“Deliveroo” decision: More rights for “gig” workers
By Kate FitzSimons, Senior Employment Lawyer and Employment Relations Specialist
[Diego Franco v Deliveroo Australia Pty Ltd, (U2020/7066), 18 May 2021]
Recently the Fair Work Commission (“FWC”) delivered an important decision, finding that Deliveroo, the digital food delivery platform, unfairly dismissed a worker. Significantly, the FWC deemed a delivery driver an employee. This marks a shift from the previously held assumption that food delivery drivers (and other similar workers) are usually to be treated as independent contractors and not employees. In the nascent “gig” economy, organisations engaging contractors must be live to the risks that in the eyes of the law, such contractors may be deemed employees.
Why does this matter?
There are important differences in the rights and entitlements employees and contractors enjoy. While engaging workers as contractors may often be appropriate and afford both the principal company and contracted worker flexibility, such workers are not entitled to the primary benefits of employment, for example, paid leave, protection from unfair dismissal, superannuation and entitlements upon redundancy. Should a worker engaged as a contractor be deemed an employee, the principal company will be liable to the worker-now-employee for all employment benefits, for the (back-dated) term of the engagement. There will also be increased liabilities to the ATO for payroll tax, which a company is not usually required to pay for an independent contractor.
What is interesting in the Deliveroo decision is that although there were a number of factors that might previously have led to the worker being characterised as a contractor, the FWC has taken a broader view around the use of smartphone technology, digital platforms used to allocate work, and the reality that delivery drivers often work for more than one delivery “App” or service provider (“multi-apping”), to find that the Deliveroo driver was in fact an employee of the company.
What was the case about?
In April 2020, Diego Franco, who had been engaged as a delivery driver for Deliveroo for three years, was terminated by the food delivery provider. Following the termination of the arrangement, Mr Franco lodged an unfair dismissal claim with the FWC. As relief for unfair dismissal is only available to employees, and not contractors, whether Mr Franco would be viewed by the FWC as an employee or contractor was pivotal to his case.
There are key “indicia”, or factors, which the courts look at when determining if a contracting arrangement is, in fact, more properly described as an employment relationship. These can include the written agreement itself, whether the worker uses their own “tools” to perform the work (or that of the company) and the level of “control” the principal company can exert over the worker, for example, whether the worker may also undertake work for another company.
Deliveroo’s case for Principal/Contractor relationship:
Deliveroo contended that Mr Franco could not be characterised as an employee of Deliveroo on a number of factors, including that:
- there was no employment contract (rather a supplier contract between Mr Franco and Deliveroo);
- Deliveroo did not control Mr Franco’s hours and it could not dictate or request that Mr Franco work particular hours or shifts;
- Mr Franco provided his own motorcycle to undertake the deliveries and his own smartphone to utilise the Deliveroo App;
- Mr Franco was not required to wear Deliveroo clothing (although he was encouraged to do so);
- Importantly, Deliveroo claimed that the fact that Mr Franco was also engaged by competitor Uber Eats as a delivery driver demonstrated that Deliveroo was unable to assert the necessary level of “control” that is typical of an employment relationship.
Decision: employment relationship
The Commission considered all of these factors and those argued by Mr Franco’s (Transport Workers’ Union) lawyers and found an employment relationship to exist. In his judgement, Commissioner Cambridge explained that the level of control asserted by Deliveroo on Mr Franco was a critical factor to his decision.
Key indication of employment relationship: control
Key indicators of this control, in the Commissioner’s opinion, centred on relatively new technology which is now commonly used in the work arena: digital algorithmic platforms used to monitor deliveries and allocate jobs; and the use of smartphones and similar mobile technology, which allows employees and workers to work for two or more competitors simultaneously.
New technology changing work relationships
Citing in particular the algorithmic platform used by Deliveroo for the first two years of Mr Franco’s engagement, the Commissioner found that, in effect, it was used to direct Mr Franco to undertake jobs at particular times and made it difficult for him to cancel booked engagements. Commissioner Cambridge stated that such digital platforms hold a “vast repository of data relating to the performance and activities of those individuals who perform the work…and can be used as a means to control those who perform the work”.
In relation to “multi-apping”, the FWC found that this did not preclude a worker from being deemed an employee, but rather could be seen as similar to an employee holding two casual jobs. Where previously an employee would have to be physically located at their place of work and therefore not working simultaneously for another employer, smartphone technology, fuelled by the changes to work practices during the Covid-19 pandemic, meant that employment is no longer predicated on being physically present.
Upon finding that Mr Franco was in fact an employee of Deliveroo, the FWC found that his employment had been unreasonably terminated.
What does this mean for companies engaging contractors?
This decision makes it clear that companies must be vigilant when engaging contractors and undertake a rigorous assessment of not just the documentation around these arrangements, but also the effect of the arrangements in their totality. The use of technology to facilitate flexible and mobile working arrangements cannot be relied upon by companies to assert that an arrangement is “arm’s length”.
It is apparent that while technology is allowing companies to engage staff in increasingly flexible ways, this flexibility cannot overcome the obligation to afford workers the benefits of employment when the reality of their work situation is not, in fact, as flexible as it may appear. Deliveroo is expected to appeal this decision and we shall watch with interest where that outcome leads companies and the workers they engage.
Contact:
Kate FitzSimons
Senior Employment Lawyer and Employment Relations Specialist
May 2021
kate@sydneylegalconsulting.com.au
www.sydneylegalconsulting.com.au
