The gig economy cases in Fair Work: Drivers and riders

Two gig economy employment issues finally come to a head last month. These are the main takeaways

The gig economy cases in Fair Work: Drivers and riders

by Amber Chandler, Partner, Barker Henley

The gig economy in Australia has received significant attention over the past few years, with the increasing presence of companies such as Uber and Amazon.

Two gig economy employment issues have finally come to a head last month, with workplace regulator the Fair Work Ombudsman (FWO) handing down a determination on the status of Uber drivers and also discontinuing a Federal Court action against Foodora in respect of underpayments to its food delivery riders.

The central issue with both companies was whether its drivers and riders were employees and thus whether they were entitled to claim unfair dismissal or underpayment of wages in the Fair Work Commission.

There have been two Fair Work Commission (FWC) decisions relating to Uber since December 2017, both concluding that Uber (legally registered as Rasier Pacific VOF or Rasier Pacific Pty Ltd in Australia) is not an employer. These can be summarised as follows:

Michail Kaseris v Rasier Pacific V.O.F [2017] FWC 6610  

  • Mr Kaseris was an Uber driver in Victoria. Uber terminated his driver’s service agreement over poor passenger ratings. He brought an unfair dismissal claim in the FWC.
  • Uber defended the claim on the basis they were not his employer. They characterised their relationship with the driver as merely a service agreement where Uber had no legal obligation except to provide access to the Partner App and remittance of the fares and cancellation fees that the passenger pays to the driver. There was no payment of wages from Uber to the driver.
  • The FWC agreed with Uber that the “work-wages bargain which is essential to an employment relationship is missing” and “on this point alone, the application fails”.

Janaka Namal Pallage v Rasier Pacific Pty Ltd [2018] FWC 2579

  • Mr Pallage was also an Uber driver in Victoria. Uber deactivated the driver for a breach of community standards. He brought an unfair dismissal claim in the FWC.
  • The agreement between the driver and Uber specifically stated the driver was not an employee of Uber.
  • The FWC did not consider the driver to be an “entrepreneur” as some had suggested.
  • The FWC noted the driver “sold rides to customers and was paid for them, along the way paying a fee for the services rendered by [Uber]…”.
  • The FWC had regard to the established “multifactorial test” to determine whether the driver was an employee or independent contractor. It noted the contract between the driver and Uber recorded there would be a direct legal relationship between the driver and his passengers to whom he provided services, there was only a business relationship between the driver and Uber, neither Rasier Pacific nor Uber would direct or control the driver generally in his performance under the agreement. The agreement specifically stated the driver was not an employee of Uber.
  • ·This meant the driver was able to choose when to log in and log off the Partner App, he had control over the hours he worked and he was able to accept or refuse trip requests
  • The tax arrangements, not having to wear a uniform or display branding, equipment provision, being able to work for others all pointed away from the employer-employee relationship.

The FWO commenced a review of Uber in 2017 to ensure compliance with workplace law and in June 2019 they released the results of their investigation. It concluded:

“The weight of the evidence from our investigation establishes that the relationship between Uber Australia and the drivers is not an employment relationship. For such a relationship to exist, the courts have determined that there must be, at a minimum, an obligation for an employee to perform work when it is demanded by the employer. Our investigation found that Uber Australia drivers are not subject to any formal or operational obligation to perform work. Uber Australia drivers have control over whether, when, and for how long they perform work, on any given day or on any given week. Uber Australia does not require drivers to perform work at particular times and this was a key factor in our assessment that the commercial arrangement between the company and the drivers does not amount to an employment relationship.”

READ MORE: The rise and rise of the so-called gig economy

In stark contrast to the FWC’s and FWO’s views on Uber, there was a decision by the FWC in November 2018 that a Foodora rider (Foodora was a subsidiary of parent company Delivery Hero) was an employee and not an independent contractor. In Joshua Klooger v Foodora Australia Pty Ltd [2018] FWC 6368, the FWC again looked at the multifactorial test and considered the overall picture was of a situation where the delivery rider was not carrying on a trade or business of his own, and instead was working in Foodora’s business as part of that business. The rider’s work was not an independent operation. Therefore, Mr Klooger’s unfair dismissal application could be brought against Foodora as he was their employee and he was successful.

Foodora went in to administration in 2018 after having ceased operations in August 2018. There were allegations that Foodora had underpaid more than 5,000 of its delivery riders. Its administrators issued a creditor’s report in November 2018 calculating the company had underpaid these riders more than $5,000,000 and owed the ATO more than $2,000,000 due to its misclassifying them as contractors instead of employees.

There are ongoing negotiations between the administrators and employees to settle this matter. The FWO commenced Federal Court action against Foodora where it was seeking to have the issue of the status of all Foodora riders determined to seek an order that the underpayments be rectified. The FWO discontinued this legal action in June 2019 after conceding it was left with little chance of clawing back underpayments or recovering any penalties as Foodora had exited the Australian market.

READ MORE: Gig economy demands new payroll strategy

Although the work generated by Uber, Foodora, Amazon and others all fall within the “gig economy” label, the decisions discussed above highlight the individuality of each case when looking at the issue of whether there is an employment relationship with the drivers or riders. The FWC will examine these disputes on a case-by-case basis as each circumstance can vary significantly. Reviewing the elements of the relationship between a company and a purported employee require consideration of the multifactorial test and giving weight to the various factors before drawing a final conclusion.

While the FWO have settled the issue in relation to the status of Uber drivers, with new companies entering the Australian market, the issue is not showing any signs of going away. Lobby group Ride Share Drivers United have been closely supporting drivers and riders cases in the USA and Australia.

The Transport Workers Union in particular has flagged increased campaigning in the gig economy with National Secretary Michael Kaine describing the presence of Amazon and Uber as a "moment of reckoning for Australia" at a conference this past May. He stated: "The economic employers in our industries – those at the top of the supply chain – know that arrogant new entrants will cut corners, bend rules and trash conventions to attack their business…And so new political fault lines will emerge.”

It is important that new businesses in this gig economy do seek good legal advice to ensure their operations are compliant with Australian workplace law, and to ensure clarity around their relationship with their workers.

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