliveroo’s rider engagement system required riders to book sessions in advance and gave preferential treatment to riders who met performance measurements or metrics that Deliveroo determined. The Commissioner also identified that the termination provisions of the supplier agreement document, which permitted termination for any reason, represented a manifestation of control.
Work Performed for Competitors
The Commissioner noted that the express permission provided by Deliveroo for riders to work for its competitors is a factor which points against the existence of an employment relationship. However, in the context of the new technology and rapidly changing labour arrangements, it was not a factor that was construed as preventing the existence of an employment relationship.
The Agreements
While the Commissioner noted that the terms of the supply/supplier agreement documents clearly attempted to establish a relationship of principal and independent contractor, Deliveroo determined the terms unilaterally and there was no capacity of Mr Franco to negotiate the terms, such that the agreements were in no way determinative.
Subcontracting
Although Mr Franco did not delegate his work, the Commissioner noted that the capacity for Mr Franco to have someone else perform his work for Deliveroo was a factor that pointed against the existence of an employment relationship. However, the Commission noted that in some instances, shift swaps in the context of employment relationships are not uncommon.
Emanation as Part of the Business
The Commissioner noted that Mr Franco clearly presented as an emanation of Deliveroo and was expected to wear clothing and carry an insulation bag which were emblazoned with the Deliveroo name and logo.
Taxation
The Commissioner noted that Mr Franco was responsible for the payment of his own tax. While this was a factor pointing in favour of independent contractor status, it was an arrangement that was a logical reflection of the arrangements established under the agreements.
The Decision
In consideration of the various factors, Commissioner Cambridge characterised the relationship between Mr Franco and Deliveroo as that of employee and employer. Ultimately, the Commissioner concluded that Mr Franco was working as part of Deliveroo’s business. The level of control that Deliveroo possessed strongly supported the existence of an employment relationship.
Upon finding that Mr Franco was an employee of Deliveroo, the court considered whether he had been unfairly dismissed. The Commission found that there was no valid reason for the dismissal of Mr Franco relating to his capacity or conduct, and termination by way of email without procedural fairness was unjust, unreasonable, and unnecessarily harsh. Regarding remedies, the Commission made orders to reinstate Mr Franco to his position and to restore lost pay.
Deliveroo has expressed an intention to appeal the decision to the Full Bench of the Fair Work Commission. Notwithstanding this, the decision as it stands could have massive implications for employment related claims within the gig economy and how gig economy platforms run their business model in Australia.
In light of calls from unions and the Federal Labor Party to introduce a more coherent legislative framework that protects the rights and entitlements of gig workers, the decision is likely to enliven political debate over the coming months.
To read more about when an independent contractor may really be an employee please click here.
Segelov Taylor Lawyers Can Help
If you believe you have been wrongly categorised as an independent contractor, it is a good idea to explore your legal options to see if you have a strong claim for compensation.
Segelov Taylor principal David Taylor is an accredited specialist in employment law. If you have concerns about your current employment status or other issues related to employment, please get in touch by email david@segelovtaylor.com.au or by phone (02) 8880 0500.