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More clarity needed on independent contractors following Deliveroo decision

Published May 18, 2021 (last updated on November 29, 2023) | Adam Wyatt - Content Writer


Businesses need more clarity as to what defines independent contracting work, as highlighted by the Fair Work Commission’s decision that a worker for food delivery company, Deliveroo, was in fact an employee and not an independent contractor.

The FWC ruling means the delivery rider would have rights to a minimum wage, superannuation contributions and unfair dismissal protection. The reasons given were the man did not build a business or brand as a rider, he did not have a clear profession or assets, he booked shifts in advance through Deliveroo’s systems, which preferenced shift allocation on the basis of performance metrics, and he was required to dress in the company’s branding.

The gig economy now accounts for more than seven per cent of the Australian workforce, and it’s changing the way we work. Employsure, Australia’s largest workplace relations advisor, believes the Fair Work Commission’s decision could lead to more employers being caught out.

“The difference between an independent contractor and an employee is not always clear cut. The relationship between an employer and employee is a contract of service, whereas the relationship between an employer and independent contractor is a contract for services. The differences are subtle, but important,” said Employsure Business Partner Josh Paterson.

“This shows there is a grey area of law that businesses need more certainty on when hiring workers. What we need to see is a more clear-cut definition of an independent contractor enshrined in law.”

If an employer incorrectly represents to their workers the nature of the relationship between them, under the Fair Work Act 2009, this could be a sham contracting arrangement. If a case goes before a court or tribunal, they look at the full picture of the relationship and all possible factors.

In the case of Deliveroo, the ruling by the Fair Work Commission could see a raft of backpay claims ordered against it if more riders are ruled as employees in the future. A typical employee can claim unpaid wages and entitlements for up to six years from the date they became due.

Conversely, food delivery company Menulog plans to make all of its workers employees over the coming years by applying for a new employment award created for food delivery drivers specifically.

“The gig economy is one of the fastest growing sectors in the country, and many Australian workers enjoy the flexibility and the opportunity to make the money the industry presents them,” continued Mr Paterson.

“This plan by Menulog to convert its workforce to employees will cost more, and it will undoubtedly set a precedent that will affect other business owners who hire independent contractors.

“This is an uncertain time for employers as they try to figure out the parameters of this working model. If business owners engage independent workers, they should get professional advice, so they know exactly where they stand, or risk legal action,” he concluded.

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