The status of ‘gig economy’ workers: An update on the Deliveroo case and further changes on the horizon

In a major decision for the gig economy, the Full Bench of the Fair Work Commission has quashed a decision that a Deliveroo delivery driver was an employee, finding that there was no employment relationship and therefore the driver was not a person protected from unfair dismissal (Deliveroo Australia Pty Ltd v Diego Franco [2022] FWCFB 156 (Deliveroo)).

The decision was made in light of the two High Court decisions in Construction, Forestry, Maritime, Mining and Energy Union & Anor v Personnel Contracting Pty [2022] HCA 1 (Personnel Contracting) and ZG Operations & Anor v Jamsek & Ors [2022] HCA 2 (Jamsek) (read our previous articles about the principles that arose from these cases here and here).

While the outcome in Deliveroo will no doubt have been a welcome result for businesses in the gig economy space, the sector will need to brace for upcoming changes that may significantly affect how gig workers are engaged.

Background to the decision in Deliveroo

Diego Franco was a delivery driver for Deliveroo pursuant to a ‘supplier agreement’. He regularly worked for Deliveroo between 2017 and 2020, whilst also performing work for other companies such as Uber Eats and Door Dash. In 2020, Deliveroo terminated Mr Franco’s agreement on the basis that he had failed to deliver orders within a reasonable time. Mr Franco lodged an unfair dismissal claim in the Fair Work Commission.

In May 2021, Commissioner Cambridge determined that Mr Franco was an employee and therefore protected from unfair dismissal. Commissioner Cambridge also found that he had been unfairly dismissed and the appropriate remedy was for Mr Franco to be reinstated with restoration of lost pay. At the time of the first instance decision, the primary consideration was the nature of relationship between Mr Franco and Deliveroo, having regard to all of the relevant circumstances of the relationship (i.e. the performance of the contract in reality) and the multi-factorial test.

In June 2021, Deliveroo lodged an appeal against the decision.

In August 2021, the Full Bench deferred their determination, pending the outcomes of Personnel Contracting and Jamsek which were likely to provide authoritative guidance in the matter. As readers will be aware, the key principle that arose from those two cases was that where parties have committed the terms of their relationship to a written contract the characterisation of the relationship proceeds by reference to the rights and obligations of the parties under the contract.

The High Court decisions in Personnel Contracting and Jamsek were handed down in February 2022.

In analysing the Deliveroo supplier agreement, the Full Bench in August 2022 found that there were four aspects of the agreement that weighed decisively in favour of the conclusion that Mr Franco was an independent contractor:

• the terms of the agreement indicated a lack of control by Deliveroo over the manner of performance of any work which Mr Franco agreed to undertake;
• Mr Franco was obliged to provide a vehicle at his own expense, in other words there was the potential for a ‘substantial item of mechanical equipment’ to be used and paid for by Mr Franco;
• the agreement did not require personal service on the part of Mr Franco and he was free to arrange for someone else to perform the services without prior approval; and
• Mr Franco was to pay Deliveroo an administrative fee to access Deliveroo’s software and for Deliveroo providing invoices and other administrative services.

In its decision the Full Bench expressed a view that the result was unsatisfactory, concluding that ‘regrettably … [the driver is left] with no remedy he can obtain from the Fair Work Commission, for what was plainly … unfair treatment‘.  The Full Bench also commented that the reality of the working arrangements between the parties appeared to be different to the terms of the supplier agreement but that based on the current state of the law this could not be taken into account.

Key takeaways from the Deliveroo decision

It is important to note that this decision does not confirm that gig economy workers generally are all lawfully engaged as independent contractors. The outcome of each case will still depend on an analysis of the written terms of each engagement where a written contract exists.

Where the validity of the contract is challenged as a sham, where the terms of the written contract have been varied, or where a contract is wholly or partly oral, there will still be a place for a wider analysis of day to day working arrangements under the multi-factor test.

Despite this, the Full Bench’s decision will have been welcomed by companies in the gig economy space generally, especially those who have signed up workers to similar contractor or supplier agreements and would seek to rely on their terms as establishing genuine independent contractor relationships.

What is on the horizon in the gig economy space?

Recent moves at both a State and Federal level will aim to make changes that may provide gig economy workers with a greater level of protection in the workplace.

In 2020, Natalie James, former Fair Work Ombudsman, chaired an inquiry into the Victorian On-Demand Workforce (Inquiry) for the Victorian government. The Inquiry’s report made 20 recommendations, the first of which was to recommend that ‘the Commonwealth Government, in collaboration with state governments and other key stakeholders, lead the delivery of the recommendations in this report regarding the national workplace system‘.

The Victorian government has since confirmed its support for all 20 recommendations, however it appears that Ms James will now have an opportunity to drive the first recommendation at a Federal level.

As we have already reported, consultation has commenced on some of the outcomes of the Albanese Government’s Jobs and Skills Summit (Summit) and consultation on changes to the Fair Work Act is now being overseen by the Department of Employment and Workplace Relations’ secretary, Natalie James.

One of the many changes to the Fair Work Act flagged by Labor in the lead up to the election is an extension of the powers of the Fair Work Commission to include ’employee-like’ forms of work, allowing it to make orders for minimum standards for new forms of work, such as gig work.

So while companies in the gig economy space may have been given a reprieve by the decisions in Personnel Contracting, Jamsek and now Deliveroo, that reprieve may prove to be short lived.

What do we do next?

While we wait to see how the outcomes from the Summit will translate into amendments to the Fair Work Act, businesses that engage contractors (including those in the gig economy space) should ensure:

• That a detailed, written independent contractor agreement is in place with each contractor.
• That independent contractor agreements are drafted carefully and reviewed regularly to reflect a genuine contracting relationship.
• Before entering into a new contractor agreement, they have carefully considered the corporate structures under which contractors will provide their services, if any.
• Day-to-day working arrangements reflect the terms of the agreement – this will assist in the event that the contract is challenged as a sham or as having been varied or waived.

Gadens is able to assist with any queries you have in respect of engaging employees or independent contractors, drafting or reviewing written agreements and advice on how best to mitigate risks.

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Authored by:

George Haros, Partner
Diana Diaz, Special Counsel
Carlyna Yap, Lawyer