Legal ramifications of the 'gig' economy

by Contributor01 Feb 2017
The rise of the 'gig' economy brings with it some key legal considerations for employers, as Athena Koelmeyer outlines

What is the 'gig' economy?
The emergence of what is known as the 'gig' economy is challenging existing labour institutions and the traditional workforce.

Although the word 'gig' has historically applied to musicians, it is presently used to describe the increasing trend of workers who choose to earn their living doing “gigs” – performing flexible and diversified work, as opposed to typical employment models, for example, working 9 am to 5 pm, Monday to Friday.

The gig economy provides expanded work opportunities for individuals that are either disenchanted with the rigidity of full-time work or who are unable to obtain secure employment.

Gig workers are predominantly independent contractors and freelancers. The growing interest in freelancing is largely driven by individuals who desire work flexibility – particularly younger workers.

The rise of flexible employment practices, freelance work and the sharing economy is steadily changing how we work and the nature of what constitutes 'work'. For example, the current world of work embraces the selling of merchandise on Ebay and Etsy, the provision of transport services through Uber, the provision of accommodation through Airbnb and the delivery of restaurant-quality food using Deliveroo and Foodora. These developments exemplify the gig economy, through which individuals can earn or enhance their income through the online trading of goods and services.

Reports and surveys
The following report and survey provides significant and relevant information about the gig economy in Australia.

In January 2016, the CSIRO’s report, “Tomorrow's Digitally Enabled Workforce” determined:
  • The number of independent contractors would continue to rise above 1 million people, despite the potential of a lack of stable income and difficulties finding work;
  • That companies might opt for staffing models that included a smaller number of core employees, with many other roles being provided by freelancers; and
  • That jobs of the future were likely to be more flexible, agile, networked and connected.
Between 17 and 23 August 2015, Upwork, a global freelancing platform whereby businesses and professionals connect and collaborate remotely, conducted an online survey on 1.000 Australian adults (324 freelancers and 676 non-freelancers) over the age of 18 and who have undertaken paid work in the 12 months prior. Some of the results of the survey were:
  • Nearly 1 in 3 Australians (4.1 million people) were performing freelance work;
  • The majority (Millennials and Baby Boomers) commenced freelancing by choice rather than necessity and were principally driven by flexibility and freedom;
  • The reasons for freelancing included flexibility and freedom in relation to location and schedules – particularly from Gen X and those with children under the age of 18;
  • 79% of non-freelancers were open to freelancing;
  • Nearly half of the freelancers were young workers (under 35 years of age) and almost 20% were over 55 years of age; and
  • The top three freelance categories were “web, mobile and software development” (44%), “design and creative” (14%) and “customer and administrative support” (13%).
Benefits and risks
The benefits to employers of on-demand labour include the ability to swiftly adjust the size of the workforce in response to work requirements, having a smaller number of permanent employees, having access to a wider range of specialised and talented individuals and increased productivity.

A fundamental component lacking in the gig economy is the satisfaction that permanent workers derive from feeling part of a company’s culture and values on a daily basis.

The benefits to individuals include flexibility, an improved work-life balance and the ability to select only the specific jobs they are interested in.

In Australia, the rise of the gig economy is not without risks. One of the risks centres on the question of whether a worker is an employee or a contractor.

Sham contracting occurs when an employer tells a worker that they are not an employee but a contractor. Effectively, the employer misrepresents the employment relationship to the worker, which results in the worker having no entitlement to the standard employment benefits, when in fact they are and which could result in breaches of the provisions in the Fair Work Act 2009 (Cth) (FW Act).

In Australia, workers engaged as contractors are not entitled to the same minimum safety net of conditions of employment that employees are entitled to.

So, in classifying an employee as a contractor, the “contractor” is denied entitlement to the minimum wage, annual leave and other basic employee entitlements.

Another potential risk is whether affiliated businesses and individuals could be held accountable under the accessorial liability provisions of the FW Act.

Section 550 of the FW Act provides that a person “involved in” the contravention of a civil remedy provision of the FW Act will be taken to have contravened that provision, with potential liability extending to businesses and individuals for their contribution to the contravention (Cerin v ACI Operations Pty Ltd & Ors [2015] FCCA 1654).
 
Key case
  • A UK Employment Tribunal was recently asked to consider whether Uber drivers were “workers” and not independent contractors, for the purposes of its Employment Rights Act, National Minimum Wage Act and Working Time Regulation.
  • The Tribunal determined the drivers to be “workers” and therefore were entitled to minimum wages, holiday pay, sick pay and breaks and concluded that the terms of the contract between Uber and its drivers did not correctly reflect the relationship, describing it to be “fiction” and “unrealistic”.
  • The UK decision could impact on a number of companies in the Australian market that rely on similar business models (gig economy) to Uber, such as Deliveroo, Foodora and Airtasker.
  • The employee or independent contractor argument in relation to Uber has not yet been tested in Australia. This will require a detailed analysis of the “multiple indicia test” – a common law test used by courts to establish whether a worker is an employee or an independent contractor. The test involves assessing a range of factors and weighing them against each other to reach a conclusion about a worker’s classification. There is no set list of factors and hence the factors considered will be different for every case (Stevens & Gray v. Brodribb Sawmilling Company Pty Limited (1986) 160 CLR 16).
  • Some of the factors that a court might consider in a delivery driver test case include who decides when and for how long the drivers work, do the drivers invoice the company for their services rather than being paid wages, whether the drivers wear a uniform, whether the drivers provide all their own equipment and who pays for insurance (Jiang Shen Cai trading as French Accent v Michael Anthony Do Rozario [2011] FWAFB 8307).
The UK decision highlights that employers who engage independent contractors should focus on the reality of how the work is actually being performed and to not assume that contractual provisions describing the relationship will be accepted.

About the author
Athena Koelmeyer is the Principal and Director of Workplace Law. For further information phone +61 2 9256 7500 or visit workplacelaw.com.au

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