The Fair Work Commission (“FWC”) has made a landmark ruling that could see more drivers and delivery workers in gig economy being given rights as employees instead of independent contractors. Deliveroo is appealing the decision, and if upheld, this could see the restructure the business model of many platform companies.

The FWC ruled that a former Deliveroo driver was an employee of Deliveroo Australia Pty Ltd rather than an independent contractor. The decision in Diego Franco v Deliveroo Australia Pty Ltd (U2020/7066), if upheld on appeal, will be a momentous case with the potential to completely reform how gig-economy platforms operate. This decision comes in the wake of increasing scrutiny of gig-economy companies for their inconsistent treatment of workers, hindering the rights and protections available to them. Other countries have already made the move towards enforcing the classification of gig economy workers as employees.

What were the facts?

The Applicant (Mr Franco) entered into a supplier agreement in 2017 to become a Deliveroo driver. The Supplier Agreement, and all subsequent agreements, contained similar terms including that Mr Franco:

  • was a supplier in business of his own account;
  • could provide services personally or through a delegate;
  • was free to work for any third parties;
  • was required to provide his own vehicle and phone
  • was required to pay an administrative fee;
  • was required to complete the services safely and efficiently; and
  • must organise his own tax and insurance.

Mr Franco worked as a Deliveroo driver for three years and also performed services for Uber Eats and Door Dash during that period. In 2020, he received an email notifying him that the Supplier Agreement services were terminated by Deliveroo due to delays with his delivery times compared with other Deliveroo drivers on similar routes. Under the agreement, Deliveroo had the right to terminate at any time and for any reason with provision of one week of written notice. Mr Franco sought to challenge his termination in an unfair dismissal application.

The FWC Decision – Employee or Contractor?

Commissioner Cambridge of the FWC determined that Mr Franco, was an employee of Deliveroo and ordered Deliveroo to reinstate Mr Franco’s employment.

As an employee, different rights attach to termination of the relationship and the FWC held that the dismissal was harsh, unjust and unreasonable. To be protected from unfair dismissal, the question turns on whether the person is an employee and has completed the minimum employment period as required in section 382 of the Fair Work Act 2009 (Cth).

Important Factors to Consider

The definition of ‘employee’ is given meaning by the common law, which involves the consideration of various factors examining the holistic nature of the relationship between the parties. The Commissioner considered the following factors in reaching its conclusion that Mr Franco was an employee:

  • although Mr Franco could determine when and where he felt like working, the practical reality was that an automated system directed him to work at particular times and to regularly make himself available;
  • the supplier agreement contained provisions which are similar in form and substance to ordinarily found in an employment contract;
  • Mr Franco had no capacity in any real sense to negotiate any of the terms of the supplier agreement; and
  • Mr Franco was not carrying on a trade or business of his own but was carrying on the business of Deliveroo. This finding is interesting given Mr Franco had the ability to work for competitors, and will be challenged in the appeal that has been confirmed by Deliveroo.

Unfair Dismissal

In the opinion of the FWC, Deliveroo did not provide Mr Franco with a valid reason for dismissal or an opportunity to respond to the complaints prior to terminating the contract, as required under the Fair Work Act. The failure to deliver food within a reasonable time was not a valid reason for dismissal, given that he was not informed by Deliveroo on the delivery times it expected.

In making the reinstatement order, the FWC noted: “irrespective of whether Mr Franco was a contractor or an employee, it was plainly unconscionable to terminate what would be well understood to be his primary source of income, without first hearing from him.”

Conclusion

The increasingly digital employment landscape and the rise of gig economies will test the balances between existing common law concepts of employment and lived realities of working relationships.

We represent both employers and employees, so if you or your organisation needs further advice or assistance in relation to redundancies or dismissals, please call Etheringtons Solicitors on (02) 9963 9800 or via our contact form.