Recent High Court and Fair Work Commission (FWC) decisions have shaken much of our understanding of the distinction between employees and contractors and the gig economy, culminating in a recent finding that a Deliveroo driver is a contractor and not an employee.
The developments started with two separate High Court decisions earlier this year that held that where a working relationship is governed by a comprehensive contract, that contract (and specifically its legal form rather than its substance) is paramount in determining the nature of the relationship. In other words, if it walks like a duck, quacks like a duck but the agreement calls it a chicken, there’s a good chance that we have a chook.
The challenges of the Gig Economy
The ‘Gig Economy’, including delivery and rideshare services, sits uneasily in the employee/contractor debate. These two categories have typically been distinguished from each other by reference to a multifactorial test, which considers whether the worker in question:
- has the right to determine when, how and by whom the work is performed;
- is required to provide their own equipment; and
- is allowed to work for other parties.
The more factors that point to an employment or contractor relationship, the more likely that characterisation will hold.
In applying the High Court’s 2022 decisions, the FWC found that the Deliveroo driver in question was not an employee because:
- Deliveroo did not control how the driver could perform the work;
- the driver was required to provide his own equipment;
- the driver could delegate the work to any person that he chose; and
- the driver was charged an administration fee for access to Deliveroo resources and software. This was inconsistent with an employment relationship.
Even the FWC disliked its own decision
However, the FWC thought that its own finding was unjust as the driver was in substance an employee.
The new approach that emphasises the primacy of the form of the contract (and that treats post-contractual conduct and the multifactorial test as relevant in construing the terms of the agreement rather than the relationship) may open considerable scope for abuse. Government legislative response is likely and might include extending the FWC’s power to review “employment-like” relationships as well as separate minimum working conditions for gig economy workers.
It will also be interesting to see how the ATO responds, including whether it amends its own employee/contractor guidance to employers.
For more on Employee vs Contractor, read the blogs below!