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Enterprise Legal - Deliveroo Decision Delivers a Spicy Punch to the Gig-Economy

Deliveroo Decision Delivers a Spicy Punch to the Gig-Economy

For a long time now we have seen delivery giant Uber successfully fend off claims from delivery drivers claiming they were employees and not independent contracts.

This time, it was Deliveroo Australia Pty Ltd (Deliveroo) who was on the menu before the Fair Work Commission and in an explosive decision, the Commission ruled that a Deliveroo driver was an employee, rather than an independent contractor.

 

What Happened?

Mr Franco had worked for Deliveroo for approximately three years when he suddenly received an email notification from Deliveroo indicating his “supplier agreement” would be terminated on the grounds that he was too slow at delivering orders.

Mr Franco subsequently filed a claim for Unfair Dismissal in the Fair Work Commission, challenging his termination.

The hurdle – Was Mr Franco an employee or independent contractor?

Independent contractors are not protected by the Unfair Dismissal provisions contained the Fair Work Act 2009 (Cth) and therefore Deliveroo objected to the unfair dismissal application on the basis that Mr Franco was an independent contractor, rather than an employee.

When looking at the relationship between Deliveroo and Mr Franco, Fair Work Commissioner Cambridge (the Commissioner) affirmed the longstanding principle that determination of whether a person is an employee or independent contractor requires consideration of various identified indicia, with no single factor being decisive, to form a view about the overall impression of the relationship.

Some of the key points that turned in Mr Franco’s favour included:

  • Contract was not king: Whilst the agreement between Deliveroo and Franco stated that the relationship between the parties was one of principal and independent contractor, it was given little weight; 
  • Presentation as part of the business: Although not mandatory, Deliveroo expects its delivery riders (including Franco while he was engaged) to wear Deliveroo branded attire and use branded equipment. The Commissioner therefore formed the view that they in effect presented to the world as part of the Deliveroo business and was held to be a factor likened to an employee;
  • Equipment: Mr Franco technically provided his own equipment, however this was limited to a smartphone and motorcycle and therefore the Commissioner held that, as he would use such equipment personally as well, this did not represent a ‘substantial investment in capital equipment’ and therefore it could not be relied upon to firmly establish a contractor relationship; 
  • Control: Although Mr Franco had significant autonomy over the work he performed as he was able to log onto the Rider app and choose when and where he would make deliveries, Deliveroo still had the primary ability to exercise control through an online system, which required riders to book engagement sessions in advance and this system provided preferential treatment to those who met performance measures. Although Deliveroo had ceased using this system and this is likely going to be one of the many sticking points for when Deliveroo appeals the decision (which it has confirmed it will be), the Commissioner focused on the fact that it had the ability to reintroduce the system;
  • Ability to work for others: Despite the fact that Mr Franco was actively working for competitors at the same time that he was engaged with Deliveroo, the Commissioner determined that this was not significant enough to prevent the finding of the existence of an employment relationship when considered in the context of the current gig-economy and digital world.

 

The Decision

Ultimately, the Commissioner formed the view that Franco was an employee and was not a contractor carrying on a trade or business of his own. Quite significantly, the Commissioner subsequently ordered Mr Franco be reinstated, which only happens in less than 15% of Fair Work Commission cases. Deliveroo was also ordered to pay Mr Franco for lost pay and his continuity of service was also not broken.

 

What Could This Mean For You?

Whilst Deliveroo have openly stated that they intend to appeal the decision, if upheld, the decision will have wide-reaching ramifications for gig workers and digital businesses who rely on a contractor and principal model.

It is becoming more and more important to ensure that businesses get the distinction between employee and contractor right as the misclassification of a worker can lead to significant unexpected liabilities including (but not limited to):

  • Fines and penalties under the Fair Work Act
  • Underpayment and back pay of wages
  • Payment of unpaid superannuation entitlements
  • Workplace Health and Safety liabilities

 

If you would like assistance with reviewing your current contractor arrangements, start a conversation with our dedicated Workplace Relations team:

☎️ (07) 4646 2621

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