News that US-based food delivery company DoorDash will open in Australia is further proof that the ‘gig economy’ is here to stay. But what exactly will this mean for employers, and the entitlements of employees?
Managing Director of Australia’s largest workplace relations company Peninsula said that the emergence of this new working model had created uncertainty and legal grey areas, particularly in the area of sham contracting.
“It’s a really interesting time for employers, as we’re seeing a lot of test cases emerge where the very definition of an employee, and their various entitlements, are being scrutinised,” he said.
“As the gig economy settles we’re looking on with interest about what it will mean for employee entitlements. There are some calls to create a whole new category of worker, called ‘permaflexi’, while others say that gig economy workers should be covered by Australia’s existing National Employment Standards.
“It’s an interesting debate, and the whole sector is moving faster than regulators are able to provide clear answers.”
Mallett suggests that employers pay careful attention to the risks of sham contracting and its implications when using gig economy workers.
“Sham contracting is a big watch out for companies that want to leverage the gig economy model. In simple terms sham contracting means deliberately disguising an employee as an independent contractor to avoid paying basic entitlements.
“It was the mistake Foodora made last year when it was accused of creating an entire workforce, but had employed them as independent contractors.”
In June 2018 the Fair Work Ombudsman began legal proceedings against Foodora, claiming it had engaged in sham contracting, resulting in the underpayment of workers.
When announcing legal proceedings former Ombudsman Natalie James said the growing climate of the gig economy would mean the agency would place greater focus on sham contracting.
“There has been broad community and academic debate about the status of ‘models’ using smartphone-driven technology as a means for deploying a workforce that delivers food to consumers from restaurants and fast food outlets,” she said at the time.
“The only way to answer the question of whether the workers delivering the meals are employees or ‘independent contractors’ is for someone to ask a court to consider the specific ‘relationships’ between a company and its workers.
“As the national workplace relations regulator, the Fair Work Ombudsman is now putting this question of significant public interest before a court to consider.”
However, the case was discontinued after Foodora ceased operations in Australia, potentially leaving large legal questions unanswered. In a similar case adjudicated by the Fair Work Ombudsman, drivers for popular ride sharing app Uber were ruled to not be employees, and therefore not entitled to minimum wages and conditions. Although a tribunal in the UK arrived at the opposite decision.
What constitutes and employee from a contractor?
The rules are not always clear cut, but generally speaking the following criteria needs to apply:
Degree of control over how and when the work is done
Expectation of ongoing work
Financial risk
Whether superannuation contributions are needed
Who provides tools and equipment
Income tax deductions
Method of payment
Leave entitlements
Ability to work for other companies
Right to delegate or subcontract
Mallett says that the continued uncertainty around this type of work meant that getting the correct advice was crucial.
“It’s an uncertain time for everyone as we try to figure out the parameters of this working model. If employers are engaging independent or ‘gig economy’ workers, we always suggest getting professional advice so they know exactly where they stand.”
