The continued growth of the gig economy has been a topical issue in relation to regulation of employment and industrial relations in Australia. This popular modern economy is built around the performance of services or tasks facilitated through technology platforms (mostly smart phone applications), and carries the promise of flexibility for workers and better access to services for consumers.
In some shape or form, the gig economy affects all our lives. On a personal level, you may be using apps to deliver food for dinner or as a taxi-alternative. On a business level, you may use the gig economy as a way of sourcing flexible additional labour or to outsource certain functions. However, as consumers, businesses and workers embrace the benefits of the new gig economy, concern is growing at the challenges it poses to traditional models for regulating work and setting minimum standards.
In this post, we examine the responses of courts, tribunals, unions and regulators to the implications of the gig economy, and consider the “where to from here” for you and your business in terms of changes to the law.
Skill sharing, work-on-demand and technology platforms
Work in the gig economy is generally carried out in one of two ways.
The first model is the crowd work system, which allows service providers to bid for and complete tasks for others (usually through open websites). The other model is the work-on-demand system, through which online platforms set up consumers with workers (most commonly for transportation or delivery services).
Unlike traditional employment relationships where work is performed by an employee for an employer, tasks performed through technology platforms in the gig economy involve a triangle of relations between the consumer, the worker performing the task and the digital intermediary.
Superpowers in this area include Uber, Deliveroo, Foodora and Airtasker, but the number of technology companies providing similar consumer options is vast.
Employee or independent contractor: not all workers are equal
Unlike employees, independent contractors in Australia aren’t protected by the safety net of minimum entitlements provided by the Fair Work Act 2009 (Cth) (FW Act) and (for most employees) modern awards.
The fact is well-known, but has come to the forefront of the Australian legal and political landscape with the emergence and growth of the gig economy.
The nature of a working relationship also impacts on other protections your workers may have, such as the unfair dismissal jurisdiction under the FW Act. It’s also relevant to entitlements and obligations under taxation and superannuation legislation, and the ability to collectively bargain for wages and entitlements through enterprise bargaining.
The test is long established and notoriously difficult
The FW Act doesn’t define when a worker is an employee. The test to determine whether a worker is an employee or independent contractor derives from common law principles developed by the courts and involves a multi-factorial approach, in which no single criterion is determinative.
Without being exhaustive, factors that a court or tribunal may consider include:
- Who has control over the work being performed.
- Whether the worker performs work for others (or has a genuine and practical entitlement to do so).
- Whether the worker or the putative employer generates goodwill from the work. Relevant sub-factors may include whether the worker advertises services to the world at large and whether the worker wears a uniform.
- Whether the worker provides services through a company (incorporation).
- Whether the worker provides and maintains significant tools or equipment.
- Whether the work can be delegated or subcontracted.
- Termination and suspension rights.
- Tax and entitlements, including whether income tax is deducted, whether superannuation is paid and whether the worker is provided with paid holidays or other leave. Other sub-factors may include whether the worker has an Australian Business Number (ABN) and goods and services tax (GST) arrangements.
- The method of remuneration.
- The worker’s level of skill.
- The contractual description of the relationship and other matters suggesting the intention of the parties.
Not all the criteria will be relevant in all circumstances and some may carry more weight than others depending on the facts of a case.
The common law test needs to catch pace with the evolving nature of the digital economy
As you will understand from the factors above, the application of the multiple indicia test to different industries, particularly emerging industries, hasn’t been without its issues.
The line for gig economy workers isn’t a clear one. Despite some decisions going the way of the worker, the majority of cases have found that gig economy workers were contractors.
The most high profile matters have involved the gig economy superpower, Uber. In two decisions, the Fair Work Commission (FWC) has found Uber drivers were independent contractors, and not employees. They therefore weren’t able to bring unfair dismissal claims.
As noted by Deputy President Gostencnik in 2017, the test doesn’t provide flexibility to consider concepts such as revenue sharing, relative bargaining power and competitive market drivers, all of which are key features of the modern “gig” economy (Kaseris v Rasier Pacific V.O.F  FWC 6610).
Put differently by Commissioner Wilson around five months later, “the nature of the work and its environment, in which unskilled work is performed, albeit alone, repetitively and over many engagements for the one principal … [has] possibly greater consistency, with a finding of employment”. Despite this, the driver was found to be an employee in this case given the weight of other indicators that tended towards a contracting agreement (Pallage v Rasier Pacific Pty Ltd  FWC 2579).
In short, it appears that the FWC is aware that the long-established test may be falling short in relation to vulnerable workers in the gig economy, but is bound to follow the test developed by superior courts.
Finding the right test case?
Despite the two Uber decisions, unions and the Fair Work Ombudsman (FWO) have continued to press on in the courts and the FWC, suggesting it may simply be a matter of finding the right test case.
