The Gig is Up: the Case for a New Classification of Work in a Changing Economy
Andrew Jose, Associate
Recent decisions by the Fair Work Commission have reconfirmed the status of Uber drivers in Australia as independent contractors. This in spite of protestations of some of the drivers engaged through its “Partner App” that they are employees. These decisions reinforce the prevailing binary classification of workers in Australia: you are either an employee or an independent contractor.
With the rise of the so-called ‘gig-economy’ and the proliferation of new types of work and digital platforms, is it time to consider changing how we classify the work that people do? Recent case law in the United Kingdom demonstrates that workers in the gig-economy may not fit into the traditional contractor-employee dichotomy. Perhaps we need a new category to balance the needs of businesses such as Uber to have flexible sources of labour? Can we still afford a limited set of entitlements and protections to workers who are becoming increasingly dependent on these digital platforms for an income?
The term ‘gig-economy’ refers to the growing area of work involving temporary or freelance style engagements of work in areas such as transportation, food delivery, odd jobs and even professional services. Everyday consumers are able to engage these services through digital platforms such as Uber’s Partner App, Airtasker, Ola and Deliveroo, where they are connected with workers and through which payments for the services are made. Workers on digital platforms such as Uber and Deliveroo execute service agreements with the company, which allows them to use the digital platform to provide their services. The company will often require their workers to meet certain requirements. For example, Uber mandates that their driver-partners hold a full drivers licence, have car insurance and undergo background checks. Payments made by consumers using the digital platform will be transferred to the workers, with the relevant company taking a certain percentage of each transaction.
The crucial element of the gig-economy from an employment law perspective is the fact that workers are strictly engaged as independent contractors, not employees.
The Victorian Government recently conducted a study into the participants in the gig economy, titled ‘Digital Platform Work in Australia’. The survey found, among other things, that participants were reporting dissatisfaction with earning a fair income, their ability to set the prices for their services and their ability to gain new skills through their work. These findings reflect a growing sentiment that changes may need to be made to how these workers are classified, which is evident in the growing area of case law surrounding the gig-economy.
Challenges to the independent contractor classification
In Australia, there is a growing body of cases that have been heard by the Fair Work Commission where workers engaged by Uber have challenged their status as independent contractors, arguing that they are instead employees and are therefore protected from unfair dismissal. In three separate cases the Fair Work Commission has firmly rejected claims brought by former Uber drivers that they were unfairly dismissed from their employment on the basis that they are in fact independent contractors and therefore not protected by the unfair dismissal provisions of the Fair Work Act.
In making these decisions, the Fair Work Commission considered various factors to determine the relationship between the drivers and Uber, using the ‘multifactorial test’ set out in the French Accent case before the previous industrial relations tribunal, Fair Work Australia. The multifactorial test looks at factors including the level of control over the person, if the person provides their own tools and equipment, if the work can be further delegated or subcontracted, if they can perform work for others and if the other party can suspend or dismiss them. In all three cases the Fair Work Commission decided that the drivers were independent contractors, pointing to factors such as the ability of drivers to log in and out of the Partner App, to control their hours of work, the ability to refuse trip requests along with other factors such as no requirements to wear uniforms, display branding and being able to work for other companies as indicative of there being a contracting relationship.
Although the Fair Work Commission found no strong arguments in favour of a finding that these drivers were employed by Uber, Deputy President Val Gostencnik’s comments in the case of Kaseris v Rasier Pacific V.O.F1 indicate that the traditional dichotomy of independent contractor/employee that has developed in Australian law may be outdated in the face of economic and societal changes which have manifested into the gig economy. In that case the applicant in part tried to rely on a decision in the United Kingdom, Uber BV v Aslam,2 which found that Uber drivers were workers and not independent contractors, but Deputy President Val Gostencnik rejected this line of reasoning. However the Deputy President did suggest in his judgment against the applicant that the traditional multi-factorial test was “no longer reflective of our current economic circumstances”, because the factors “take little or no account of revenue generation and revenue sharing as between participants, relative bargaining power, or the extent to which parties are captive of each other, in the sense of possessing realistic alternative pursuits or engaging in competition”.
On the flipside of these cases is the decision of the Fair Work Commission in Klooger v Foodora Australia Pty Ltd.3 Foodora was another participant in the gig-economy, providing food delivery service through a network of delivery riders and drivers. The applicant delivery rider was successful in establishing that he was an employee of Foodora and in doing so was successfully able to make an unfair dismissal claim. The Fair Work Commission found after applying the multifactorial test that Foodora’s rostering system exhibited a high degree of control over the riders, with no ability for them to work outside of those hours or locations. The riders were also required to use branded attire and equipment, and the employment contract was drafted in such a way that it contained provisions which closely resembled an employment contract. The Fair Work Commission did consider the applicant’s use of a ‘substitution scheme’ whereby he was able to use third parties to perform the work through his account on the Foodora application, but did not allow Foodora to rely on this line of reasoning due to its acceptance and validation of the scheme despite it being in breach of contract and other Australian laws for other reasons.
