What’s the price of a gig? Risks for employers and insurers in the gig economy
The Full Bench of the Fair Work Commission recently handed down its decision in Deliveroo Australia Pty Ltd v Diego Franco  FWCFB 156, overturning an earlier decision and finding that a Deliveroo rider was an independent contractor.
The decision has implications for both employers and EPL insurers.
Deliveroo had terminated the driver’s engagement for alleged poor performance. He made an unfair dismissal claim, in which he alleged he was an employee and had been unfairly dismissed by Deliveroo.
Deliveroo denied the claim and made a jurisdictional objection. It argued the driver was an independent contractor providing services to Deliveroo and, as he was not an employee, could not make an unfair dismissal claim.
The Full Bench’s decision
When the case first came before the Fair Work Commission, Commissioner Cambridge found in favour of the driver. The Commissioner held the driver was an employee and had been unfairly dismissed. The Commissioner ordered Deliveroo to reinstate the driver and pay him back pay for the time he had been out of work.
However, on appeal, the Full Bench held that, although the Commissioner’s decision was correct at the time it was made, it was bound to follow subsequent High Court decisions. Because the Commissioner’s decision was inconsistent with now current law, the Full Bench was required to find in Deliveroo’s favour.
The relevant High Court decisions were issued on 8 February 2022: Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd  HCA 1 and ZG Operations Australia Pty Ltd v Jamsek  HCA 2.
In these decisions, the High Court held:
- Whether someone is an independent contractor or an employee is to be determined by reference to the rights and duties created by the contract between the parties (written or otherwise) that regulates that relationship.
- The conduct of the parties after they enter into the contract and/or the circumstances of entry into the contract is not relevant to the determination.
- The sole inquiry is to be the meaning and effect of the contract as at the time the contract is formed.
In Deliveroo v Franco, the Full Bench applied these principles, and looked solely at the supplier agreement between the driver and Deliveroo. It found:
- Deliveroo had little control over the manner in which the driver performed the work. The requirement to deliver food ‘in a reasonable time period’ was like other independent contracting agreements in road transport. It described more of a standard of performance than a mechanism for control.
- The driver had to provide, at his own expense, a vehicle to drive so he could deliver the food. This was not limited to a bicycle and could have included a substantial vehicle such as a car.
- The driver could ask a delegate to perform the services, as long as the delegate was trained and appropriately skilled. The driver had to pay the delegate for work performed.
- The driver was remunerated by a fee for each delivery completed, rather than time worked (although the Full Bench said this was not necessarily inconsistent with employment). However, out of the fees payable to the driver, the driver was obliged to pay 4% of the total fees payable to him back to Deliveroo. This fee was in exchange for use of Deliveroo’s software and invoicing.
What this means for businesses engaging independent contractors
The Fair Work Commission’s decision emphasises the importance of using suitable contracts to engage independent contractors. Amongst other things, the contracts should:
- be clear about the control each party has over the services;
- give the contractor rights to delegate the performance of the services to others;
- address who is to provide tools and equipment;
- deal clearly with payment of fees, tax, insurances; and
- not try to hide an employment relationship by calling it an independent contracting relationship.
Businesses engaging contractors should update their contracts to address terms which are neutral, ambiguous or suggest the relationship is really one of employment. The contracts should be appropriately updated having regard to the matters outline din the recent High Court decisions.
Businesses should especially avoid ‘updating’ written contracts by simply slapping the label ‘independent contractor’ on them. Courts and tribunals will still look to the facts to interpret the contract where the contract is silent or ambiguous.
What this means for insurers
EPL underwriters should consider doing the following when pricing the risk of insuring businesses who engage independent contractors:
- whether to include questions on their proposal forms about the type of written agreements used by an insured to engage contractors;
- asking an insured whether the agreements have been updated with reference to the recent High Court decisions.
This would better inform an EPL insurer about the risk of potentially costly employment claims by ‘contractors’ in the business.
Contact Gilchrist’s Connell’s workplace relations and safety team for advice