Foodora for Thought – Are your Contractors Really Employees?

07 January 2019

Businesses which engage workers as independent contractors instead of employees often do so to avoid the obligation to pay employment entitlements, such as annual leave, personal/carer’s leave and superannuation. However simply classifying a worker as a contractor does not automatically exclude the possibility that they may actually be employees. 

In a recent decision the Fair Work Commission outlined its approach to determining these relationships when it confirmed a former food delivery rider for Foodora Australia Pty Ltd was an employee and not an independent contractor.  

In the decision, the Commission considered a variety of factors when determining the nature of the relationship between the parties including the following:

  1. Although Foodora would offer shift times which were selected voluntarily by delivery riders, it would fix start and finish times and geographical locations for each rider.  The Commission found that this was a similar arrangement to that of employers and casual or part-time employees;
  2. Although the “independent contractor agreement” between the parties expressly stated that the contractor was not an employee of Foodora, it contained many provisions similar in form and substance to those ordinarily found in an employment contract; 
  3. Foodora exercised a considerable amount of control over the manner in which the applicant performed work, thereby making the relationship appear more like an employment arrangement. For example riders were ranked on their work performance, and encouraged to maintain their high ranking by performing a certain number of deliveries during a shift and working a minimum amount of shifts each week; and 
  4. Foodora presented its delivery riders to the world at large as part of their business through public statements available on their website (i.e. referring to them as “our drivers” and “our couriers”), and obliging the riders, through its contractor agreements, to wear uniforms and equipment displaying the Company’s branding during shifts.

The Commission observed that, whilst engaging contractors in day to day business is a legitimate and essential aspect of running a business in a “modern industrialised economy”, such practices should be heavily scrutinised where those arrangements facilitate the potential avoidance of legal rights and responsibilities such as the obligation to pay employment entitlements.  

The Commission raised the issue of whether the approach to determining such relationships should be modified and expanded where new technologies are impacting on the nature of employment. 

This decision will have major ramifications for businesses which regularly engage independent contractors to perform services in their day-to-day operations, including tech and start-up companies. Simply classifying a worker as a contractor does not mean companies are able to avoid their legal obligations if the worker is really an employee.  All of the features of the relationship are relevant, not just the classification in the contract document itself.

If you are considering retaining an independent contractor rather than an employee and have concerns as to whether that arrangement would withstand scrutiny in the event of a legal challenge in the future, please telephone John Sneddon.

John Sneddon, Partner: (07) 3307 4504 or jsneddon@shandtaylor.com.au

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