EMPLOYMENT AND SAFETY UPDATE: FWO delivers Foodora their just desserts

Those who are familiar with our employment and safety updates may recall earlier this year when we discussed the controversial “Uber decision” before the Fair Work Commission (FWC). In that case, the FWC held that Uber drivers are not employees, but rather, are engaged by Uber as independent contractors. The discussion on that topic can be found here.

The Foodora proceedings

Last month, the Fair Work Ombudsman (FWO) commenced proceedings against Foodora Australia Pty Ltd (Foodora) alleging that the food delivery company had fallen foul of the sham contracting provisions under the Fair Work Act 2009 (Cth) (the FW Act).

The proceedings come just weeks after the introduction of the Fair Work Amendment (Making Australia More Equal) Bill 2018 (Cth). These proposed laws seek to empower the FWC to make “minimum entitlements orders” to bring workers in the “gig economy” under the protection of the FW Act. A minimum entitlements order would have the effect of extending rights to workers, such as minimum pay and conditions, which otherwise may not be afforded to them.

What are the allegations against Foodora?

The proceedings before the Federal Court relate to three workers that performed work for Foodora in 2016. The workers were based in Melbourne and Sydney and were engaged by Foodora to deliver food and drinks to customers by bicycle and car. The FWO has alleged that Foodora has contravened sham contracting laws by misrepresenting these workers as independent contractors.

The FWO submits that the workers are not contractors but are in fact employees, notwithstanding that Foodora required them to have an ABN and sign an “Independent Contractor Agreement”. However, as we have identified in previous editions, it is the substance and nature of the relationship with the worker that is critical, rather than the form. The terms of an independent contractor agreement will be disregarded by the courts in circumstances where to all practical intents and purposes, a worker is in fact an employee.

The ‘multi-factor’ test

In analysing the relationship between Foodora and the workers, the FWO applied what is known as the ‘multi-factor’ test. This test is used by the courts to determine whether a worker is an employee or a contractor and involves asking a series of questions as to the nature of the relationship between the company and the worker.

Having considered the multi-factor test, the FWO determined that the workers were Foodora employees on the basis that:

  • Foodora exercised a significant degree of control over the workers, particularly in relation to the workers’ hours, location and manner of work;
  • Foodora held the workers out in a manner consistent with an employment relationship, in that the workers were required to wear branded clothing and use material supplied by Foodora;
  • Foodora paid the workers fixed hourly rates, and the workers did not negotiate their rates of pay at any time;
  • the workers did not advertise their services or perform similar tasks in their personal capacities for the general public;
  • the workers did not delegate or subcontract the performance of their delivery duties; and
  • the workers were not conducting their own business in that they did not have their own business systems and insurances.

What’s next for Foodora?

If the FWO is successful, Foodora will be ordered to pay the workers the entitlements they would have received under the Fast Food Industry Award 2010 during their engagement with Foodora. This would include back-pay for minimum wages, casual loadings, and penalty rates for evening, weekend and public holiday work. Foodora may also be responsible to pay civil penalties of up to $54,000 per contravention in the event the Federal Court determines that the sham contracting provisions under the FW Act have been breached.

A case management hearing for the matter took place in Sydney on 17 July 2018 before Justice Perram of the Federal Court. Final orders in relation to the matter have not yet been made.

Lessons for employers

The increased focus by the FWO on worker exploitation is a timely reminder for all employers to undertake a self-audit of their arrangements with workers. It is imperative that workers are correctly classified from the outset to ensure that the substance and nature of the relationship matches the label. This issue is relevant to all businesses and industries, not just those operating in the “gig economy”.

In our previous article regarding the “Uber decision” we discussed the incoming report by the Senate Select Committee on the Future of Work and Workers. That report, which may recommend certain changes to the law to reflect the impacts of technology on the workplace, was due to be released by 21 June 2018. However, the preparation of the report has been delayed and it is now due to be released by 15 August 2018.

The report will be relevant as it will provide an indication of the future of workplace laws and how the courts may assess the “employment relationship” in light of advances in technology. It is unclear at this point whether the traditional tests of employment will continue to be applied, but it is clear that change is coming and we need to consider the recommendations of the Senate Select Committee, due next month.

“The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.”
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