There is currently a sham contracting case on foot in the Federal Circuit Court against another food delivery service, Deliveroo, in which the applicant rider has claimed that he is in fact a casual employee and is therefore entitled to higher rates of pay along with entitlements. Recent media reporting suggests that the applicant will rely on factors such as being required to wear a uniform, using branded equipment and the ‘batching system’ used by Deliveroo to determine priority for offering shifts to riders.
Recent developments in the United Kingdom
In the United Kingdom instead of the independent contractor/employee dichotomy there are three categories for classifying the work that people do. People are either employees, workers or independent contractors, with different levels of entitlements and protections afforded to each category. Workers are entitled to:
- the national minimum wage;
- protection against unlawful deductions from wages;
- minimum levels of paid holidays;
- minimum lengths of rest breaks;
- not work more than 48 hours per week or the right to opt out of this;
- protections for whistleblowing and against unlawful discrimination; and
- not to be treated less favourably if they work part-time.
Employees will receive all of these rights along with other entitlements such as sick leave, maternity/paternity leave and minimum notice periods. Independent contractors sit on the other side of the spectrum, not receiving any of these entitlements aside from any work health and safety protections.
There have been two major cases which have considered the question of how to classify participants in the gig-economy in the United Kingdom; Uber BV v Aslam and Independent Workers’ Union of Great Britain v RooFoods Ltd (t/as Deliveroo).4
The decision of the Employment Appeal Tribunal in Uber BV v Aslam confirmed that Uber drivers in the United Kingdom are in fact workers and not independent contractors. The deciding factor in this matter was that drivers for Uber were “incorporated” into the business of Uber under their arrangements and controls, which contradicted Uber’s argument the drivers were conducting their own independent businesses. The tribunal found that drivers were able to establish their own business relationship with customers, worked on the understanding that they would be indemnified by Uber for bad debts, and they were subject to various controls by Uber including setting default routes to take, limiting vehicle choices, fixing the fare so that the driver cannot negotiate a different fare with the passenger, and performance management facilitated through the driver rating system.
In contrast to this, following this decision the Central Arbitration Committee (a specialist body on trade union matters) found in Independent Workers’ Union of Great Britain v RooFoods Ltd (t/ as Deliveroo) that riders for Deliveroo did not have worker status because they had a genuine right to use a substitute to perform deliveries before and after they had accepted a particular job.
Outside of these developments, it is apparent that the United Kingdom is at least considering how these new forms of work should be dealt with in terms of classifications and entitlements. In 2017 the “Good Work: the Taylor review of modern working practices” reported on the changing employment practices in the modern UK economy, advising that employer practices needed to change in order to keep up with modern businesses. In relation to digital platform-based work, such as Uber, it recommended that clearer distinctions be drawn between workers (referred to as ‘dependent contractors’) and independent contractors, with additional protections given to dependent contractors and stronger incentives for firms to treat them fairly. The report recommended that legislation around principles of classification be made clearer, with a right of substitution no longer being a barrier to being a worker, and more emphasis placed on the principle of control (not just supervision).
Where do we go from here?
Digital platforms and the so-called gig-economy have had a significantly positive impact in providing useful services through cheaper and more responsive methods, which are in large part due to the ability to use independent contractors. Businesses such as Uber, Ola and Deliveroo are able to focus on the core services and sharpen these offerings through the flexibility, freedom and cost savings provided by independent contractors.
However, it has become clear that as the gig-economy grows and its labour participants become increasingly reliant upon businesses such as Uber as a primary source of income, the legal framework will need to respond to ensure that there is a balance struck between the needs of workers and the businesses engaged in the market. The ‘worker’ labour classification in the United Kingdom provides a reasonable middle-ground between the two separate classifications of workers and independent contractors in the Australian context. Perhaps by using this as a starting point, we can create a third classification to meet the emerging challenges of the digital landscape and work in the gig-economy.
1. Michail Kaseris v Rasier Pacific V.O.F  FWC 6610
2. Uber BV & Ors v Aslam & Ors  EWCA Civ 2748 (19 December 2018)
3. Joshua Klooger v Foodora Australia Pty Ltd  FWC 6836 (16 November 2018)
4. Independent Workers’ Union of Great Britain v RooFoods Ltd TUR1/985(2016)