This morning saw the release of news that yet another Gig Economy company will come under scrutiny for its alleged “sham contracting arrangements”.
A New Court Case
In proceedings lodged in the Federal Circuit Court of Australia, a former “delivery rider” for Deliveroo will put forward the argument that he was exploited by Deliveroo by failing to pay a minimum wage, penalty rates and the required superannuation. In short, it will be argued that the rider was not an independent contractor, but was in fact an employee under the “control” of its employee.
This new test for the Gig Economy comes off the back of a series of cases in recent times for companies wishing to use IT platforms by way of “application” to arrange the provision of services between alleged “contractors” and customers. Gig Economy companies argue that they are merely the conduit that links the service provider to the customer. Courts are beginning to find that this is not the case at all.
Who is Guilty and Who Is Not?
While Uber managed to convince the Courts that their drivers were contractors, other companies have not been as lucky. Only recently, Foodora closed its doors which some argue was a result of an unfavourable finding by the Fair Work Commission. In that case, it was held that Foodora had engaged in sham contracting because it, among other things, pit contractors against each other in the form of an “oppressive hierarchy”. The system used created an environment whereby Foodora was able to highly control its workers through various means.
Deliveroo is said to use a similar method, in the form of “priority groups” and therefore is likely to come under similar scrutiny as Foodora unless it is able to convince the Court otherwise.
What Is Sham Contracting?
In 2006, the Federal Government took steps to ensure independent contractors’ rights were protected, via the Independent Contractors Act 2006 (IC Act) and the Fair Work Act 2009 (FW Act). Importantly, it inserted the ability for Fair Work Inspectors to seek the imposition of penalties for any employer who attempted to disguise an employment relationship as an independent contracting arrangement.
They took this step because sham contracting was becoming prevalent amongst employers who sought to avoid responsibility for employee entitlements.
Fair Work has continued to work hard at stamping out this behaviour, but now faces the challenge of the new “Gig Economy”. Companies are becoming even more creative in their business models, and some are being more successful than others.
What Will Happen?
If Deliveroo finds itself being held to be an employer of its drivers, this will have repercussions in the Gig Economy. Whilst many argue that Gig Economy business allows the desired flexibility for its contractors, those who work for these businesses find themselves considerably underwhelmed by the payment for the services provided.
This case will no doubt put scrutiny on similar models used by such businesses as Uber Eats and Menulog. It may also curb the enthusiasm of other companies who see this business model as a way to keeping costs low through maintaining a cheap workforce.
We will be watching as this case progresses.