Foodora employee, Mr Klooger, was found last week by the Fair Work Commission to be an employee and not a contractor despite sub-contracting his work to other food delivery workers (Mr Klooger v Foodora Australia Pty Ltd).1
Mr Klooger was engaged as a delivery worker for Foodora when his services were terminated because according to Foodora, he refused to return to them, their intellectual property rights in a Telegram group chat app which allowed Foodora deliverers to swap shifts. Foodora had its own chat group on “What’s App” which reached capacity, however Mr Klooger devised an app for deliverers to swap shifts on the Telegram platform. Although his contract prohibited him to delegate his work to others without Foodora’s consent, his technological efforts in developing an alternative shift swap platform, were not stopped by Foodora who even encouraged him for his entrepreneurial efforts.
Mr Klooger claimed unfair dismissal.
Foodora argued he was precluded from filing an unfair dismissal claim because he was not an employee but an independent contractor. Amongst other matters, Foodora argued –
• Mr Klooger was able to sub contract all his work, as well as operate his own business of delegating work to others, and paying them the income he would have received less an amount for tax;
• He did not have any particular obligation to accept shifts offered;
• Foodora did not really have enough control over him or its other drivers;
• The terms of the contract acknowledged that the parties considered themselves as contractors not as employer / employee;
• Mr Klooger could work for other competitors;
• Mr Klooger was not paid any annual leave but had an ABN number and participated in the GST scheme.
Commissioner Cambridge ultimately applied the traditional multifactorial test set out in a long line of authority2 which test looks at a number of indicia or criteria, where no single factor is decisive. However, recently the “business test” has become more prevalent and was also an important factor for the Commission in this case. The business test in simplistic terms, focuses on whether an individual operates their own business (indicating they’re a contractor) or are they really representatives of their employer’s/head contractor’s business (indicating they’re an employee).3
Ultimately the Commissioner held that the following factors supported a finding that Mr Kluger was in fact an employee –
• Foodora had considerable control over which drivers/deliverers performed shifts and also used analysis of deliverer’s performance to compare them and determine to whom shifts should be allocated;
• there was not a significant level of capital investment by the individual to undertake their job compared with say a truck driver investing a significant amount in their equipment. Here Mr Klooger used a bicycle; 4
• Mr Klooger did not have separate places of employment nor did he advertise for a services as part of his own business or generate his own “goodwill” and further Foodora, did not present him to others as operating his own business;
• Although he delegated his work, under his contract, Foodora could exercise a right to terminate Mr Klooger’s services;
• even though he was not paid any annual leave nor sick leave, he was paid on a regular basis.
There was also a strong public policy reason which drove the Commissioner’s decision which in the writer’s view, is a proper factor to take into consideration when assessing the true nature of whether someone is an employee or independent contractor.
While recognising the legitimate practice of contracts for services in the modern economy, Commissioner Cambridge stated –
“….if the machinery that facilitates contracting out also provides considerable potential for the lowering, avoidance, and/or obfuscation of legal rights, responsibilities, or statutory and regulatory standards, as a matter of public interest, these arrangements should be subject to stringent scrutiny (emphasis added). Further, if as part of any analysis involving the correct characterisation that should be given to a particular relationship, an apparent violation of the law, or statutory or regulatory standards is identified, as a matter of public interest, any characterisation of the relationship which would avoid or minimise the likelihood of such violation should be preferred.”5
In other words, as in this case, where new deliverers (not Mr Klooger) were paid as little as $13 per hour plus $3 per delivery in addition to an extra dollar per delivery on Fridays, Saturdays and Sundays; or when their paid hourly rates were replaced with a fixed rate of $10 per delivery which had progressively reduced to $7, any intervention by a court or commission to scrutinise whether the arrangement is really an attempt to avoid paying at least Award wages, is appropriate. Might the individual worker in these circumstances be effectively “controlled” by the head contractor? Well if you ask the workers who are paid such low amounts in remuneration this question, they may well say yes and further if you ask them whether they are operating their “own business”, they are also likely to say they are not, nor are able to (because they don’t have any time capacity to run their own business).
Lessons
This issue of whether someone is an independent contractor or employee is not a new one. The Courts have grappled with this issue in many cases over a long period of time in different contexts including in taxation and personal injury law. 6
If you have entered into a so called independent contract for services, it’s important that you receive proper and considered legal advice on your proper status as it applies to your circumstances sooner rather than later because there are important ramifications to both you and your employer or contracting party.
1. [2018] FWC 6836
2. see Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 160 and Hollis v Vabu (2001) 207 CLR 21;
3. FWO v Quest South Perth Holdings Pty Ltd [2015] FCAFC 37;
4. Hollis, at para 47.
5. U2018/2625 at para 103;
6. Dixon J in Colonial Mutual Life Assurance Society Limited v Producers and Citizens Co-operative Assurance Company of Australia Limited [(1931) 46 CLR 41 at page 48].