I would like to acknowledge the 18 August 2022 LinkedIn post by Anthony Wood, Partner at Herbert Smith Freehills, Lawyers (and no relation of mine, so far as I know). Anthony brought to the attention of the LinkedIn community an important decision of the Full Bench of the Fair Work Commission this week, which sheds further light on the way in which Australian courts and commissions are likely to apply recent decisions of the High Court that have changed the rules about how we distinguish between employees and independent contractors. He concludes his insightful post as follows:
“With job security one of the themes underpinning Labor’s 2022 election platform, it’s now likely to become a political and legislative issue before the new federal parliament”.
Please be sure to read Anthony’s post and engage in the conversation. You can find Anthony’s post on LinkedIn here.
“…as winds of change blow shrilly round my poor abode.” [i]
FWC Full Bench decision
Earlier this week, the Full Bench of the Fair Work Commission finally handed down its delayed decision in Deliveroo Australia Pty Ltd v Diego Franco.[ii]The case was an appeal from a finding of unfair dismissal in relation to a food delivery worker.
The decision was delayed whilst the case was put on hold to give time for the High Court to consider the appeals in Personnel Contracting[iii] and Jamsek;[iv] and then to allow the Full Bench to consider the effect which those decisions were to have on disposal of the matter before it.
Distinguishing between casual employment and independent contracting
Platform-based work, or gig-economy work, often presents as either casual employment or independent contracting. Sometimes it can be difficult to distinguish between them. That was certainly so in this case.
However, feeling constrained by the recent High Court’s decisions to limit its consideration to an analysis of the contractual rights and obligations of the parties, the Full Bench reversed the finding at first instance and determined ultimately that Mr Franco was an independent contractor. Consequently, his unfair dismissal claim was beyond the Commission’s jurisdiction.
Equivocal and weak factors
The following factors, though somewhat equivocal, were considered by the Full Bench to be not inconsistent with conventional understandings of casual employment:
- that Mr Franco was not obliged to do any work for Deliveroo and that Deliveroo was not obliged to make any work available to Mr Franco (clause 2.2)[v]
- that Mr Franco could accept or reject any work offered to him when logged into the Deliveroo Rider App (clause 2.4)[vi]
- that Mr Franco was free to work for any other party including competitors of Deliveroo (also clause 2.2)[vii]
The following factors, though difficult to reconcile with conventional understandings of casual employment and weighing somewhat against a finding that Mr Franco was an employee, were still not determinative by themselves:
- that Mr Franco had the right to elect not only when but where he chose to work, and that Deliveroo was restricted to offering work within the parameters thus determined by Mr Franco (clause 2.3)[viii]
- that Mr Franco, even once he had accepted an order, was allowed to subsequently “unassign” himself from that order, in which case he was not obliged to perform it (clause 2.5.1)[ix]
The lesson, here, is that these factors are not decisive either of themselves or in aggregate.
Weightier factors
However, the Full Bench considered that four aspects of the work contract did weigh decisively in favour of the conclusion that Mr Franco was in an independent contracting relationship with Deliveroo.
Keep in mind that the factors might weigh differently in other cases. This was a case involving food delivery work. In a case involving construction or horticultural labour or academic work, the factors might not carry the same weight.
1. Deliveroo lacked control over the manner of performance of the work which Mr Franco agreed to undertake.[x]
Mr Franco was able to determine the route and what type of vehicle he would use to carry out his deliveries.
The Full Bench considered that the requirement for timely delivery was typical for independent contracting arrangements in the road transport industry and constitutes a performance standard rather than a right of control.
Similarly, broadly stated contractual obligations “to deal with others professionally” when performing delivery services and to “provide the services with due care, skill and ability” were interpreted by the Full Bench as merely establishing performance standards rather than a contractual right to control the manner in which the work was performed.
2. Mr Franco was obliged by clause 4.1 of the contract to provide, at his own expense, the vehicle used to carry out his deliveries.[xi]
Drawing upon the language of Gageler & Gleeson JJ in Jamsek, the Full Bench considered that the contract required Mr Franco to provide a “substantial item of mechanical equipment” such that “the personal is overshadowed by the mechanical”.
