Jacquie Seemann and Conor McNair

Uber and Foodora – new legal challenges

Jacquie Seemann and Conor McNair

18 December 2018

Award Conditions Employment Contracts

In May 2018, we reported that the Fair Work Commission had found an Uber driver was an independent contractor (not an employee) and so was not entitled to claim unfair dismissal. You can read our article regarding that decision, Kaseris v Rasier Pacific VOF [2017] FWC 6610, here.

There have been a number of developments since then involving Uber, and a similar platform, Foodora, which we explore in this article.

Uber

Earlier this year the Commission found that another Uber driver was not an employee. In this case, Pallage v Rasier Pacific Pty Ltd [2018] FWC 2579, the Commission noted that although Uber invited the Commission to rely on the Kaseris decision to accept that its drivers were independent contractors and not employees, each case must be tested on its own facts and circumstances and so it had to ask the question.

Foodora

Unfair dismissal claim – Josh Klooger

The circumstance-specific nature of the employee/independent contractor test was at the heart of the high-profile unfair dismissal claim of former delivery rider, Josh Klooger, against Foodora. Klooger relied, amongst other things, on being paid an hourly rate even after Foodora shifted to paying per delivery for other riders.

Subsequent to the commencement of Mr Klooger’s claim (and another claim made by the Fair Work Ombudsman and outlined below), Foodora went into voluntary administration. If a company is in administration, proceedings against the company are stayed except with the administrator’s consent, or leave of court. Foodora’s administrator consented to Mr Klooger’s claim continuing.

On 16 November 2018, the Fair Work Commission handed down its decision in relation to Mr Klooger’s claim (Klooger v Foodora Australia Pty Ltd [2018] FWC 6836). Unlike in the decisions of the Commission in relation to Uber, Commissioner Cambridge found that Mr Klooger was an employee of Foodora, and that the termination of his employment by Foodora was unfair.

The decision underscores that each case will be considered on its facts and circumstances.  In deliberating as to whether Mr Klooger was an employee or an independent contractor, the Fair Work Commission considered Foodora’s dictation of Mr Klooger’s courier shift start and finish times, which indicated an employer relationship; the batching system, which included a fortnightly assessment process and ranking system that dictated shifts offered and selected. This restrained Klooger from picking and choosing work, as a contractor normally would. Although the contract between the parties made reference to a contractor relationship, the Commission found that the contract contained provisions which were similar in form and substance to an ordinary employment contract.

Sham contracting claim

Around the same time as Mr Klooger commenced his unfair dismissal claim, the Fair Work Ombudsman separately commenced claims against Foodora on behalf of three other Foodora riders/drivers, alleging sham contracting and resultant failure to pay employee entitlements.The Fair Work Ombudsman’s claims were also interrupted by the company’s voluntary administration. However, although the administrator consented to Mr Klooger’s unfair dismissal claim continuing, the Fair Work Ombudsman has indicated that it will not continue its case against Foodora while it is in administration.

Other claims

There are also tax implications from Foodora’s classification of its workers as independent contractors. In August this year, shortly after they were appointed, the administrators informed creditors that:

  • the ATO is satisfied that Foodora should have contributed superannuation on behalf of the workers, because the circumstances of their engagement either make them employees or satisfy the deeming provisions in s.12(3) of the SGAA; and
  • Revenue NSW is similarly satisfied that Foodora should have included the workers’ earnings in calculating its payroll tax, again, because the circumstances of their engagement either make them employees or satisfy the deeming provisions in NSW payroll tax legislation.

Considerations

These developments reinforce that questions of whether workers are employees or independent contractors can raise a number of separate legal issues. Ultimately,  even though Foodora may not feature in the Australian market in future, the dilemma Foodora is facing underlines the wide-reaching implications of the legal status of workers in all gig economy enterprises. The gig economy is not a market to enter without a considered plan to meet all deeming obligations of those who engage gig workers, including PAYG W income tax, workers’ compensation and, as has come up in the context of Foodora, superannuation and payroll tax.

These cases (and resultant headlines) dealing with the gig economy and long-term ‘casual’ employment draw further attention to campaigns by the unions and the Fair Work Ombudsman to closely scrutinise entrenched working relationships. The outcomes demonstrate that complex issues such as the right categorisation of a worker as an ’employee’, ‘independent contractor’, ‘casual’ or ‘part-timer’ remain a fundamental challenge for any business to get right so as to ensure compliance with workplace laws. If you have any questions about your own operations please feel free to contact our Employment and Safety team.