In the FWC, the Transport Workers’ Union (TWU) is supporting a former Foodora delivery rider. The rider worked in Melbourne between February 2016 and March 2018. Speaking outside the FWC hearing in Sydney, he said when he began “it was pretty good” and he was earning $14 an hour, plus $5 each delivery. This hourly rate would be just above the current national minimum wage of $18.93 per hour, however the rider wouldn’t be receiving any accrued benefits such as annual or personal leave, or penalties or loadings. However, the rider’s remuneration decreased over the years, with the rider alleging that he was dismissed when he “decided to speak up about it”.
In the Federal Court, the FWO has also commenced proceedings against Foodora relating to alleged sham contracting. The FWO alleges Foodora required each of the three delivery riders to have an ABN and sign a contract titled Independent Contractor Agreement on their commencement. The FWO said two of the workers were juniors aged 19 at the relevant time, while the other worker, an Indian migrant, had been 30.
Will law makers step in?
The Senate has established a Select Committee on the Future of Work and Workers to inquire into and report to Federal Parliament on the impact of technological and other change on the future of work and workers in Australia. The committee is due to report by 15 August 2018.
In the meantime, changes to the law have been proposed in a number of ways at both federal and state level.
Redefining existing legislation
The approach which has already been considered in Parliament is to amend existing legislation, while maintaining existing constructs, to make it fit for purpose in the modern world.
Following this approach, the Greens introduced legislation in May 2018 intended to give the FWC the power to extend the provisions of the FW Act, modern awards or enterprise agreements to gig economy workers (Fair Work Amendment (Making Australia More Equal) Bill 2018 (Cth)). The Bill is unlikely to pass either house, given the Liberal-National Coalition’s current numbers, but signals an approach that may be followed in the future.
At state level, Victoria’s industrial relations minister Natalie Hutchins announced on 3 July 2018 that gig economy players will face penalties if they dismiss drivers or couriers without notice, or fail to provide contracts or pay invoices within 30 days. The reforms will involve amendments to the Owner Drivers and Forestry Contractors Act 2005 (Vic).
Outside of Parliament itself, in New South Wales outgoing TWU national secretary Tony Sheldon (who has been nominated for the NSW Labor Senate ticket) has also said that one of his goals will be to “reverse the current practice of allowing wealthy companies, such as those in the on-demand economy, to take away our rights”.
A new definition of employment or a new category of independent worker?
A more radical approach has been suggested by the Australian Council of Trade Unions (ACTU), which has been campaigning for changes to the law relating to “non-standard” work practices, including in respect of the gig economy.
While acknowledging that the gig economy (currently) only represents a small part of overall employment in Australia, “reliance on platform-based business models is likely to expand rapidly across the service sector, including in areas such as disability and aged care, education, health, legal, financial and accounting services”.
The solution to this growing issue, in the view of the union peak body, is for all workers (regardless of their status as an employee or contractor) to have “the same basic rights to access the minimum wage, paid leave, public holidays, occupational health and safety protections and collective bargaining”.
This approach, which would significantly change the way we look at “employment” in Australia, isn’t dissimilar to the position in the United Kingdom which has an intermediate category of worker. These workers, although not employees, receive certain entitlements. The approach has, however, been strongly opposed by employer groups.
Where to from here?
In the absence of clear movement towards a legislative solution, a number of powerful unions have stepped in to find commercial solutions. Some companies have agreed to this out-of-court approach, which has the benefit of improving a company’s public relations profile while maintaining the flexibility the gig economy is best known for.
Most notably, Coles has signed two supply chain memorandums with the TWU, relating to transport workers in the Coles supply chain and the emergence of “on demand” workers. In addition, the global home-sharing platform giant Airbnb has reached two deals, one with the TWU and one with United Voice.
The approach by these unions and major brands reflects the existing responsibility that franchisors have under the FW Act for minimum conditions and standards in their franchise network. It also mirrors the approach taken in model work health and safety legislation, which requires that businesses in control of work or a supply chain not shed their responsibilities for health and safety of workers by simply passing the responsibility onto others.
Whether Parliament expands the scope of existing legislation, creates a new category of worker, or redefines the traditional approach to who is responsible for ensuring minimum conditions and protections through a supply chain model, there is little doubt that industrial regulation needs to evolve to ensure our gig workers have appropriate labour protections.
Until this time, you should review arrangements within your business’ supply chains for the engagement of workers, particularly those engaged on an “on hire” basis.
Practical Law Australia Employment has resources which can assist you with the review of employment contracts, independent contractor arrangements, and terms and conditions of service. To learn more about Practical Law or request a 7-day trial, visit the website.