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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.” 

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

Peter Fray

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