Fair Work Commission Deliveroos unsavoury outcome for gig companies

By Matt Garozzo, Matt Condello and James Daff
27 May 2021
The Fair Work Commission's decision indicates a potential shift in its treatment of gig workers.

There has been a lot of discussion about the status of gig workers, recently spurred by a decision in the Fair Work Commission which found that a Deliveroo rider was an employee under the Fair Work Act 2009 (Cth), rather than an independent contractor (Diego Franco v Deliveroo Autralia Pty Ltd [2021] FWC 2818). These cases rest on their facts, so it is a bit difficult to see this as a major sea change just yet, but it is consistent with a recent trend here and overseas which should prompt anyone engaging gig workers as independent contractors to review their arrangements carefully.

Dismissed for late deliveries

Mr Franco was engaged by Deliveroo to perform services as a motorbike delivery driver, pursuant to supply/supplier agreements. Mr Franco was identified as an independent contractor, and a supplier in business on his own account. Like other similar food delivery services, Mr Franco would log onto the Deliveroo app to be able to access, accept and perform deliveries in his area.

Following an investigation, Deliveroo determined that Mr Franco's delivery times were unacceptably delayed and his supply/supplier agreement was therefore terminated with 7 days' notice. Mr Franco subsequently lodged an unfair dismissal application with the Fair Work Commission.  

Delivery rider found to be employee

Deliveroo argued that Mr Franco was a contractor and not an employee (and therefore not entitled to unfair dismissal protection).

The Commission (Commissioner Cambridge) noted the well-established legal principles that apply when considering whether an individual is an employee or independent contractor, involving the consideration of a number of factors with no one factor being decisive. It emphasised that, when making this assessment, one must stand back from the detailed picture and look at the overall effect of the relationship.

Notwithstanding that there were a number of factors indicative of independent contractor relationship, it held Mr Franco was in fact an employee. 

Of particular significance, Deliveroo was able to implement or withdraw a significant level of control over Mr Franco, which it found to be a strong factor indicating the existence of an employment relationship. The Commission noted that, while Mr Franco appeared to have freedom regarding when, where or how long he worked, a closer look revealed a very different picture. Noting that Mr Franco was required to book engagement sessions in advance and that better performing drivers received preferential treatment, it said the "economic reality" of the situation would ordinarily compel Mr Franco to undertake delivery work.

What about the fact that Mr Franco performed work with other food delivery services including Uber Eats and Door Dash (a custom referred to as "multi-apping")? It acknowledged this as a factor pointing against his being an employee, but in the context of a modern rapidly changing workplace (where individuals can simultaneously perform work for two or more employers from remote locations), this should not be construed as preventing the existence of an employment relationship.

Having found Mr Franco to be an employee and entitled to unfair dismissal protection, the Commission went on to find his dismissal to be unfair, on the basis that there was no valid reason (noting that Deliveroo did not inform the driver of delivery times that were expected of him) and involved an unjust and unreasonable dismissal process. The Commission determined that the driver should be reinstated and his lost pay restored.

Deliveroo has indicated that it will appeal the Fair Work Commission's decision. We will provide any updates as they arise.

Working vs employment in the modern world

There have been a number of recent decisions where gig workers have unsuccessfully claimed that they were in fact employees (and not independent contractors). However this case follows a broader global trend of cases where gig workers have been found to be employees. In Australia, this has included Klooger v Foodora Australia Pty Ltd [2018] FWC 6836, where the Commission (again Commissioner Cambridge) found a Foodora delivery driver to be an employee and entitled to unfair dismissal protection. The decision came shortly before Foodora chose to exit the Australian market permanently, and so was not the subject of an appeal.

This recent trend of decisions has sceptically applied a close lens to contractor arrangements, with the result that certain factors which previously would have weighed heavily against finding an employment relationship are found not to be so conclusive, in light of modern work arrangements. The future of that trend in Australia may well be determined by the result of the forthcoming appeal and any subsequent challenges that might arise in the proceeding.

The Deliveroo decision nonetheless has broad implications for companies with a heavy reliance on the contractor model, and will likely result in more challenges from contractors regarding their contractual arrangements and claims for employee entitlements and unfair dismissal (where engagements are terminated).

In light of the Commission's decision, organisations should be careful to ensure their arrangements for the engagement of workers reflects the current state of this rapidly developing area of law.  

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