Primacy of the Contract for Gig Economy Workers

Nicola Nygh and Katariina Hatakka consider the implications for gig economy workers of High Court decisions affirming the primacy of written contracts in employment disputes and look at the recent decision of the Full Bench of the Fair Work Commission concerning a delivery rider for Deliveroo.

This article draws on a more substantial article by Nicola and Katariina, “Primacy of the Contract for Gig Economy Workers” published in Vol 11 No 3 edition of Workplace Review.

For over 20 years courts have applied the multifactorial test to determine whether a worker is an employee or contractor. The High Court has now held in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (Personnel Contracting)[1] and ZG Operations Australia Pty Ltd v Jamsek (Jamsek)[2] that where there is a comprehensive written contract, the terms of the contract alone determine the worker’s status as an employee or contractor. This approach affords greater certainty than the multifactorial test. However, it has significant implications for workers in the gig economy where businesses generally try to characterise their workers as subcontractors which limits their workplace rights and protections.

In two decisions of the Fair Work Commission prior to Personnel Contracting and Jamsek, the Commission held that delivery riders for Foodora and Deliveroo were employees. In Klooger v Foodora Australia Pty Ltd (Foodora)[3] and Franco v Deliveroo Australia Pty Ltd (Deliveroo)[4] the Commission came to that conclusion applying the multifactorial test which involved considering the totality of the parties’ relationship beyond the contractual terms between the parties. However, on appeal the Full Bench of the Commission held that the judgment in Personnel Contracting obliged it to overturn the Commission’s decision in Deliveroo.[5] The Full Bench held that if it had been permitted to apply the multifactorial test to the manner of performance of the contract between Deliveroo and Mr Franco, it would have found that Mr Franco was an employee[6]. However, Personnel Contracting required the Full Bench to “ignore certain realities”[7] and to limit its consideration to the terms of the contract.

Consistent with the decision in Personnel Contracting, the description of Mr Franco in the contract as a contractor was not determinative. However, the Full Bench concluded that Mr Franco was a contractor by analysing the terms of the contract including the lack of contractual control that Deliveroo had over how Mr Franco performed his work, Mr Franco’s contractual right to sub contract, the obligation on Mr Franco to provide his own delivery vehicle and the administration fees payable by Mr Franco to Deliveroo under the contract. The Full Bench concluded that “regrettably, this leaves Mr Franco with no remedy he can obtain from the Fair Work Commission for what was, plainly in our view, unfair treatment on the part of Deliveroo[8].”

The increased certainty provided by the High Court decisions in Personnel Contracting and Jamsek is welcomed. However, as independent contractors workers in the gig economy have limited rights. Among other things they are not entitled to minimum wages under legislation, awards and enterprise agreements and do not have the protections available to employees under the Fair Work Act. The rights of workers in the gig economy are best addressed by legislation. Inquiries have been held, and legislation recommended, at both Federal and State levels including recommendations to expand the definition of employment and employee in the Fair Work Act and extend the powers of the Commission.

 

[1] Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 96 ALJR 89; 312 IR 1; [2022] HCA 1.

[2] ZG Operations Australia Pty Ltd v Jamsek (2022) 96 ALJR 144; 312 IR 74; [2022] HCA 2.

[3] Klooger v Foodora Australia Pty Ltd (2019) 283 IR 168; [2018] FWC 6836.

[4] Franco v Deliveroo Australia Pty Ltd (2021) 305 IR 255; [2021] FWC 2818.

[5] Deliveroo Australia Pty Ltd v Franco [2022] FWCFB 156.

[6] Deliveroo Australia Pty Ltd v Franco [2022] FWCFB 156, [54].

[7] Deliveroo Australia Pty Ltd v Franco [2022] FWCFB 156, [53].

[8] Deliveroo Australia Pty Ltd v Franco [2022] FWCFB 156, [57].

 

Photo by Paolo Feser on Unsplash.