The changing world of work and the developing trend towards more flexible work, workers and workplaces continues to be a hot topic globally for lawyers, unions, politicians and workers alike.
In an article published earlier this year, we analysed conflicting decisions relevant to the question of whether gig economy workers are ‘independent contractors’ excluded from certain legislative protections, or ‘employees’ entitled to minimum wages, paid leave and the benefits and entitlements of employment.
We now take a further look at the latest decisions and policy developments in the developing trend towards more flexible work, workers and workplaces.
In our earlier article, we examined the case of Kaseris v Rasier Pacific V.O.F  FWC 6610 (Kaseris), where the Fair Work Commission (FWC) rejected a Victorian Uber driver’s argument that he was an ‘employee’ protected by unfair dismissal laws under the Fair Work Act 2009 (FW Act).
In the recent case of Pallage v Raiser Pacific Pty Ltd  FWC 2579 (Pallage), Uber again successfully defended a driver’s bid to claim unfair dismissal, with the FWC determining that Uber was not his employer for the purposes of the FW Act.
The driver entered into a series of service agreements with Uber BV and its associated entity, Raiser Pacific Pty Ltd (Uber). Relevantly, those agreements included terms to the following effect:
- the relationship between the driver and Uber was a business relationship only;
- Uber would not be deemed to direct or control the driver generally or in his performance under the agreement;
- the driver was not an employee of Uber or any of its affiliates; and
- the driver indemnified Uber if he was found to be an employee of Uber.
Uber deactivated the driver on 4 December 2017 for breaching ‘community standards’.
While Uber refused to disclose the nature of this breach, the driver speculated it related to two customer complaints.
The FWC applied what is known as the ’multi-factorial’ approach to determining whether a person is an employee or independent contractor. This involves assessing whether factors typically indicative of an employment relationship are present in any given case.
In doing so, the FWC noted that the nature of the work and its environment (where unskilled work was performed, albeit alone, repetitively and over many engagements for the one principal) was consistent with a finding of employment.
However, the FWC concluded that ‘while elements of the contract itself appear more consistent with an employment relationship (for example, those dealing with termination), most do not.’
In particular, the FWC was satisfied that (as was the case with the driver in Kaseris), this driver:
- could choose when to log into and off from Uber’s Partner App;
- had control over the hours he worked; and
- was able to accept or refuse trip requests.
The FWC also considered it relevant that the driver:
- had his own Australian Business Number and was responsible for remitting GST and other tax liabilities;
- was not required to wear a uniform;
- provided his own equipment, most significantly in the form of a motor vehicle;
- was permitted to work for others; and
- was remunerated irregularly.
Ultimately, these factors indicated that the relationship was not one of employment.
On 12 June 2018, the Fair Work Ombudsman (FWO) commenced legal action in the Federal Court against Foodora Australia Pty Ltd (Foodora), a food delivery company.
The FWO alleges that Foodora engaged in sham contracting resulting in underpayments to three bicycle couriers it engaged in 2015. The FWO further alleges that, during 2016, Foodora misrepresented to those workers that they were independent contractors when they were in fact employees of Foodora.
A sham contracting arrangement exists when an employer attempts to disguise an employment relationship as an independent contracting arrangement. This is often done to avoid responsibility for employee entitlements.
Under the sham contracting provisions of the FW Act, an employer must not:
- misrepresent an employment relationship or a proposed employment relationship as an independent contractor arrangement;
- dismiss or threaten to dismiss an employee in order to engage them as an independent contractor; or
- make a knowingly false statement to persuade or influence an employee to become an independent contractor.
The FW Act provides significant penalties for contraventions of these provisions.
The test for employment applied is this context is the same multi-factorial test referred to above.
Applying this test, the FWO alleges the three workers were actually employees of Foodora during the relevant period, having regard to:
- the level of control, supervision and direction Foodora exercised over the workers’ hours, location and manner of work;
- the requirement for the workers to wear a Foodora-branded T-shirt and use food storage boxes and/or bike racks supplied by Foodora;
- the workers’ payment at fixed hourly rates and/or amounts per delivery in circumstances where the workers did not negotiate their rates of pay at any time; and
- the absence of evidence that the workers were genuinely conducting their own delivery business, and in particular, the fact that the workers did not:
- advertise or promote their availability to perform deliveries to the public;
- delegate their delivery duties with Foodora to any other person; or
- have their own customer base, business premises or insurance.
