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It’s a Gig World Out There – A guide to current issues in the gig economy

There is a growing industry built around task-based work, ‘online platforms’ and ‘skill-sharing’. This ‘gig economy’, which expands well beyond the well-known companies like Uber, Airtasker and Deliveroo, makes the traditional approach to characterising workers as either ‘employee’ or ‘contractor’ much more difficult. So, how will regulators in Australia respond to the challenge?

Under Australia’s national workplace relations legislation, employees are entitled to a range of minimum entitlements, while independent contractors are not subject to a safety net. This framework sits uncomfortably with the realities of the ‘gig economy’, where the unique situation of many workers means that they do not sit clearly within either category.

Last year, the Fair Work Commission (FWC) considered the case of an Uber driver alleging unfair dismissal, and ultimately concluded that he was a contractor.[1] However in a key test case, the Fair Work Ombudsman has recently issued proceedings in the Federal Court alleging that Foodora has engaged in sham contracting regarding three workers based in Melbourne and Sydney.

Potential legislative change

In May 2018, the Australian Greens introduced the Fair Work Amendment (Making Australia More Equal Bill) to the Federal Parliament. If the Bill is passed, workers and unions will be able to apply to the FWC for a ‘Minimum Entitlements Order’ to cover a worker, or a group of workers. These orders would enable the FWC to apply certain wages, terms and conditions to workers, even where they are not classified as ‘employees’. This Bill follows the recent implementation of the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017, which significantly increased penalties for the underpayment and exploitation of vulnerable workers.

While the Bill is unlikely to be approved by the Senate as it is currently constituted, the major parties, including the Australian Labor Party (ALP), are formulating a comprehensive policy position on the issue of gig workers. The ALP has published six ‘National Sharing Economy Principles’ that will form the basis of any proposed legislative or regulatory reforms. These reforms include potential scope for collective bargaining by workers in the gig economy, as well as options to bring these workers under insurance and workers’ compensation schemes.

In addition to the approach proposed by the Greens, other options currently being debated within industry include a new category of ‘independent worker’, which falls outside the traditional dichotomous classification of ‘employee’ and ‘contractor’, embracing concepts such as ‘joint employment’ (which has to date been rejected by Australian courts), or deeming employers for different legal purposes.

In a further development last week, the ALP in NSW foreshadowed plans to amend the State IR Act to extend minimum pay and employment conditions to gig economy workers if elected in March 2019.

Negotiation between unions and the private sector

In the face of sustained union campaigns against gig economy arrangements, some businesses are developing their own arrangements with unions in an effort to balance the tension between flexibility and security and to avoid negative media scrutiny.

For example in April 2017, Airtasker (an online job-posting platform) reached agreement with Unions NSW to increase minimum rates of pay and improve conditions for workers. The deal provides scope for an independent dispute resolution process to be brokered by the FWC. However, Airtasker has indicated the platform’s technology is not capable of ensuring, among other things, adherence to minimum pay standards, which makes the implementation of the deal at a practical level unclear.

More recently in May this year, Coles and the Transport Workers Union (TWU) signed a memorandum of understanding outlining five ‘core principles’ covering ‘on-demand’ workers. One of the principles of the agreement provides that on-demand workers should not be prohibited from accessing the same rights as other workers.

Just how many operators enter into such agreements, whether the agreements result in any material change to minimum rates of pay and how the agreements will impact the gig economy business model generally remains to be seen. However, in the face of sustained pressure from employee associations, such as the Australian Council of Trade Unions (ACTU), it seems key players will continue to take a proactive approach to implementing cooperative arrangements rather than waiting for formal regulation.

Further litigation

While last year’s decision regarding an Uber driver found that he was not an employee, and accordingly he did not have access to unfair dismissal remedies, it is anticipated that further potential litigation will provide clarification about how particular ‘gig-workers’ will be legally classified.

