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On 7 June 2018, the Fair Work Ombudsman (FWO) announced it had finalised its investigation into Uber Australia Pty Ltd (Uber Australia) and determined to take no compliance action against it.
This decision followed an extensive investigation aimed at determining whether or not Uber was engaging in ‘sham contracting’ in an attempt to deny benefits to drivers which employees are ordinarily entitled to. As a result of the investigation, the FWO has concluded that the relationship between Uber Australia and its drivers is not an employment relationship. Accordingly, the drivers are not entitled to receive the minimum wage, annual leave, sick leave or any benefits that employees ordinarily receive.
In reaching this decision, the Fair Work Ombudsman, Sandra Parker, stated that inspectors examined a wide range of evidence, including drivers’ contracts, ‘log on’ and ‘log off’ records, interviews with drivers and Uber Australia, ABN documents, payment statements, banking records and pricing schedules. On this basis, it was concluded that:
The weight of evidence from our investigation establishes that the relationship between Uber Australia and the drivers is not an employment relationship… For such a relationship to exist, the courts have determined that there must be, at a minimum, an obligation for an employee to perform work when it is demanded by the employer… Our investigation found that Uber Australia drivers are not subject to any formal or operational obligation to perform work.
The FWO finding perhaps comes as no surprise, as it is consistent with the Fair Work Commission’s rulings in the matters of Michail Kaseris v Rasier Pacific V.O.F  FWC 6610 and Janaka Namal Pallage v Rasier Pacific Pty Ltd  FWC 2579. In both these decisions, an Uber driver was classified as an independent contractor rather than an employee and consequently denied the right to bring a claim for unfair dismissal. In reaching these decisions, the Commission considered, among other things, the driver’s extensive level of control, the requirement that the driver provide their own equipment (such as a vehicle and mobile telephone) and the lack of uniform and need to display any logos.
The decision by the FWO not to pursue compliance action against Uber Australia is a strong indication that an employment relationship would be unlikely to be found to exist in these arrangements. That said, it is interesting to note that different conclusions have been reached when the issue has been considered overseas. For example, in a recent English Court of Appeal decision, Uber unsuccessfully challenged a ruling classifying Uber drivers as workers and entitling them to holiday pay, sick leave and a minimum wage. In the United States, the Californian Labor Commission also held that an individual Uber driver was in fact an employee. However, the relevant federal body in the US (the National Labor Relations Board) has recently published an opinion which indicated that Uber drivers should be considered to be independent contractors rather than employees. In reaching this opinion, the Board considered the high level of control that Uber drivers have, similar to the reasoning used in the above decisions within Australia. What is also notable for industries involved in the ‘gig economy’ is the degree of weight the FWO was prepared to put on the ability of the relevant workers to set their own hours.
On 21 June 2019, the FWO announced it had discontinued its legal action against Foodora Australia Pty Ltd (Foodora Australia).
The FWO commenced legal proceedings against Foodora Australia in June 2018, alleging it had engaged in ‘sham contracting’ activities which resulted in three food delivery workers being underpaid $1,620 plus superannuation over a period of four weeks. In August 2018, Foodora Australia ceased operations in Australia and sold its assets.
In the circumstances, Ms Parker stated that it is unlikely that the court action would result in any additional payment to workers – or penalty – being recovered. FWO’s decision therefore appears to arise from the circumstances of Foodora Australia’s cessation of operations rather than a decision on the merits of the situation.
Modern work arrangements and the gig economy are challenging to the traditional legal distinction drawn which between ‘employees’ and ‘contractors’. Although FWO has not continued with compliance action against Uber Australia or Foodora Australia, it has made clear its objective to prevent ‘sham contracting’ and the wrongful denial of employee benefits to those who are entitled to them. The decisions by FWO not to pursue compliance action in these circumstances means that the question of whether an employment relationship exists remains open.
It is important for employers to note the ongoing policing of work arrangements and the likely ramifications of non-compliance. In light of the extensive investigation into the correct classification of Uber drivers and the current spotlight on the issues raised, when in doubt, an employer should seek legal advice to avoid incorrectly classifying workers and the risk of hefty consequences. It is also critical for parties engaging such workers to ensure their classification of the working relationship is clearly and precisely recorded in the written contract.
Further information / assistance regarding the issues raised in this article is available from the author, Madelaine August, Partner or your usual contact at Moray & Agnew.