Jacquie Seemann and Conor McNair

Employee or contractor? A problem that the ‘gig economy’ does not simplify

Jacquie Seemann and Conor McNair

2 May 2018

Employment Contracts Employment Disputes Industrial Relations

Increasingly, ordinary people around the world are seeking and finding services through apps on our phones – arranging transportation with Uber, ordering food using Deliveroo, and sourcing a handyman through Airtasker. This technology-enabled expansion of the ‘gig economy’ is providing increased options and simplicity for consumers. However, it also raises complex questions about the employment status and entitlements of those who work in the gig economy. Recent case law considering Uber in the UK and Australia demonstrates just how convoluted these issues can be.

Not all ‘workers’ are equal in the eyes of the law.  In Australia, whether a person is an ’employee’ or an ‘independent contractor’ has implications for how they work and what rights and entitlements they have – including who is responsible for the work performed and what happens if there is an accident. As part of this, in addition to being required to provide employees minimum rates of pay, paid and unpaid leave entitlements and notice of termination and redundancy pay, employers also owe those employees a duty of care and are vicariously responsible for their actions whilst at work. Aside from broad work health and safety obligations that apply to all workers, principals do not have the same employee obligations to their independent contractors. There are also taxation issues which arise depending on whether a worker is an employee or an independent contractor – these issues may include state taxes, FBT, GST, SGC and income tax. Whether or not a worker is an employee or an independent contractor can be difficult to say with any certainty – a court will look at all the facts and circumstances in making a decision, including:

  • who has the right to exercise control in the manner in which work is performed;
  • whether the worker is presented to the world as a representative of the business (such as by wearing a uniform);
  • whether the worker performs work for others;
  • who provides the worker’s tools or equipment;
  • whether the worker is entitled to reject work or delegate the work to others;
  • whether the worker creates goodwill or saleable assets from their work; and
  • whether the worker spends a significant portion of their remuneration on business expenses.

In Uber v Aslam & Ors1, the Employment Appeal Tribunal (EAT) in the U K in November 2017 confirmed an earlier decision that two Uber drivers were ‘workers’ within the meaning of the relevant legislation (as opposed to independent contractors), and as such were entitled to employment-type benefits including holidays and the national minimum wage.

The EAT noted the unequal bargaining positions of the parties and concluded that the terms of the contracts that had been ‘drafted by an army of lawyers’ did not ‘reflect the reality of the situation’ between drivers and Uber. The contrasts were described as ‘pure fiction, bearing no relation to the real dealings and relationships between parties’. When the facts and circumstances were considered, it was clear that Uber exercised a high level of control over the work performed by drivers – for example: Uber recruited drivers through a formal recruitment process, drivers were required to use certain model cars, Uber controlled key information such as passengers’ identity and final destination, and Uber set the route drivers were obliged to follow. These factors and others led to a conclusion that, in practice, the drivers worked for Uber and not for themselves.

By contrast, in the Australian context, the Fair Work Commission found in December 2017 that an Uber driver was an independent contractor, not an employee.2 In reaching this conclusion, Deputy President Gostencnik noted that the statutory concept of a ‘worker’ in the UK is much broader than the concept of an ’employee’ in Australia. The Australian Uber driver was found not to be an employee because the fundamental employment relationship of a ‘wages-work bargain’ was absent – the Uber driver had ultimate control over when, where and how he worked; he was required to provide his own vehicle, smart phone and data plan; he was not permitted to display Uber’s logo; and, finally, he did not receive any wages, superannuation contributions or benefits such as annual, sick and long service leave.

Despite reaching different conclusions as to the status of Uber drivers, it is clear that the EAT in the UK and the Australian Fair Work Commission both consider that the ‘gig economy’ challenges traditional notions of work and working. In the UK, the Tribunal was very critical of Uber, pointing out that the position that it argued in the case was based on an overly technical and ultimately fictitious construction, and saying that ‘the notion that Uber in London is a mosaic of 30,000 small businesses linked by a common “platform” is to our minds faintly ridiculous’.

In Australia, the Fair Work Commission accepted that, as the traditional tests of employment were developed well before the creation of the ‘sharing’ economy, they fail to account for the modern digital environment with revenue generation and revenue sharing between parties, relative bargaining power and the gig economy. Deputy President Gostencnik stated that, whilst the methods used to distinguish an employee from an independent contractor are outmoded and no longer reflective of our current economic circumstances, until new laws are created, the traditional available tests will have to do.

It will be fascinating to see how the law will adjust to keep pace with these emerging, technology-enabled ways of working. Some jurisdictions in the Unites States have also found that Uber services are in effect employment relationships. The 2017 Australian Uber case may well not be the final word on the subject – the driver was unrepresented, and the company’s evidence went unchallenged.  The Transport Workers Union is currently supporting unfair dismissal claims by two Foodora food delivery drivers in what might be a more definitive test case than the 2017 Uber case.3

If you would like us to review the management of your workforce in light of these examples, please contact a member of our Employment and Safety team.

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References:

1 Uber B V, Uber London Ltd and Uber Britannia Ltd v Aslam, Farrar and Dawson and Ors UKEAT/0056/17/DA

2 Mr Michail Kaseris v Rasier Pacific V.O.F [2017] FWC 6610 (21 December 2017),

3 David Marin-Guzman, ‘Foodora fires courier for refusing to quit workers’ chat group’, AFR, 14 March 2018 – http://www.afr.com/news/policy/industrial-relations/foodora-fires-courier-for-refusing-to-quit-workers-chat-group-20180314-h0xg33