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23 November 2022

Fair Work Commission delivers blow to the employment status of gig workers

The Full Bench of the Fair Work Commission (FWCFB) has recently reaffirmed the primacy of contractual terms when determining the employment status of a gig worker. However, this position is unlikely to subsist due to the Labor Government’s proposed legislative amendments tackling secure jobs and the gig economy.

The Full Bench of the Fair Work Commission (FWCFB) has recently reaffirmed the primacy of contractual terms when determining the employment status of a gig worker. However, this position is unlikely to subsist due to the Labor Government’s proposed legislative amendments tackling secure jobs and the gig economy.

The question of whether a gig worker should be characterised as an employee or independent contractor remains a prominent question confronting the Fair Work Commission (FWC). Formerly, courts adopted a multifactorial approach when determining whether an individual was an employee or contractor. This involved assessing the totality of the employment relationship to determine how the worker’s status should be characterised. However, following the landmark High Court decision in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1, the High Court affirmed the primacy of contractual terms and the importance of contractual interpretation (see our previous related article).

The FWCFB’s recent decision in Deliveroo Australia Pty Ltd v Franco [2022] FWCFB 156, is a case where principles established in Personnel Contracting weighed decisively in favour of the finding that a Deliveroo supplier, Mr Franco, was an independent contractor. In reaching this conclusion and overturning the decision at first instance, the FWCFB placed considerable emphasis on the contractual rights and obligations that attached to Mr Franco’s supplier agreement.

Importantly, Deliveroo, in following Personnel Contracting, affirms that a broader assessment of the totality of the employment relationship is no longer the determinative factor in finding an employment or independent contractor relationship. As such, it is imperative that businesses engaging workers as independent contractors ensure contracts accurately reflect that relationship and avoid terms indicating an employment relationship. The outcome is a blow for gig workers attempting to have their engagement classified as an employment relationship.

The Deliveroo case

Mr Franco worked for Deliveroo for three years as a delivery rider pursuant to a ‘supplier agreement’. Because of various complaints about unacceptable delays in Mr Franco’s delivery times, Deliveroo terminated his supplier agreement in April 2020. The Transport Workers’ Union (TWU) challenged this termination, on behalf of Mr Franco, by applying to the FWC seeking an unfair dismissal remedy under the Fair Work Act 2009 (Cth) (FWA).

At first instance, the FWC concluded that Mr Franco was an employee of Deliveroo and thus protected from unfair dismissal under section 382 of the FWA. Adopting the multifactorial test approach, the FWC determined that, given the substantial degree of control Deliveroo had over his work, Mr Franco was not conducting business on his own account and that he was an employee. Consequently, Deliveroo’s decision to dismiss Mr Franco was deemed ‘callous’ in the circumstances and the FWC ordered that he be reinstated.

The appeal

Deliveroo appealed the decision to the FWCFB. The FWCFB stayed the appeal pending the decision in Personnel Contracting.

In August 2022, the FWCFB quashed the first instance decision finding that Mr Franco was an employee of Deliveroo. The FWCFB, in finding that Mr Franco was an independent contractor, did note that the first instance decision was a correct application of the law at the time. However, following Personnel Contracting, once regard was had to the primacy of the terms of Mr Franco’s supplier agreement with Deliveroo, the rights and obligations prescribed under the supplier agreement were indicative of an independent contractor relationship. The FWCFB considered the following aspects of the supplier agreement in coming to its conclusion:

  1. Under the terms of the supplier agreement, Mr Franco provided his own vehicle to facilitate making deliveries.
  2. Mr Franco had substantial discretion over the hours he worked and routes he took, which evinced a lack of control on behalf of Deliveroo over the manner in which work was performed.
  3. Mr Franco was responsible for paying Deliveroo an administrative fee to use their platform and render invoices for work completed.

Primacy of contract

Following Personnel Contracting and Deliveroo, businesses must draft contracts carefully to incorporate rights and obligations in a way that reflect an independent contractor relationship. Presuming they meet these drafting standards and until legislative amendments amend this position, employers can be confident that gig workers will continue to be engaged in their business as independent contractors.

Importantly, businesses need to ensure that the independent contractor relationship reflects and is consistent with the terms of the written contract. Primacy of contract will not be upheld where arrangements are not representative of the written contractor agreement, or where sham contracting in contravention of the FWA is established.

What this means for the multifactorial approach

There appears to be confusion following the decisions in Deliveroo and Personnel Contracting regarding the operation of the multifactorial test. In reality, as set out in Personnel Contracting, the multifactorial test was misapplied previously by the courts to situations involving relationships governed solely by written contracts, compared to relationships involving oral, or partly oral and partly written, contracts.

In circumstances where the terms of a relationship are comprised entirely by a written agreement, and there is no sham contract arrangement alleged, it is the written agreement that must be examined in characterising the parties’ relationship. This is compared to circumstances where the terms of the agreement are oral, or partly oral and partly written, and the multifactorial test is to be applied to assist in characterising the parties’ relationship.

Conclusion

It is essential for businesses to have written agreements in place with independent contractors that accurately reflect an independent contractor relationship. Businesses engaging gig workers to perform services can take relative confidence in these arrangements where the written contractor agreement accurately reflects the parties’ relationship.

However, employers should be prepared for further developments, given the Labor Party’s intended secure jobs legislation, which will seek to introduce new minimum standards for employee-like work conducted by gig workers and under labour hire arrangements.

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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.

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