The TWU has brought unfair dismissal claims on behalf of two food delivery cyclists at Foodora, and as noted above, the Fair Work Ombudsman (FWO) also filed legal proceedings against the company for sham contracting in June. FWO alleges that Foodora deliberately misclassified at least three drivers as independent contractors, which meant they were paid below award minimum entitlements. If FWO is successful in its claim, Foodora faces penalties of up to $54,000 per contravention under the Fair Work Act.

While the outcome of these cases will provide further guidance on labour arrangements, it is fair to say the ‘gig-economy’ sector is in no way homogenous, and accordingly businesses operating on digital platforms should seek specific advice about their own operations. This is particularly so as labour platforms vary greatly in the level of control and negotiation power exercised by workers, payment systems, and the way different contractual relationships are managed. Businesses need to look at their unique circumstances in order to navigate the changing compliance landscape.

The big picture

Businesses, unions, governments and courts in the USA, UK, Europe and across the world are grappling with how to adapt to the challenges raised by the gig economy. Recent decisions in other jurisdictions have seen an increased preparedness for the courts to accept that non-traditional forms of engagement constitute employment relationships.

The issue is likely to feature heavily in the debate regarding workplace relations reform in the upcoming Federal election, with the ACTU’s ‘change the rules’ campaign demanding equal rights for gig economy workers.

In the face of such uncertainty, it is clear that legislators will need to develop regulation that facilitates creative working opportunities while still protecting the rights of workers. Major players in the gig economy should be part of the process of shaping any such reforms. As noted by the Senate regarding its recent enquiry: ‘Companies which understand this and work with unions and government to drive positive change will be best placed to grow their business in a legal and ethical way’.[2]

Maddocks is currently working with a number of gig economy businesses to navigate the Fair Work legislation. We can assist you with advice regarding all aspects of a start-up operation, including regulatory compliance.

Author
Karli Evans | Partner
T +61 3 9258 3843
E karli.evans@maddocks.com.au
Eloise Daff | Lawyer
T +61 3 9258 3602
E eloise.daff@maddocks.com.au

[1] Kaseris v Rasier Pacific V.O.F [2017] FWC 6610.

[2] See https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Education_and_Employment/AvoidanceofFairWork/Report/c08

There is a growing industry built around task-based work, ‘online platforms’ and ‘skill-sharing’. This ‘gig economy’, which expands well beyond the well-known companies like Uber, Airtasker and Deliveroo, makes the traditional approach to characterising workers as either ‘employee’ or ‘contractor’ much more difficult. So, how will regulators in Australia respond to the challenge?

Under Australia’s national workplace relations legislation, employees are entitled to a range of minimum entitlements, while independent contractors are not subject to a safety net. This framework sits uncomfortably with the realities of the ‘gig economy’, where the unique situation of many workers means that they do not sit clearly within either category.

Last year, the Fair Work Commission (FWC) considered the case of an Uber driver alleging unfair dismissal, and ultimately concluded that he was a contractor.[1] However in a key test case, the Fair Work Ombudsman has recently issued proceedings in the Federal Court alleging that Foodora has engaged in sham contracting regarding three workers based in Melbourne and Sydney.

Potential legislative change

In May 2018, the Australian Greens introduced the Fair Work Amendment (Making Australia More Equal Bill) to the Federal Parliament. If the Bill is passed, workers and unions will be able to apply to the FWC for a ‘Minimum Entitlements Order’ to cover a worker, or a group of workers. These orders would enable the FWC to apply certain wages, terms and conditions to workers, even where they are not classified as ‘employees’. This Bill follows the recent implementation of the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017, which significantly increased penalties for the underpayment and exploitation of vulnerable workers.

While the Bill is unlikely to be approved by the Senate as it is currently constituted, the major parties, including the Australian Labor Party (ALP), are formulating a comprehensive policy position on the issue of gig workers. The ALP has published six ‘National Sharing Economy Principles’ that will form the basis of any proposed legislative or regulatory reforms. These reforms include potential scope for collective bargaining by workers in the gig economy, as well as options to bring these workers under insurance and workers’ compensation schemes.

