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Contractor or Employee? FWC says Deliveroo Driver is an Employee

Employment Law

The Fair Work Commission (FWC) has recently found that a Deliveroo driver was an employee and not an independent contractor – delivering further uncertainty for businesses in the gig economy concerning the engagement of personnel.

In Diego Franco v Deliveroo Australia Pty Ltd [2021] FWC 2818, Commissioner Cambridge decided that Mr Franco was an employee, and therefore entitled to protection from unfair dismissal. The FWC ordered that Mr Franco be reinstated together with orders for continuity of service, and to restore lost pay.

It’s not the first time the FWC has found that a delivery driver was an employee and entitled to protection from unfair dismissal. In 2018, the FWC found that Foodora delivery driver Mr Klooger – was also an employee – Klooger v Foodora Australia Pty Ltd [2018] FWC 6836.

However, in 2020, a full bench of the FWC handed down its decision in Gupta v Portier Pacific Pty Ltd [2020] FWCFB 1698, in which it found that Uber drivers were independent contractors and not employees. This decision followed a number of earlier decisions at first instance of the FWC that Uber drivers were not employees, and a determination in 2019 by the Fair Work Ombudsman (FWO) after concluding its investigation into Uber Australia and finding that the relationship between the company and its drivers was not “an employment relationship”.  However, as the FWO pointed out at the time, the investigation was not an investigation into the gig economy generally, but related to Uber Australia solely.

So, while the Deliveroo decision is certain to be appealed, it will most likely make gig economy businesses which utilize and rely on independent contractor arrangements, a little nervous.

Can we expect a broader gig economy investigation by the FWO following this recent FWC decision?

Perhaps, or maybe the FWO is waiting for further clarification from the High Court of Australia on this most vexed of issues – when it consider the status of whether workers are employees or contractors following appeals of the decision of the Full Bench of the Federal Court of Australia in Jamsek v ZG Operations Australia Pty Ltd [2020] FCAFC 119 and CFMMEU v Personnel Contracting Pty Ltd [2020] FCAFC 122.

In Deliveroo, Commissioner Cambridge states [at 99]:

“The correct approach to a determination of whether a person has been engaged as an employee or an independent contractor involves issues of both fact and law. The particular factual circumstances of the relationship under examination need to be subjected to the common law principles that have been established as relevant to the proper characterisation that is to be provided to that relationship.”

Employee or contractor – what’s the difference?

The courts have set out certain factors as to whether a worker is likely to be an employee or a contractor including:

  • is the contractor carrying on their own business?
  • is the contractor able to generate profit and goodwill?
  • does the contractor provide their own tools of the trade?
  • does the contractor advertise their services to the public at large?
  • what is the obligation to perform work, and what control does the contractor have over the work performed?
  • what is the degree of control exercised by the principal?
  • is the contractor incorporated?
  • does the contactor issue tax invoices, or is income tax deducted?
  • can the contractor perform work for others at the same time, or can a different person undertake the work?

The above list is not an exhaustive list, and the issue as to whether a worker is an employee or contractor will depend on the factual circumstances of each situation.

In Deliveroo, Commissioner Cambridge (at [100 – 101]) referred to the relevant legal principles that have developed “from a considerable body of case law” – and which have been described as “the adoption of a multifactorial approach” involving the consideration of “various factors including a number of identified indicia, with no single factor being decisive, and an overriding requirement for examination of the totality of the relationship between the Parties so as to ultimately provide a sound basis upon which to determine whether the relationship was one of employment or independent contractor.”

At [103], in affirming the summary of the multifactorial approach summarized by the Full Bench of FWA and FWC in the French Accent and Gupta decisions, Commissioner Cambridge referred to the task that must be performed in in order to properly determine the question of whether a relationship is one of employment or independent contractor:

“The object of the exercise is to paint a picture of the relationship from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole.”   (Gupta v Portier Pacific Pty Ltd [2020] FWCFB 1968)

If anything, these decisions highlight the difficulty in determining whether a worker is an employee or a contractor – a matter ultimately determined by applying the legal principles to the facts and circumstances of each particular case.

If you are an employee or contractor and need advice on a contract for services or employment, or if you are a business needing advice on the risks when engaging independent contractors, speak to one of our employment lawyers, and we can assist with you some practical advice.

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