Is Independent Contracting Dead?

Is Independent Contracting Dead?

The Fair Work Commission has ruled that a Deliveroo rider is an employee not an independent contractor. This is yet again a major blow to businesses whose business structure relies on the flexibility of independent contracting.

Independent Contractor vs Employee

The case was for unfair dismissal, a right only given to employees. It was found that Mr Diego Franco had been an employee of Deliveroo, had been unfairly dismissed and was entitled to reinstatement and his lost earnings.

The findings of the Commission required a full review of the relationship between Deliveroo and Mr Franco. In coming to its conclusion, the Commission paid particular attention to:

1. Mr Franco wearing Deliveroo branded clothing during his shifts;
2. Mr Franco used Deliveroo’s online booking system to book in work. Although the shifts were made available to drivers to select, the drivers were prioritised if they had received good reviews. This showed Deliveroo had control over shift allocation;
3. Mr Franco was not required to invest substantially in equipment;
4. The swapping of shifts between drivers did not show they were running their own business. Rather, it was like a common shift swap between employees;
5. Mr Franco did not have his own ‘brand’ or build up his own business.

The Dismissal

As Mr Franco overcame the first hurdle of being an employee, the Commission then looked to the reason for his dismissal. Deliveroo claimed that it had removed Mr Franco’s access to its booking system as he had been delivering orders too slowly. Whilst riding too slowly on its own may have been a justification for dismissal, Deliveroo fell short in making sure the termination was procedurally fair. The Commission found that the termination should have been conducted personally and Deliveroo should have conveyed to Mr Franco the acceptable time for making deliveries and the consequences of failing to meet those times.

Effect of the Decision

The finding of the Fair Work Commission likely means that all Deliveroo riders/drivers are considered to be employees. Provided that other delivery driving companies share the same business structure, their drivers will also be considered employees. However, this decision is unlikely to be limited to just the delivery driving industry.

The key focus of the Commission was who exercised control over the worker. If any business exercises control or has capacity to exercise control over the worker, the worker is at risk of being deemed an employee.

The impact of having a worker deemed an employee, rather than a subcontractor, is that:

1. The worker must be paid minimum wage;
2. The worker must be paid superannuation;
3. The worker is entitled to leave, including annual leave, personal leave and long service leave;
4. The worker would be covered by the unfair dismissal protections in the fair work legislation;
5. The worker must be given notice if they were terminated.

Appeal

Deliveroo have flagged their intention to appeal the decision. However, it is unclear how successful an appeal will be given the recent Australian cases have all leaned towards this conclusion. There have also been international cases which have reached the same conclusion, including one against Deliveroo in the Netherlands.

If you are concerned about the impact on your business or the categorisation of your workers, please contact one of our experienced employment law team members Taurus Legal Management on (03) 9481 2000 or at info@tauruslawyers.com.au.