In a huge win for the ride-sharing economy, the Fair Work Commission’s (FWC) deputy president has rejected an Uber driver’s claim that he was an employee of Uber, instead finding that there was no employment relationship between Uber and the driver and that as a result unfair dismissal laws did not apply.
There is no doubt that the work landscape is undergoing significant change in the face of the rapid growth of the sharing economy. However, there is strong debate over whether these changes are a positive opportunity for businesses and workers alike, or simply a threat to the protection provided to workers under the existing employment framework.
Two sides to every debate
The debate centres around whether businesses utilising contractor arrangements to deliver services to customers (such as Uber, Deliveroo and Foodora) are using the contractor relationship as a way to avoid requirements that would be imposed on them if those workers were employees. As a result, there is concern among some groups that this shift in working arrangements will leave many individuals in a vulnerable position without the protection of minimum employment conditions, and that this would be a huge step backwards for workers.
As the debate continues, more and more cases have come out of the woodworks, with individuals providing services to or via digital platforms such as Uber, Deliveroo and Foodora trying to fight the giants for minimum employment conditions. The future of businesses utilising this type of digital platform model hangs precariously in the balance, with each case bringing along a fresh wave of concern for multiple parties in the arrangement. The consequences of these decisions are far-reaching, and potentially more damaging to the economy than many would realise. Having all Uber drivers, for example, treated as employees of Uber would almost certainly destroy the Uber’s ability to provide access to drivers in the same way as it does presently; arguably causing great cost not just to the business itself, but also to consumers who have passionately embraced the flexible and less expensive transport option, as well as many individuals who have made utilised the opportunity to earn additional income in a flexible manner.
What’s under threat for workers?
In Australia, workers who are classified as employees are protected by minimum employment conditions which must be provided by every employer.
The core minimum entitlements for employees are the national minimum wage and the National Employment Standards (NES) which are maintained and regulated by the Fair Work Commission (“FWC”). They include things such as:
- Minimum wages;
- Maximum weekly working hours;
- Leave entitlements, including annual leave, personal leave, long service leave and parental leave; and
- Protection from unfair dismissal and unlawful termination.
Compulsory superannuation guarantee contributions are also a statutory requirement under the Superannuation Guarantee (Administration) Act 1992), which employers must comply with.
Failure to be classified as an employee means that the above protections are not available.
Why isn’t an Uber driver an employee?
In the recent matter raised to the Fair Work Commission (Kaseris v Rasier Pacific V.O.F), the FWC rejected an Uber driver’s unfair dismissal claim he filed, after his account was deactivated due to poor ratings from passengers. Uber objected to this application by alleging Mr Kaseris was not protected under the Fair Work Act 2009 (Cth), as he was not an employee. The FWC agreed with Uber and dismissed the application, ruling that the driver was not an employee.
The FWC referred to various established principles in coming to this conclusion, identifying the following indicators to assess whether an employment relationship existed between the parties.
| Considerations by FWC regarding driver’s employment status | |
| Control | The driver had complete control over the way he wanted to provide his services through the app, including work hours, accepting or refusing trip requests, operation and maintenance of his vehicle. |
| Equipment | The driver was required to supply his own vehicle, valid registration, insurance, smart phone, and wireless data plan. |
| Uniform | The driver was not permitted to display the Uber name, logo or colours on his vehicle and was not required to wear any uniform or other clothing connected to the Uber brand. |
| Liability of GST and other taxes | The driver was required to register for GST and remit all tax liabilities to the ATO, while the income received by the driver was not treated as being subject to PAYG withholding tax. |
| Description of the relationship | Both Uber and the driver had agreed the relationship was solely one of an independent contractor. |
| Other | The driver was responsible for his own tax affairs and did not accrue annual, sick or long service leave. Uber did not make any superannuation contributions on behalf of the drivers. |
Ultimately, it was concluded that the elements fundamental to an employment relationship were not present.
The wider impact
While the above case was a Fair Work matter and thus not strictly binding in a tax law environment, the tests used by the FWC draw a distinct similarity to those employed by the ATO to determine whether a person is an employee or contractor, and the general principles will be transferable across jurisdictions. Therefore, it is likely that under both employment law and taxation law, an Uber driver will be considered an independent contractor.
This decision also has ramifications in other areas where the rise of the gig economy is rampant, such as food delivery, tasks-on-demand and other freelancing areas.
What does it mean for you?
| Workers | Businesses using employees and/or contractors | |
| If you are considering conducting utilising or working through a platform, ensure you understand the nature of your contractual relationship before entering into it.
If you do undertake work as a contractor:
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Where to from here?
With changes in the way our economy operates, and the types of work opportunities available to individuals, the number of temporary workers (such as Uber drivers) is increasing rapidly, with existing law failing to provide the protections that come with employment to workers in this new space. While there are clearly many significant benefits to this new part of the economy, the lack of protection could be a concern for future generations who will be engaging in more gig economy work and may find themselves in a less stable employment environment.
The Deputy President of the FWC noted “Perhaps the law of employment will evolve to catch pace with the evolving nature of the digital economy. Perhaps the legislature will develop laws to refine traditional notions of employment or broaden protection to participants in the digital economy. But until then, the traditional available tests of employment will continue to be applied”.
| Services Highlight |
| If you’re not sure whether you or a worker are classified as an employee or contractor, Catalyst Financial can assist you.
We will work with you to understand your circumstances and apply the relevant concepts in order to determine the outcome. Call us today! |
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