Business

Jun 13, 2018

Is this the beginning of the end of the gig economy?

Well, not exactly. But depending on what the Fair Work Ombudsman says about Foodora's contracting arrangements, it could force legislators to start thinking critically about the future of employment.

Charlie Lewis — Journalist

Charlie Lewis

Journalist

Protest against the conditions for food delivery riders, in Melbourne earlier this year

Yesterday’s announcement that workplace regulator the Fair Work Ombudsman is launching action against delivery service Foodora addresses something at the heart of the gig economy — the issue of classification.

Foodora classifies its riders as contractors rather than employees. A contractor functions as a business; they have a great deal of control over what work they do and how, and often work with multiple businesses at once. They take on the risk of making a profit or loss and they aren’t covered by laws providing for minimum wage, leave or unfair dismissal. Essentially, an independent contractor takes on all the liabilities of a business and loses all the protections afforded to an employee. If you treat someone like an employee but pay them like a contractor, it’s called “sham contracting. This is what Foodora is accused of. 

But Foodora is not an outlier, not a dodgy operator within the gig economy. Foodora’s model is the gig economy model. 

“The case is a game changer for food delivery services,” University of Technology Sydney industrial relations associate professor Sarah Kaine told Crikey. “And it’s encouraging — if you think these are sham contracting arrangements — that FWO obviously have considered all the factors and think they have a strong enough case to take it to prosecution.” 

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By extension, you might expect that this could bring about the end of the gig economy, which is based on cheap ad-hoc labour, free from the regulations employers are normally subject to. But don’t expect this case, if successful, to flow on to the rest of the industry. 

“The case law and the regulatory frameworks make it trickier than it intuitively seems,” Kaine said. “At the heart of the matter is how the regulatory bodies like the Fair Work Ombudsman, the Fair Work Commission and the Australia Tax Office define a contractor.”

As Kaine told the Senate Committee on the Future of Work and Workers last month, there are several factors that go into a regulator or court’s decision over whether a worker is a legitimate contractor. The ATO looks at six factors: ability to delegate, basis of payment, tools and other assets, commercial risks and independence. Legislation covering superannuation and work safety offer different definitions, while the Fair Work Act refers to ‘the ordinary meaning of employee’ which relies on case law. Case law, in turn looks at shifting and context reliant concepts like ‘control’.”

Indeed, Fair Work Ombudsman Natalie James was cautious talking to Radio National yesterday about the case.

“We’re not in a position to put an entire business model before the courts, we can only look at particular relationships, but of course a case like will be informative for others in the market … what will the implications be? That depends on what the court finds. I shouldn’t and can’t really speculate on the impact of a decision.”

Kaine said the increasingly muddy waters around definitions were no accident. 

“Why is it so complicated? The cynical answer is because companies have gotten very good at getting around the law,” Kaine said.

“I’ve been on a panel with the head of Deliveroo and he said ‘we will not do this or that because we don’t want it to look like we have employees’. They’re quite explicit about it.”

As such, even if FWO were successful in its case against Foodora, it is unlikely to have an immediate knock-on effect.

“Really, we need to sort out the law, because it’s so open to interpretation,” she said.

 

*UPDATE: A previous version of this  incorrectly article stated Sarah Kaine shared a panel with the head of Foodora. This has been changed to Deliveroo

8 comments

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8 thoughts on “Is this the beginning of the end of the gig economy?

  1. Rameses

    Most businesses seem to have very little interest in a social contract.

  2. kyle Hargraves

    Is it that difficult for the reporters at Crikey to become organised and systematic? Select a few industries that exist within the small business sector and then (surprise) examine the working conditions.

    A good deal of the economy of the small business sector is treated as if the employees are de-facto contractors. Some places require an ABN to commence work. Hospitality, tourism tour-guides, including most part-time bus/coach drivers, diving instructors and aeroplane/helicopter grade 3 instructors, telephone sales and real-estate sales etc. are in this category – but the list is by no means exhaustive. There was a ruling from the ATO some years ago that if 80% of ones income came from a single source than, prima facie, the recipient was an employee.

    You and your colleagues, Charlie, ought to spend more time joining dots and less on attempting to create indignation. An interesting dot-joining exercise might be to ask the Opposition for its reasons in supporting tax cuts to large business or supporting Security Legislation as an alternative to plugging the holes in standard IR legislation.

    1. jmendelssohn

      That sounds like an ideal group project for journalism students – under the supervision of a senior academic supervisor, taking into account questions of ethics + law. Most media outlets are too under resourced these days to undertake such a labour intensive job, but as there are many more journalism students than jobs, this kind of project would be an excellent Sorting Hat and also fulfil a great public service. If I remember correctly Chicago’s Innocence Project, which saw so many people released from Death Row, was originally a student project.

    2. AR

      Gotta lurve Mr SHOUTY’s paean to ‘utes, utes, utes’ – why wouldn’t descendants of the Rodent be keen on the thrusting entrepreneurship of the tradies and other s/e cutting their own throats instead of relying upon SerfChoices?

  3. AR

    The future, if any, looks like a choice between UBI and the gig economy.
    Geez, that’s a toughie…

  4. 1984AUS

    The Fair Work Ombudsman’s funding has been frozen in the budget.

    But a quarter of a million dollars for proslytizing chaplains in schools has been thrown at the religious right who now with Little Napoleon Wannabe Kroeger as their leader in Victoria controlling the Liberals on their behalf. See this great article:

    The Victorian right’s capture of the Liberal Party

    https://www.thesaturdaypaper.com.au/news/politics/2018/05/12/the-victorian-rights-capture-the-liberal-party/15260472006213

    The FWO’s funding was frozen I believe after an 8 page media release detailing wage theft, super theft, criminal behaviour and harassment of workers by farmers etc was released. And Guy Rundle’s article on the deep north had shades of it too. A beaut article and great read:

    https://www.crikey.com.au/feature/trouble-in-paradise/

  5. Arky

    The genuine “gig economy”, things where people genuinely pick up a gig here and a gid there to pick up a few extra bucks in spare hours ad hoc, would not be affected.

    The situation where someone works regularly for a single company and under the same sort of conditions that a casual employee would work under, these should rightfully be treated as casual employees, that’s not the “gig economy” just an attempt to rename casual employment.

  6. Metal Guru

    The gig economy is the private enterprise model for casualisation, sham contracting and contracting genreally. governments are not immune from casualisation and they can do this by internal regulations and getting around employment barriers through reclassifying employees, their roles and responsibilities. There are just not enough real jobs out there. You can’t call hospitality, tourism and retail the desired end for genuine, long lasting employment that is going to create wealth for those working in those industries into the future.
    Reregulation is the only way. An end to labour hire. Another method is test cases for sham contracting. This should lay the foundation for further regulation. but this is all tinkering at the edges.
    What is required is an employment boom a la post war. I would caution anyone wanting to engage in the gig economy or put themselves into labour hire or sham contracting roles. Particularly in those industries mentioned who seem to be populated by students or migrants who are just desperate to stay in the country. I guess its continued education all the way until a “real” job comes along or trade training. A drastic slow down to migration intake to 50-70,000 is the best way and I don’t know why this isn’t canvassed more in the letters and the articles in Crikey. It would smash or help smash the business model of cheap, exploited almost slave labour we are seeing everywhere.
    Tell me how did WorkChoices being repealed help when the business class aided by governments have found a way around this?

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