Fair Work ruling on Deliveroo case poses questions for gig economy

Will this sway the employer vs contractor debate?

Fair Work ruling on Deliveroo case poses questions for gig economy

By Stephen Marriott, Special Counsel, Moray & Agnew

A recent decision of Commissioner Cambridge in the Fair Work Commission has gained a great deal of attention in the media. In the case of Franco v Deliveroo Australia Pty Ltd, a delivery rider was found to be an employee of Deliveroo and therefore had access to the unfair dismissal jurisdiction. The outcome leads to questions about the future of the reliance on contractors in the gig economy.

The facts and the argument

Mr Franco was a delivery rider for Deliveroo. He signed a series of supply agreements and the terms of these agreements characterised the relationship as not being one of employment. The agreements clearly articulated that he was in business on his own account, free to provide services himself or through a delegate, was not obliged to do any work for Deliveroo, was free to work at any time he chose and that he was to provide his own mobile phone and vehicle. The agreements further stated that he was responsible for his own tax but that certain insurances would be paid for by Deliveroo. Mr Franco purchased Deliveroo livery and wore it while delivering for Deliveroo.

Deliveroo regularly reviewed the delivery time records which showed that Mr Franco’s average delivery times were slower than other delivery riders. As a result of this, Deliveroo sent Mr Franco an email advising him that he was failing to deliver on time and as a result his supply agreement was terminated with 7 days’ notice.

In order for Mr Franco to have access to the unfair dismissal jurisdiction, he needed to establish that he was in fact an employee of Deliveroo and not an independent contractor as indicated in the agreements.

There have been a number of previous cases that have explored how to tell if a person is in fact an employee. The cases involve an assessment of a number of factors or indicia which provide an overall picture of whether a person can really be said to be in business for themselves or more properly characterised as working for an employer.

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The case for Franco

Mr Franco argued that there were several indicia present pointing to his status as an employee, including that:

  • He was not in reality carrying out his own business in the hope of making a profit and was not in reality a private company for hire as a delivery driver
  • He was strongly encouraged to wear Deliveroo livery while delivering
  • The punitive sanctions that Deliveroo had at its disposal meant that it in effect exercised a high degree of control over the work
  • While notionally he was free to delegate his work, this was a legal fiction that practically speaking would be impossible to give effect to
  • He was completely unable to negotiate the terms of his remuneration. His remuneration was entirely determined by Deliveroo which generated invoices which were notionally issued under Franco’s ABN to Deliveroo.

The case for Deliveroo

Deliveroo relied very much on the terms of the contract itself and recent Federal Court authority to argue that Mr Franco was not an employee. In particular it stressed that the contract provided that Franco was free to work for direct competitors of Deliveroo and that he in fact had worked for competitors, that he was not required to provide the work personally, that he was paid according to invoices and not paid wages, that he had provided his own equipment (his smart phone and his motorcycle) and that he could largely determine how and when he worked.

It was also noted that Deliveroo did not have any right to discipline Mr Franco.

FWC Findings

Commissioner Cambridge noted the significant case law dealing with this particular issue and that to a greater or lesser degree the indicia of employment were arguably present in many of the cases. The question was whether Franco was an employee on the basis of the balance of all of the indicia.

Commissioner Cambridge largely agreed with Mr Franco’s submissions on each of the indicia in particular noting that the arrangement in place camouflaged a significant amount of control that Deliveroo had over his work. It was also noted that while he did provide his own equipment, this was equipment he would have had in any case and that there was no significant capital outlay.

Through wearing the Deliveroo livery, he was presenting himself to the public as part of their business and his mode of remuneration as well as how invoices were generated all led to the conclusion that he was in fact an employee of Deliveroo.

Commissioner Cambridge then considered all the relevant tests for whether a dismissal is unfair, concluding that the dismissal had been harsh, unjust and unreasonable.

Read more: Can employees be ‘dismissed’ without being fired?

The context and implications

The case has gained much publicity. However, it should be stressed that this is still only the decision of a single commissioner and it remains to be seen as to whether an appeal will successfully be pursued.

There are an increasing number of such decisions with respect to gig economy jobs and so far, the results with respect to those decisions have not always been consistent.

Commissioner Cambridge made a similar determination in respect of another delivery driver in Klooger v Foodora Australia Pty Ltd [2018] FWC 6836. However, more recently, the Full Bench of the FWC ruled that an Uber Eats driver was not an employee in Gupta v Portier Pacific Pty Ltd; Uber Australia Pty Ltd t/as Uber Eats [2020] FWCFB 1698.

There have also been some very well publicised cases in the UK, where gig workers have been found to have rights beyond the rights of independent contractors.

The overall effect of these cases is that there is uncertainty over the legal relationship between gig economy businesses and the people who work for them. While this case is not strongly binding authority, if ultimately gig workers are employees, there will naturally be questions about a number of other entitlements to which they may have access.

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