Class actions are set to become a prominent feature of the Australian employment law landscape. With several high-profile cases currently before the courts, and a flurry of recent employment law decisions, the rise in class actions is set to continue. This follows trends in the United States where, over recent years, employment related class actions have steadily increased.
For businesses with high numbers of contractors, labour hire workers and casual employees, preparing for increased scrutiny by relevant bodies is critical.
Potential areas for class actions
Class action funders are now, more than ever, prepared to venture outside the ordinary bounds of commercial litigation. Recent developments in Australian employment law will also fuel employment related class actions in the year to come.
Gig economy contractors held to be employees
The Fair Work Commission recently found that that a Foodora rider was an employee in the unfair dismissal case of Klooger v Foodora Australia Pty Ltd.
This is the first finding by an Australian court or tribunal that a digital platform worker was an employee rather than an independent contractor. Factors that weighed heavily in favour of Klooger being found to be an employee included:
- start and finish times and locations of shifts were fixed by Foodora;
- there was no unrestricted entitlement on Klooger to sub-contract;
- Klooger did not carry on his own business;
- Klooger was required to wear a Foodora uniform and use Foodora equipment; and
- Foodora had a high level of control over the manner in which Klooger performed the work.
The Transport Workers Union of Australia supported Klooger in the case and made the following statement following the decision “This ruling shatters the foundation that the on-demand economy is built on…This fight does not end here... We will continue to demand an end to the exploitation of riders and other on-demand economy workers.”
The multifactorial test used in the Foodora case to differentiate employees from contractors may result in different results for other similar businesses that use technological platforms, depending on the nature of their business model.
Characterisation of casuals
The recent decision of the Full Court of the Federal Court in WorkPac Pty Ltd v Skene regarding payment of annual leave for casuals is likely to give rise to class actions involving casuals. Click here for our previous article on this decision.
The Fair Work Ombudsman’s focus on sham contracting (particularly in the gig economies) is likely to spur potential claimants and their class action law firms, unions, and potential litigation funders.
Being prepared for this increased scrutiny by the Fair Work Ombudsman, unions, class action law firms, courts and the Fair Work Commission, is particularly critical for businesses with high numbers of contractors, labour hire workers and casual employees.
Current class actions
In reviewing casuals and contractor-related class actions, some decisions should be kept in mind in relation to what’s ahead for 2019.
Some specific class actions in this space include:
A class action involving 4,000 telecommunications workers has been commenced in the Federal Court of Australia against a workforce management company, ISGM (now trading as Tandem Corporation). The claim alleges that subcontractors to companies such as Telstra and Foxtel were in fact employees and therefore entitled to a minimum wage, paid annual and long service leave, overtime, penalty rates, allowances and superannuation. In addition to underpayment claims, penalties are also being sought by the claimants, who are represented by a personal injury law firm. The firm is reportedly supported by an Australian based litigation funder and the Australian Communications Workers Alliance.
The Federal Court of Australia’s declaration that the RECS (Qld) Pty Ltd Agreement (the One Key Agreement) was void and of no effect, has left One Key Resources exposed to potential proceedings by its casuals who should have been categorised as permanent employees under the relevant modern award. In addition to proceedings brought by the CFMMEU on behalf of its affected members, One Key Resources is facing a potential class action from casual employees, who were non-union members, claiming personal leave and annual leave for the period they worked under the now void One Key Agreement.
400 Workers at the Mount Arthur Coal Mine are pursuing BHP for approximately $40 million in underpayments, claiming they were incorrectly hired as casual employees by labour-hire companies.
In late 2016, a highly publicised class action worth $85 million was filed in the Federal Court of Australia against APPCO, a marketing agency that largely consults with charities. The action consists of 1,400 claimants across Australia who allege that APPCO was involved in sham contracting because fundraising workers were hired as independent contractors, rather than employees, to avoid paying basic employee entitlements. The National Union of Workers has brought a similar claim on behalf of 100 workers against marketing companies Aida and Credico.
The law relating to class actions is one of the fastest moving in Australia, requiring significant expertise in order to grapple with the myriad of strategic issues that can arise.
As an employer facing a potential class action investigation (such as an investigation instigated by the Fair Work Ombudsman) or being a defendant to a class action claim, there are a number of important considerations to be made.
The strategic issues in question may include:
Multiple and competing class actions
The process can be hampered by the instigation of multiple, sometimes overlapping or even competing, class action claims relating to the same conduct. This increases the complexity of proceedings and defence costs.
Unlike in the United States where there is a certification procedure in place for the commencement of class actions, there is no such process in Australia. The phenomenon of the ‘beauty parade’ (that is, a court-controlled process of selection among multiple potential class actions) is currently under consideration by appellate courts.
Strategies to “de-class” or shut out proceedings early
Consideration should be given to the rules that allow defendants to bring to an end class actions early in the proceedings including where the representative action is not representative of the class of claimants or where it is deemed not ‘in the interests of justice’, either for considerations of cost, efficiency or appropriateness or where it will not operate to significantly curb proceedings. These strategies offer potential for employers to cut off class actions at the pass.
Implications of the opt-out or opt-in models
Although the legislative model in Australia for class actions is an opt-out model, meaning that all members within the class action description will have their rights determined by the class action unless they actively opt out, in reality proceedings have been permitted to run on either an opt-out or opt-in basis. As a defendant, opt-in arrangements may result in a lack of certainty and finality in the proceedings because all potential claims may not be dealt with through a single class action process.
To navigate this evolving landscape, significant expertise is required on the part of class action defendants to both grapple with the complexities of the law, and/or to engage early with opposing lawyers (and funders, as the case may be) to ward off proceedings or enter into early confidential negotiations.
Preparing for 2019
Australian employment law in relation to class actions continues to move rapidly and class action defendants are often required to contend with the complexities of the law as well as a range of other demands. If you have any concerns or queries about these or other employment-related law issues, please contact our employment law team.
Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).