The “sharing economy” is still in its infancy but steadily establishing itself as a force to be reckoned with. It’s generally defined as a socio-economic ecosystem where human and physical resources are shared. Put simply, it’s about sharing stuff like cars (Uber) and accommodation (Airbnb) when the owner decides the resource is available, for a fee.

While the business model is evolving, the law is typically lagging behind. The challenge for the “sharing economy” is working out how it can comply with the law while retaining the flexibility (and cost efficiency) it requires.

Deciding how to engage the workforce is one area of significant challenge given the workplace relations legislation heavily regulates the forms of engagement available. Broadly speaking, these can be divided into two categories; employees or contractors. There are pros and cons with each and neither seems to provide a perfect fit.

“Employment” is typically determined having regard to a number of factors, including the level and degree of control the “employer” has over the individual” and whether the individual is integrated into the organisation. Email addresses, business cards and other branding is consistent with employment. However, this model is typically unattractive to the “sharing economy” given the hours of work are unpredictable or determined by the individual and payment is commission based rather than hours worked. Other onerous obligations associated with employment are also a deterrent such the cost of paid leave entitlements and vicarious liability.

Casual employment might seem a viable option if the work is typically ad hoc. However, casuals are entitled to a higher minimum pay rate, and longer term casuals present a risk of being deemed permanent and consequently entitled to the same benefits as permanent employees.

On the other hand, the contractor model may be appropriate if the arrangement meets criteria including the worker running their own business, providing their own tools of trade, being able to delegate their work, submitting tax invoices and if they are incorporated. However, if the substance of the relationship is more akin to employment, the principal faces exposure to non-compliance with the relevant protective legislation afforded to employees, including the “sham contracting” provisions in the Fair Work Act 2009 (Cth) which carry heavy penalties for a breach and reinstatement of entitlements.

It appears there is a case for regulatory reform, as the current options for engaging workers don’t provide a neat fit. However, that’s not likely to happen in the short term given the most recent Productivity Commission draft workplace relations report didn’t tackle the issue head on.