15 January 2018


The Fair Work Commission gives Uber a Christmas gift: Drivers are not employees

 

Rohan Burn, Associate

In December 2017, the Fair Work Commission (“FWC”) dismissed an Uber driver’s unfair dismissal application on the basis that the applicant was not an employee and therefore not able to pursue this statutory remedy. This decision contrasts with a recent UK employment tribunal decision in which Uber drivers were found not to be self-employed, and were consequently found to be entitled to basic workplace rights.

Some caution needs be applied to taking this as a green light for gig-economy work arrangements as being beyond the scope of employment laws, as the applicant had no legal representation and it is a single member decision.

The FWC found the overseas decision to be of “no assistance” to the applicant because of the significantly more expansive definition of a “worker” in the United Kingdom. In the Australian context, there is no statutory definition of employment and a worker’s status is determined by reference to common law principles. This requires a multi-factorial analysis of the formal terms and actual work practices adopted between the parties. Deputy President Gostencnik did suggest the emphasis on a work-wages bargain and the current indicia that distinguish an employee from an independent contractor may be “outmoded” for participants in the digital economy.

The contractual relationship

Those unfamiliar with the specifics of Uber’s service agreements may be surprised that the respondent maintained Uber was in no way affiliated with providing transport services in Australia. Uber is self-defined as a technology company that provides a software application which enables a driver to accept a request from an Uber app user (a “Rider”). This acceptance creates a direct legal relationship between the driver and Rider that is independent of Uber and its affiliates.

The FWC agreed that Uber does not pay the driver for a service but rather charges the driver a service fee that is calculated as a percentage of the fees paid by the Rider. This was not “seriously challenged” by the applicant and this contributed to the absence of any work-wages bargain, as there was no obligation on the driver to perform a service and for Uber to pay for that service.

Indicia of worker status

At common law, a key indicium of an employment relationship is the amount of control over a worker. A major problem for the applicant in arguing that he was an employee of Uber was the “complete control” he had in the provision of his service to Riders. Part of Uber’s appeal to drivers is said to lie in their ability to determine when they work, for how long, and in what locations. Uber drivers also operate and maintain their personal vehicles, must wear their own clothes, and style how they interact with Riders.

The FWC found these factors outweighed the need for drivers to accept and meet Uber service standards aimed at protecting the Uber brand, ensuring customer satisfaction, and maintaining safety requirements. These standards are assessed based on the ratings that Riders give their drivers and Uber maintains the right to deactivate a driver’s account if, as in this case, those ratings are consistently poor.

Possible ramifications for your business

  • There is an increasing tension with the applicability of the traditional common law tests to modern labour markets.
  • The understanding of the parties and the description in the contract is not determinative of how the relationship will be characterised.
  • Developments in common law or legislative intervention may have ramifications that affect your organisation’s rights and obligations if employment relationships are seen to be inadvertently created.
  • Multiple factors must be taken into consideration to determine a worker’s employment status and PCS can assist employers to ensure their arrangements with “independent contractors” are genuine.
Posted in Legal Advice & Consulting.
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