Deliveroo rider not an employee - Fair Work Commission Full Bench overturns previous decision

Background
In another chapter in the recent series of decisions regarding the employment status of gig workers as either independent contractors or employees, the Fair Work Commission Full Bench in Deliveroo Australia Pty Ltd v Diego Franco [2022] FWCFB 156 has overruled a previous decision that a Deliveroo driver was an employee.  

Mr Franco started working for Deliveroo in 2017 as a food delivery rider pursuant to a ‘supplier agreement’. In April 2020 he was identified as a rider with delayed delivery times that were unacceptable. As a result, Deliveroo emailed Mr Franco and advised that because he failed to deliver orders within a reasonable time, he was in breach of his agreement with Deliveroo and his agreement would be terminated. One week later, his access to the Deliveroo Rider App was disabled preventing him from obtaining any delivery jobs.

Mr Franco then made an application for unfair dismissal where Commissioner Cambridge found that Mr Franco was an employee of Deliveroo and therefore was protected from unfair dismissal under the Fair Work Act. In coming to this conclusion, the Commissioner used the multifactorial test (which was the most current and appropriate method at the time) and found in favour of a relationship of employment due to the following main factors among others:

• Deliveroo exercised a level of control over Mr Franco (and all riders) evident through the volume of data in relation to worker utilisation and performance of work;

• While Mr Franco was entitled to work for Deliveroo competitors, this is not inconsistent with an employment relationship but demonstrates modern and changing workplace arrangements impacted by the new digital world and the pandemic; and

• Although Mr Franco provided his own bike and phone, the Commissioner was of the view that this did not represent a substantial capital outlay in order to perform work for Deliveroo because he required these items for personal use anyway.

Therefore, it was held that Mr Franco was not carrying on a trade or business of his own but was working as part of Deliveroo’s business and the Commissioner found it appropriate to reinstate Mr Franco to his employment and restore his lost pay.  

In June 2021, Deliveroo appealed this decision however the appeal was deferred awaiting the two judgments of CFMMEU v Personnel Contracting Pty Ltd and Jamsek v ZG Operations Pty Ltd to be handed down by the High Court, as these were likely to provide importance guidance in relation to the employee versus independent contractor analysis.

Decision
Following the decisions of Personnel Contracting and Jamsek, the Full Bench overturned the Commissioner’s finding that Mr Franco was an employee of Deliveroo immediately prior to the termination of his engagement. Instead, the relationship between the parties was more likened to that of an independent contractor relationship and Mr Franco had no jurisdiction to make an unfair dismissal application.

Consequently, Mr Franco was left with no remedy which he could obtain from the Fair Work Commission despite the Full Bench sharing their opinion that there was unfair treatment on the part of Deliveroo here.

Reasoning
Adopting the approach of the High Court in focusing on the contractual rights and obligations of the parties rather than the broader practical relationship between the parties, the Full Bench identified four aspects of the supplier agreement which weighed “decisively in favour of the conclusion that Mr Franco was in an independent contracting relationship with Deliveroo”. These were:

• A lack of control by Deliveroo as Mr Franco had the right to determine the ‘safe and efficient’ route used to make the delivery and to determine what type of vehicle he uses. These rights, along with the fact that Deliveroo also has no ability to require Mr Franco to actually perform any delivery work in the first place indicates Mr Franco has the control over the mode of performance of the work;

• Secondly, as the supplier agreement allows for deliveries to be carried out with “something more than just a bicycle”, then it is possible that Mr Franco may provide a “substantial item of mechanical equipment” rather then something of personal nature;

• Thirdly, Mr Franco had the right to arrange for someone else to perform the delivery services that he was contracted to provide, without any approval from Deliveroo; and

• Fourthly, Mr Franco was required to pay an administrative fee of 4% of the total fees payable to him for access to Deliveroo’s software and for Deliveroo providing invoices and other administrative services. The Full Bench determined that a fee of this nature is inconsistent with the existence of an employment relationship.

An important distinction was made between performance standards and control, as the supplier agreement imposed various requirements on Mr Franco to make deliveries within a ‘reasonable time period’, to act professionally and courteously when dealing with others, and to provide services with due care, skill and ability. The Full Bench concluded that these requirements were simply performance standards consistent with an independent contract arrangement rather than a right of control that Deliveroo held. Mr Franco still had the ultimate control of how, where and when work was done. 

Interestingly, the Full Bench also identified some factors that they were obliged to ignore in these circumstances following the application of Personnel Contracting. These included Deliveroo operating a system requiring riders to book sessions they would work in advance and providing preferential access based on performance, Mr Franco being encouraged to use a Deliveroo-branded insulation bag and clothing, and using two motorcycles to perform the deliveries which he both also used for personal use. Had the Full Bench been permitted to take these factors into account, a different conclusion would have been reached, similar to that of Commissioner Cambridge finding an employment relationship.

This conclusion by Commissioner Cambridge was noted by the Full Bench to be correct at the time given the current law when the decision was made, however the subsequent judgments from the High Court have rendered it incorrect.                             

Key Takeaways   
This decision is clearly a blow to gig workers in Australia, demonstrating that there is potential to have no remedies available despite being the victim of adverse action due to the fact they could be labelled as independent contractors. On the other hand, it provides businesses with greater confidence regarding their ability to engage certain workers as independent contractors.

This will certainly not be the end of disputes requiring an employee v independent contractor analysis. Given that the Full Bench expressed their dissatisfaction that Mr Franco had no remedies available here despite being unfairly treated, there is also likelihood that legislative reform is introduced to refine traditional concepts of employment and afford adequate protection to gig workers. 

For now, it is clear that the approach taken by the courts will involve focusing on the written contractual rights and obligations of the parties to determine whether a worker is an employee or independent contractor. Therefore, businesses need to ensure that their agreements engaging workers are carefully drafted to give effect to the intended relationship.

If you need advice on contracting for employees and independent contractors, please contact:

Article prepared by:

Jim Babalis
Special Counsel
T 03 5225 5205
E jbabalis@ha.legal

Jim Rutherford
Principal Lawyer
T 03 5226 8579
E: jrutherford@ha.legal

Matthew Synoradzki
Graduate Lawyer
T 03 5226 8542
E msynoradzki@ha.legal