3. The contract did not require personal service on the part of Mr Franco.[xii]
Clause 9 of the contract provided that Mr Franco had the right, without the need for prior approval from Deliveroo, to arrange for someone else to perform delivery services on his behalf.
Many contracts provide for delegation. What was significant about this contract was that Deliveroo did not try by its contract to control Mr Franco’s right to delegate performance of the work to others. Whether or not it did so by other means was not relevant to the task of characterising the relationship.[xiii]
4. Although the method of remuneration (payment by results) was not inconsistent with an employment relationship, and would not have been determinative by itself, Mr Franco was required to pay an administrative fee of 4% of the amount earned by him.[xiv]
The fee was charged for access to Deliveroo’s software and for Deliveroo’s providing invoices and other administrative services. The Full Bench considered that this was not consistent with an employment relationship.
A word of caution, however. Reliance on this factor can quickly lead you into error if the weight of factors points to the relationship being one of employment. In those circumstances, charging an “administration fee” might amount to nothing more than making unlawful deductions from a worker’s wages.
Alternative redress and remedial frameworks
From a reading of paragraphs [53] to ]55] of the decision, one gets that the Full Bench reached its conclusion with a deep sense of regret. Anthony Wood, in his recent LinkedIn post,[xv] which I again encourage you to read, foreshadowed the need for a legislative solution when he wrote:
“With job security one of the themes underpinning Labor’s 2022 election platform, it’s now likely to become a political and legislative issue before the new federal parliament.”
Anthony Wood ,18 August 2022
He may well be right; and a legislative solution might eventually look something like the UK extension of employment entitlements to certain classes of dependent contractors defined as “workers” under the Employment Rights Act 1996 (UK). But I fear that such a solution will take time to develop, and that the complexities of applying a characterization tri-chotomy to the wide range of situations in which the distinction between employees and independent contracting is important under federal, state and territory legislation[xvi] may add an extra layer of complexity and confusion. That is not to say that it should not be attempted.
Commercial rather than industrial remedies?
For now, workers who find themselves in the position of Mr Franco may need to consider what alternative remedies may be available to them under the Independent Contractors Act 2006 (C’th) and the unfair-terms-in-small-business-standard-form-contracts of the Australian Consumer Law. They (and their representatives) may need to consider how to take advantage of the small business collective bargaining class exemption under the Competition and Consumer Act 2010 (C’th) if they seek to redress bargaining imbalances[xvii] and seek commercial, rather than industrial remedies.
A group of Boral concrete carters in Western Australia obtained protection under the ACCC’s class exemption earlier this year to collectively bargain with Boral Limited over “terms of agreement for the provision of cartage services including payment for carting concrete including using own vehicles, and other related terms”.
Whilst the outcome may not be as satisfactory as extending employment-like entitlements or providing legislative clarification of their worker status, there would be no reason in principle why Deliveroo independent contractors (and others in the same position) could not do likewise were someone to step forward to assist them with organization and representation.
Let’s hope somebody does.
Andrew C. Wood
[i] Anon.
[ii] Deliveroo Australia Pty Ltd v Diego Franco [2022] FWCFB 156 (17 August 2022).
[iii] Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1.
[iv] ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2.
[v] At para [43].
[vi] At para [43].
[vii] At para [44].
[viii] At para [45].
[ix] At para [45].
[x] At para [46].
[xi] At para [48].
[xii] At para [49].
[xiii] At para [54] the Full Bench observed, with regard to the workplace reality (as distinct from the legal character of the parties’ relationship): “As a matter of reality, Deliveroo exercised a degree of control over Mr Franco’s performance of the work, Mr Franco presented himself to the world with Deliveroo’s encouragement as part of Deliveroo’s business, his provision of the means of delivery involved no substantial capital outlay, and the relationship was one of personal service. These matters, taken together, would tip the balance in favour of a conclusion that Mr Franco was an employee of Deliveroo. However, as a result ofPersonnel Contracting, we must close our eyes to these matters.”
[xiv] At para [50].
[xv] 18 August 2022.
[xvi] Consider how such a tri-chotomy would apply to state and territory payroll tax or workers compensation schemes.
[xvii] Collective Bargaining Class Exemption Notice Form 15th July 2022, ACCC Class Exemptions Register, https://www.accc.gov.au/system/files/public-registers/documents/Boral%20concrete%20carters_0.pdf
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