In addition to the approach proposed by the Greens, other options currently being debated within industry include a new category of ‘independent worker’, which falls outside the traditional dichotomous classification of ‘employee’ and ‘contractor’, embracing concepts such as ‘joint employment’ (which has to date been rejected by Australian courts), or deeming employers for different legal purposes.

In a further development last week, the ALP in NSW foreshadowed plans to amend the State IR Act to extend minimum pay and employment conditions to gig economy workers if elected in March 2019.

Negotiation between unions and the private sector

In the face of sustained union campaigns against gig economy arrangements, some businesses are developing their own arrangements with unions in an effort to balance the tension between flexibility and security and to avoid negative media scrutiny.

For example in April 2017, Airtasker (an online job-posting platform) reached agreement with Unions NSW to increase minimum rates of pay and improve conditions for workers. The deal provides scope for an independent dispute resolution process to be brokered by the FWC. However, Airtasker has indicated the platform’s technology is not capable of ensuring, among other things, adherence to minimum pay standards, which makes the implementation of the deal at a practical level unclear.

More recently in May this year, Coles and the Transport Workers Union (TWU) signed a memorandum of understanding outlining five ‘core principles’ covering ‘on-demand’ workers. One of the principles of the agreement provides that on-demand workers should not be prohibited from accessing the same rights as other workers.

Just how many operators enter into such agreements, whether the agreements result in any material change to minimum rates of pay and how the agreements will impact the gig economy business model generally remains to be seen. However, in the face of sustained pressure from employee associations, such as the Australian Council of Trade Unions (ACTU), it seems key players will continue to take a proactive approach to implementing cooperative arrangements rather than waiting for formal regulation.

Further litigation

While last year’s decision regarding an Uber driver found that he was not an employee, and accordingly he did not have access to unfair dismissal remedies, it is anticipated that further potential litigation will provide clarification about how particular ‘gig-workers’ will be legally classified.

The TWU has brought unfair dismissal claims on behalf of two food delivery cyclists at Foodora, and as noted above, the Fair Work Ombudsman (FWO) also filed legal proceedings against the company for sham contracting in June. FWO alleges that Foodora deliberately misclassified at least three drivers as independent contractors, which meant they were paid below award minimum entitlements. If FWO is successful in its claim, Foodora faces penalties of up to $54,000 per contravention under the Fair Work Act.

While the outcome of these cases will provide further guidance on labour arrangements, it is fair to say the ‘gig-economy’ sector is in no way homogenous, and accordingly businesses operating on digital platforms should seek specific advice about their own operations. This is particularly so as labour platforms vary greatly in the level of control and negotiation power exercised by workers, payment systems, and the way different contractual relationships are managed. Businesses need to look at their unique circumstances in order to navigate the changing compliance landscape.

The big picture

Businesses, unions, governments and courts in the USA, UK, Europe and across the world are grappling with how to adapt to the challenges raised by the gig economy. Recent decisions in other jurisdictions have seen an increased preparedness for the courts to accept that non-traditional forms of engagement constitute employment relationships.

The issue is likely to feature heavily in the debate regarding workplace relations reform in the upcoming Federal election, with the ACTU’s ‘change the rules’ campaign demanding equal rights for gig economy workers.

In the face of such uncertainty, it is clear that legislators will need to develop regulation that facilitates creative working opportunities while still protecting the rights of workers. Major players in the gig economy should be part of the process of shaping any such reforms. As noted by the Senate regarding its recent enquiry: ‘Companies which understand this and work with unions and government to drive positive change will be best placed to grow their business in a legal and ethical way’.[2]

Maddocks is currently working with a number of gig economy businesses to navigate the Fair Work legislation. We can assist you with advice regarding all aspects of a start-up operation, including regulatory compliance.

Author
Karli Evans | Partner
T +61 3 9258 3843
E karli.evans@maddocks.com.au
Eloise Daff | Lawyer
T +61 3 9258 3602
E eloise.daff@maddocks.com.au

[1] Kaseris v Rasier Pacific V.O.F [2017] FWC 6610.

[2] See https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Education_and_Employment/AvoidanceofFairWork/Report/c08