In brief: A recent decision by the Fair Work Commission has implications for all employers and businesses who engage independent contractors, not just those operating in the gig economy.

In a landmark decision likely to have profound consequences for the changing nature of work, the Fair Work Commission has this week found that a former Foodora delivery rider was an employee of Foodora, not an independent contractor. Foodora was ordered to pay the rider $15,559 in compensation.

The relevant facts leading to the conclusion that the delivery rider was an employee

  • the rider commenced performing work for Foodora on 11 March 2016 subject to a signed document titled "Independent Contractor Agreement" designating the work performed as that of a "Corporate Rider". Under the contract, the rider was paid $14 per hour for each hour he was engaged, plus an additional $5 for each delivery performed;

  • work was assigned to the rider via a series of computer-based "apps", with the start and finish times of each shift and the geographic location of the shift predetermined by Foodora but with the rider free to choose his preferred shifts. When performing work as a Corporate Rider, the rider was required to wear Foodora branded attire and to use branded equipment, including a Foodora branded insulation box;

  • after a period of only two weeks, the rider was informed by Foodora that his work would change to that of "Rider Captain", a role involving additional duties including helping other riders swap shifts and other minor administrative tasks. As a Rider Captain the rider was paid an additional $100 per week and given preferential shift selection;

  • over time, the rider allowed four other people to access the Foodora rider platform via his own login. In exchange, the rider would deduct 18% tax and a further 1% cut of amounts paid by Foodora before passing the remainder on to the other rider;

  • in November 2016 the rider was offered a permanent full-time position by Foodora as a Driver Manager, which he accepted. In this position, the rider was paid a $40,000 annual salary and performed both delivery and administrative work. In March 2017, the rider stepped down from his permanent position, returning to his previous delivery work. In addition, the rider made presentations to new riders, for which he received $20 per hour from Foodora;

  • in October 2017, Foodora made changes to the arrangements for shift allocation amongst drivers. In short, those changes effectively imposed penalties against riders who declined shifts (or were "no shows"), were late to start an allocated shift or who worked fewer shifts on weekends (amongst other things);

  • in early 2018, the rider made several complaints regarding the rates Foodora paid to new delivery riders, including appearing on Channel Ten's the Project to publicly voice his grievances with management;

  • in February 2018, Foodora raised concerns with the rider regarding a potential breach of confidentiality and intellectual property rights as a result of the rider maintaining administration rights and refusing to transfer ownership of a web-based chat group used by riders as part of the shift allocation process; and

  • in March 2018, Foodora informed the rider via email that his refusal to transfer ownership and administration rights of the chat group had led to a decision by Foodora to terminate the rider's contract effectively immediately. The rider subsequently commenced unfair dismissal proceedings in the Fair Work Commission.

Was the rider an employee or an independent contractor?

Noting that the correct approach to determining whether a person is an employee or an independent contractor required a consideration of both fact and law, Commissioner Cambridge of the Fair Work Commission, determined as follows:

"In this instance, the correct characterisation of the relationship between [the rider and Foodora] is that of employee and employer. The conclusion that must be drawn from the overall picture that has been obtained, was that the [rider] was not carrying on a trade or business of his own, or on his own behalf, instead the [rider] was working in [Foodora's] business as part of that business. The work of the [rider] was integrated into [Foodora's] business and not an independent operation. The [rider] was, despite the attempt to create the existence of an independent contractor arrangement, engaged in work as a delivery rider/driver for Foodora as an employee of Foodora".

Was the rider unfairly dismissed from his employment with Foodora?

As an employee, the rider was capable of being dismissed from his employment by Foodora, with the company now in voluntary administration ordered to pay the rider $15,559 in compensation for his "plainly unjust, manifestly unreasonable and unnecessarily harsh" dismissal via email.

Implications of this decision for employers and business owners

The Foodora case represents the first occasion on which the Fair Work Commission has been prepared to assess and determine the nature of the working relationship that exists in the gig economy, having previously declined to do so on two separate occasions involving drivers engaged by ride sharing platform Uber. Whether the decision in Foodora has flow-on implications for other players in the gig economy including Uber, Deliveroo and/or Taxify remains to be seen, although we expect to see an increase in claims by aggrieved deliver drivers/riders for underpayment and unfair dismissal. The prospects of success in such cases will likely depend on the contractual arrangements in place between the platform provider and the delivery driver/rider in question.

However, the implications of the Foodora case are not limited to businesses operating in the gig economy as the multi-factor test for assessing whether a person is an employee or a contractor applied by the Fair Work Commission in this case is relevant to all employers and business owners who engage independent contractors.

Simply calling a worker an independent contractor will not be sufficient, nor will labelling the contract document an "independent contractor agreement" (or similar). Instead, consideration must be given to the totality of the relationship, including but not necessarily limited to:

  • the nature and manner in which work is performed: for example how is work offered and accepted? Who determines the starting and finishing times for work?

  • the degree of control exercised over the worker

  • the ability of the worker to perform work for others

  • the extent of capital investment (if any) required of the worker

  • the method of payment and treatment for taxation and superannuation purposes

  • the ability of the worker to delegate or sub-contract the work

  • whether the conduct of the worker has the potential to create goodwill or damage the reputation of the business for which work is performed or, alternatively, the worker's own business or undertaking

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2022.

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