The Fair Work Ombudsman has launched legal proceedings against food delivery giant Foodora in what will be a major test case for the under-fire gig economy in Australia.
The FWO alleges Foodora engaged in “sham contracting” that resulted in the underpayment of three workers in Melbourne and Sydney.
The case, which will be heard in Sydney’s Federal Court, will be a major test for the wider gig economy and several global tech company’s practice of classifying workers as independent contractors rather than employees.
It follows major campaigns from the unions, Labor and Greens for better regulation and working conditions for the gig economy in Australia.
The Ombudsman’s case centres on two then-19 year old bicycle delivery riders in Melbourne and a 30-year-old delivery driver in Sydney working for Foodora in 2015.
The case alleges that the riders were underpaid a combined $1500 across a four-week period, along with lost superannuation contributions.
“The Fair Work Ombudsman alleges that when Foodora engaged the three workers in 2015, and during periods in which they performed work in 2016, Foodora breached sham contracting laws by misrepresenting to them they were independent contractors when they were in fact employees of Foodora,” the Ombudsman said.
The FWO used a “multi-factor test” to determine whether the trio were employees or independent contractors, considering Foodora’s level of control over their hours and locations, the requirement to wear a Foodora-branded t-shirt and a non-negotiable hourly rate.
Most major gig economy companies, including Uber and other food delivery services, classify workers as independent contractors rather than employees, allowing them to skirt the Fair Work Act and avoid paying the minimum wage and other entitlements like superannuation and leave payments.
The case will have major ramifications for the gig economy in Australia and those working within it.
Fair Work Ombudsman Natalie James said the gig economy is a main priority for the organisation this year.
“Relevant to the decision to litigate in this case is the extent to which contracting arrangements are utilised by this significant business,” Ms James said.
“There has been broad community and academic debate about the status of ‘models’ using smartphone-driven technology as a means for deploying a workforce that delivers food to consumers from restaurants and fast food outlets,” she said.
“The only way to answer the question of whether the workers delivering the meals are employees or ‘independent contractors’ is for someone to ask a court to consider the specific relationships between a company and its workers.
“As the national workplace relations regulator, the Fair Work Ombudsman is now putting this question of significant public interest before a court to consider.”
A case management hearing will take place in the Sydney Federal Court on the 10th of July. Foodora faces a penalty of up to $54,000 for every breach of the Fair Work Act it is found to have made.
The FWO is also seeking a court order for the company to back-pay the workers in full and make superannuation contributions.
It follows a similar case in the UK late last year, when authorities found that Uber drivers are employees rather than contractors. Uber lost an appeal in November against the ruling that its drivers have minimum wage rights.
The Fair Work Ombudsman in Australia has also launched an investigation into Uber, beginning last year.
The working conditions within the gig economy and potential regulation in the space has been a major point of discussion this year.
The Transport Workers Union launched a campaign earlier this year for gig economy workers’ rights, after its survey found that three quarters of delivery riders in Australia are earning below the minimum wage, and half knew someone that had been hurt on the job.
“Change is needed urgently to resolve the many injustices occurring in the on-demand economy every day. The on-demand economy is a tired example of the old-fashioned exploitation at play in modern Australia. The year may be 2018 but for some workers it looks a lot like the 1800s,” TWU national secretary Tony Sheldon said.
The campaign won the support of the federal opposition, with shadow employment minister Brendan O’Connor saying it is “vital” that the government works with the tech sector to “ensure employees’ rights are respected and their conditions enhanced”.
The Greens recently introduced legislation to Parliament that would ensure minimum wage and benefits for gig economy workers.
But the government has previously warned against attempts to regulate the gig economy, saying it could “stifle” innovation.
At a recent National Press Club address, ACTU chief Sally McManus said industrial relations law is at least 10 years behind the gig economy.
“Workplace laws written before Uber and written before the global financial crisis are not able to do the job of ensuring a fair go for working people today,” Ms McManus said.
The workforce of today is vastly different to the workforce of 10 years ago. Corporations have used their power to drive holes through our rights, converting once steady jobs into insecure jobs, cutting and holding down wages,” she said.
“Technology has changed the workplace and the business model of the so-called gig economy sidesteps all the workers’ rights. Delivery drivers using apps have less rights than workers a hundred years ago.”