Foodora faces penalties of up to $54,000 per contravention if found guilty.
On 13 June 2018, the UK Supreme Court (Court) handed down the appeal case of Pimlico Plumbers Ltd and another v Smith  UKSC 29. Mr Smith was a plumbing and heat engineer who performed work for Plimco Plumbers Ltd (Pimlico) between August 2005 and April 2011, under two written agreements.
In August 2011, Mr Smith commenced proceedings against Pimlico and its owner in an employment tribunal for unfair dismissal, discrimination, unpaid annual leave and unlawful deduction of wages.
The tribunal held that Mr Smith was a ‘worker’ and not an ‘employee’ or ‘independent contractor’ for the purpose of the Employment Rights Act 1996 (UK) (ER Act). Mr Smith was therefore entitled to the minimum wage and holiday pay.
Pimlico Plumbers appealed this decision. The appeal turned on whether, under section 230(3) of the ER Act:
- Mr Smith had undertaken to perform personally any work or services for Pimlico; and
- Pimlico was not a client or customer of Mr Smith.
The Court found that:
- The tribunal was entitled to conclude that Mr Smith had undertaken to ‘personally perform’ work for Pimlico. While Mr Smith had the right to substitute others to do his work, his only right of substitution was of another Pimlico operative. The drafting of the relevant agreements between Pimlico and Mr Smith (which used phrases like ‘you’ and ‘your’ to address Mr Smith) contemplated performance by Mr Smith personally, suggesting that Mr Smith’s right of substitution was only ‘insignificant’.
- The tribunal was entitled to conclude that Pimlico was not a client or customer of Mr Smith. Pimlico exercised tight control over Mr Smith (evidenced by the requirement that he wear Pimlico uniforms, drive its branded van, carry its ID card and closely follow administrative instructions). In addition, there were ‘severe terms’ as to when and how much Pimlico was obliged to pay Mr Smith, which was inconsistent with him being an independent contractor.
In reaching this conclusion, the Court emphasised that it was merely finding that the tribunal was entitled to reach its decision. A number of passages in the judgment suggest that the Court was persuaded by the counter arguments presented by Pimlico.
The concept of ‘worker’ under the ER Act (somewhere between an ‘employee’ and ‘independent contractor’) is not a concept in Australian employment law.
However, it has consistently been applied by UK Courts to give gig economy employees some minimum entitlements, without enlivening an ‘employment’ relationship. For instance, the decision in Pimlico is consistent with the finding in Uber B.V. and others v Aslam and others (Appeal No UKEAT 0056/17/DA) (discussed in our previous article).
Businesses, aided by technological innovation, have increased the prevalence of flexible work arrangements once considered atypical.
The Australia Institute’s Centre for Future Work recently released a report which found that, ‘…for the first time in recorded statistics, less than half of employed Australians work in a permanent full-time paid job with leave entitlements.’
In classifying ‘insecure work’, the report includes not only casual workers, but those on contracts in the ‘gig economy’ (such as Uber divers) and those employed by labour hire organisations.
The Australian Council of Trade Unions (ACTU), led by Sally McManus, has harnessed this report as a basis for arguing that big business has too much power and it is time to ‘#changetherules’. The ultimate call to arms is for proactive policy intervention to overhaul workplace rules limiting the use of casual employees and legislating for casual conversion to permanent employment.
The Greens have endorsed the ACTU’s ‘#change the rules’ campaign.
LOOKING FORWARD - LEGISLATIVE CHANGE
In June 2018, three bills were presented and read for a first time in the Australian parliament. These were:
These Bills, which will fail without crossbench or Labor party support, provide for all workers to be entitled to minimum standards set by the FWC. Ultimately, they aim to extend protections under the FW Act to ‘insecure workers’, including contractors.
The Senate Select Committee of the Future of Work and Workers was due to provide its report this month, however that date for that report has been extended until 15 August 2018.
In this evolving economy, it is important for employers to balance opportunity and innovation with risk. Further, until such time as there is legislative change, they should also ensure that workers who are engaged as independent contractors are appropriately classified as such.