Is employment law about to catch up with the gig economy?

Uber and similar gig economy companies are pushing the boundaries of the employment relationship envisaged by the Fair Work Act 2009.  

The proliferation of the gig economy

The term “gig economy” refers to the growing number of workers who are trading the employer‑employee relationship for short-term engagements on a task-by-task or “gig” basis for various employers. 

This growth can be attributed to the technology driven emergence of digital platforms that link workers and organisations, including Uber, Deliveroo, Air Tasker, AirBnB and, until their recent exit from Australia, Foodora.  While workers are quick to praise the flexible lifestyle of working as self-employed contractors, others, including the Fair Work Ombudsman, have expressed concerns that the gig economy is being used to exploit workers and allow companies to avoid obligations to pay employee entitlements.

Applying the traditional tests of employment

In August 2017, Uber terminated its service agreement with one of its drivers in Victoria on the basis of poor passenger ratings.  The driver brought a claim against Uber for unfair dismissal claiming that he was an employee and the dismissal was harsh and unjust.  In response, Uber argued that there was no employment relationship.  The Commission agreed with Uber, and determined that Uber had no legal obligation except to provide access to the accompanying smartphone app and remittance of the fares and cancellation fees that the rider pays to the driver, because the minimum mutual obligation necessary to create an employment contract (that one party perform the work and the other party pay for that work) was missing.¹

This position has continued to be tested in the last year in the Fair Work Commission by unions, such as the Australian Manufacturing Workers’ Union, who claim that many gig economy workers “enjoy fewer rights and protections” and exist in a “low-wage poverty trap".² Gig economy companies are similarly adamant that their workers are contractors and not employees. 

The Foodora test case

Food delivery company Foodora recently faced separate proceedings brought by the Fair Work Ombudsman and a former delivery rider backed by the Trade Workers Union.  Both cases were in relation to riders’ working status and claims of underpayment, incorrect PAYG withholding and not meeting superannuation obligations.  Foodora argued, among other reasons, that because their workers had ABNs and signed contracts as independent contractors (two factors considered in the multifactorial test), their riders were not employees and were therefore not entitled to benefits normally associated with employment (such as minimum wage rates under a modern award).  Foodora has subsequently filed for voluntary administration.  Despite Foodora’s likely liquidation, the former delivery rider’s case in the Fair Work Commission is expected to continue.  The Fair Work Ombudsman’s case in the Federal Court has, however, been dropped. 

Australian Senate Recommendations

On 19 September 2018, the Senate Select Committee on the Future of Work and Workers tabled its report.  The report found that the growth of non-standard employment, including gig economy work, is having a significant impact on Australian workplaces, with regular full-time employment now estimated as representing less than 50% of total employment in Australia³.  The Committee also “rejects assertions that workers who perform tasks in the gig economy are independent contractors in the true spirit of the term".⁴

The Committee recommends that the Australian Government amends the definition of employee to capture gig workers, so they are fully protected under Australia's industrial relations system.⁵

If this recommendation is followed, this may result in changes to the law that will have a dramatic impact on companies operating on a gig economy model.

Lavan comment

The Fair Work Commission and courts apply traditional tests of employment, including the control test, which significantly pre-date the introduction of technology driven gig economy companies.  However, this may all change if the Senate Committee’s recommendations are adopted and become law, to the point where gig economy workers are considered employees.  As such, in light of the proliferation of Uber and similar gig economy companies in the market, there will likely be many challenges arising from the status of drivers and other gig economy workers in the future.  We could soon be looking at a whole new playing field for the operation of the gig economy business model.

If you have any questions regarding employment status or gig economy companies, please contact Lavan’s Employment and Safety team.