The line between employee and contractor continues to be blurred in the gig economy. To avoid litigation, companies must determine how to classify workers.

In June 2018 the Fair Work Ombudsman launched legal proceedings against a food delivery business, Foodora, on the basis that it treats its workers as independent contractors rather than employees.

The gig economy is booming and some businesses are:

  • embracing the changes (eg, facilitating the use of Uber rather than taxis or using Airtasker rather than traditional suppliers of labour); or
  • being challenged (eg, dealing with an increasing number of requests for flexible working arrangements as employees may want to assist someone through Airtasker in the morning or leave early to work an Uber shift in the evening).

Many businesses are still considering whether they can use the gig economy to better service their customers by quickly connecting them with people who can provide assistance.

Contractors or employees?

The question of whether workers in the gig economy qualify as employees (and are entitled to superannuation, annual leave and all of the other benefits that go with employee status) has been bubbling for some time. One of the largest uncertainties for the gig economy has been how it fits, if at all, into the existing system of employees and independent contractors.

In recent months, Uber has successfully argued twice that its drivers are not employees for the purposes of unfair dismissal claims. However, in March 2018 the Transport Workers Union announced that it would be supporting two Foodora delivery riders in bringing unfair dismissal claims of their own.

In 2017 the Federal Circuit Court issued a decision that served as a reminder to gig economy employers of the liabilities that they may face. The court ordered Z Transport Group to pay A$72,000 as a penalty for engaging a bicycle courier as an independent contractor when he was an employee.

The Fair Work Ombudsman's recent claim against Foodora is a test case to determine whether three of Foodora's delivery cyclists and drivers are employees. The case is based on the significant amount of control that Foodora has over the workers' activities, including:

  • the requirement that they wear Foodora-branded clothing and carry food storage boxes;
  • the fact that Foodora unilaterally decides the rates of pay for its workers; and
  • the fact that the workers work only for Foodora and do not publicly advertise their own personal delivery service.

If Foodora is unsuccessful in defending the Fair Work Ombudsman's claim, it could be liable for hundreds of thousands (if not millions) of dollars in penalties and back pay as further claims from other workers would likely follow.

Tips for employers

While the gig economy awaits the outcome in Foodora, what should employers be doing in the meantime?

Check contractor arrangements Even if a company is not involved in the gig economy, it should check its employee contractor arrangements. The Fair Work Ombudsman has flagged that it is focussing on the issue of sham contracting and will not hesitate to go after businesses which attempt to avoid employment obligations by incorrectly engaging workers as independent contractors. While some businesses use independent contracting arrangements as a historical convenience, this could backfire if an independent contractor relationship is tested in court.

Increase flexibility Employers should consider whether there is any need or opportunity to increase the flexibility of their business' working hours. Forcing employees into rigid full-time or part-time working hours may not be as efficient or productive as allowing them to work from home outside of normal office hours. However, if an employee requests the right to work flexibly, the employer should ensure that it is up to speed on the limitations of this right. Some employees may be unaware that they cannot come and go as they please or work three or four jobs at once.

Invest in technology There may be opportunities to use new technologies to assist the workforce and provide services to customers.

Otherwise, employers should continue to watch this space. Major ramifications could be arriving in the months to come and employers should ensure that their businesses are ahead of the curve.(1)

For further information on this topic please contact Aaron Goonrey at Lander & Rogers' Sydney office by telephone (+61 2 8020 7700) or email ( Alternatively, contact Luke Scandrett at Lander & Rogers' Melbourne office by telephone (+61 3 9269 9000) or email ( The Lander & Rogers website can be accessed at


(1) An earlier version of this article was first published in HRM Online on 28 June 2018.

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