…If it quacks like a duck – Fair Work Commission rules on Foodora and employment relationships

Key Points: 

• The gig economy has seen traditional business and employment relationship being challenged by the ‘disruptive’ new entrants.

• Gig economy providers have long claimed that their workers are not ‘employees’ and therefore to not enjoy the same workplace protections.

• The Fair Work Commission ruling shows the Commission doesn’t agree.

A recent Seminar I presented, Dancing with the Gig economy – Risk, liability and responsibility in the modern workplace, drew the attention of insurers and business leaders to the inherent structural risks embedded in the emerging gig or share economy. Of particular concern to those employers, regulators and businesses not directly engaged in this new way of doing business, is the fact that this this kind of work still remains largely unregulated and unchecked. This can lead to the undermining of traditional businesses, along with employment conditions and other protections.

Regulators across the country are struggling to keep up with the changes digital disruptors bring and responses to these new entrants can vary greatly. Of particular concern has been the classification of gig economy workers within traditional employment frameworks and requirements, including workers’ compensation. These employment classifications and protections are further complicated by the ways in which tech platforms promote their offering, especially in relation to ‘independent contractor’ arrangements. Concerns about worker protections become particularly critical within the broader context of the gig economy where workers are often highly vulnerable.

In the middle of 2018, the then Fair Work Ombudsman (FWO), Natalie James, articulated the position they would be taking and made clear the FWO’s intention to act to protect those workers and established conditions:

My job is to ensure compliance with the law in an age of disruption. Where employees are incorrectly classified as independent contractors, it has the potential to not only affect the worker but also unfairly disadvantage other businesses applying award rates of pay and conditions. Disruption of existing markets is only legitimate if it is lawful.

(The Gig Economy: Navigating new ways to work, Natalie James, Fair Work Ombudsman, 20 June 2018)

The FWO went onto initiate action against Foodora in relation to sham contracting, which was halted when the company entered voluntary administration and subsequently exited the Australian market. 

Likewise concerned with employment matters, the Transport Workers’ Union represented a former Foodora employee in a recent unfair dismissal matter [Joshua Klooger v Foodora Australia Pty Ltsd (U2018/2625)]. The decision was handed down on 16 November, 2018 and is likely to prove highly significant in the regulation of similar arrangements such as those used by Uber Eats and Deliveroo.

The case contended that the Foodora delivery driver, Mr Joshua Klooger, was an employee, not an independent contractor, as Foodora claimed. As previously indicated by the FWO, the employment engagement arguments were tested against traditional legal constructs regarding employer/employee relationships. The Commission found at [102] that (emphasis added):

…the correct characterisation of the relationship between the applicant and the respondent is that of employee and employer. …The applicant was, despite the attempt to create the existence of an independent contractor arrangement, engaged in work as a delivery rider/driver for Foodora as an employee of Foodora.

In a decision which should give all employers pause for thought, the Fair Work Commission, after finding that Mr Klooger was, in fact, an employee subsequently determined that his termination had been "plainly unjust, manifestly unreasonable, and unnecessarily harsh" [123].