The whole world is still wrangling with how to classify gig workers, the FWO decision is one part of that.
Apples and oranges – what’s the difference? You might start with the colour or the feel of the skin, open it up to check what is inside, or take a bite to get a taste. But how can you tell the difference between ‘employees’ and ‘independent contractors’, particularly in the rapidly growing and changing world of the gig economy?
The Fair Work Ombudsman (FWO) has, after a two-year investigation, determined that Uber drivers in Australia are independent contractors, not employees. The FWO’s primary reason for finding that the drivers are not in an employment arrangement is because Uber’s drivers do not have a formal or operational obligation to perform work when a job is made available to them.In other words, they work as and when they please.
While the FWO stated that the decision relates exclusively to Uber Australia and would not determine other gig economy relationships, it takes a clear position in an international employment law debate and, despite having no formal legal consequences, follows an approach taken in previous cases.
The evolving Australian framework
The 2018 case of Pallage v Raiser Pacific involved an unfair dismissal claim by a driver who had entered into a series of service agreements with Uber and its associated entity Raiser Pacific. The driver had his account deactivated for breaching “community standards”.
The Fair Work Commission had to first determine whether Pallage was an employee and accordingly eligible to protections from unfair dismissal. The Commission analysed several unique factors of the Uber and driver relationship, including that drivers:
- could choose when they logged on or off from the app;
- could accept or refuse trips;
- could work the hours and locations they wished; and
- did not wear a uniform.
The Commission determined that drivers had enough personal control over when and where they operate, how often, who they picked up and how they interacted with the Uber platform, to be considered independent contractors (as opposed to employees, whose working arrangements would be largely controlled or directed by the employer).
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Equivalent US position
Similarly to Australia, US courts have established factors for determining employee or independent contractor relationships, including whether the worker:
- is engaged in a business;
- has their own uniform/tools;
- has regular remuneration set at a fixed hourly-rate or fee;
- has a degree of control over the work and nature of work the conduct; and
- believes, with the employer, they are entering a genuine employment relationship.
In April, the US National Labor Relations Board used these factors to conclude that UberX and UberBLACK drivers were independent contractors. The board believed the overriding feature of the Uber system was that “on any given day, at any free moment, drivers could decide how best to serve their economic objectives.”
Alternative UK position
In contrast, a recent UK decision demonstrates a willingness by UK Courts to reach the conclusion that Uber drivers are employees.
Unlike others views that Uber is a ride-sharing service, the UK Court of Appeal determined that Uber was a ‘transportation business’. The court held that drivers were working for Uber by providing skilled labour allowing the business to deliver its services and earn profits.
The UK Court of Appeal found that Uber drivers were entitled to at least the basic workers’ rights such as holiday and sick pay and the national minimum wage.
Impacts of the FWO decision
While the FWO decision has no formal legal consequences, it’s likely to raise concerns about the vulnerability of workers in the gig economy. The Centre for Future Work claims that the average UberX driver earns around $14.62 an hour in Australia, well below the minimum wage, which is to be set at $19.49 per hour from 1 July 2019.
If Uber drivers are determined to be independent contractors, they will not be entitled to this wage safety net.
Other groups, such as the RideShare Drivers United lobby group and the Transport Workers Union, have also expressed their concerns with the FWO decision, to the effect that categorising gig economy workers as independent contractors may erode existing labour standards generally.
The FWO’s decision also contrasts with a 2018 Fair Work Commission decision against Uber’s rival gig economy competitor, Foodora, which was ordered to pay $15,000 in compensation to a worker who was found to be an employee and to have been unfairly dismissed. It appears that the FWO intends to determine employment arrangements in the gig economy on a case-by-case basis.
The current FWO Uber determination illustrates that this area remains one to watch. It is plausible that a court or tribunal may take a different approach and even follow the precedent set by the UK. The growing case law on this topic offers some indicators about how this may be determined in the near-future. However, for now, it is very much unresolved.
Aaron Goonrey is a Partner and Luke Scandrett is a Senior Associate in Lander & Rogers’ Workplace Relations & Safety practice. Aaron can be contacted at firstname.lastname@example.org
This is an edited version of an article that will appear in the August 2019 edition of HRM magazine.