The Full Bench of the Fair Work Commission applied recent High Court authorities when determining that a Deliveroo driver was not an employee.
The law regarding the characterisation of relationships between employers and workers has seen significant development this year, with the High Court handing down its decisions in CFMMEU v Personnel Contracting Pty Ltd1 (Personnel Contracting) and ZG Operations Australia Pty Ltd v Jamsek2 (Jamsek) on 9 February 2022.
The High Court found in Personnel Contracting and Jamsek that, where the working relationship is governed by a comprehensive written contract, the written terms are paramount in determining the nature of the relationship between the parties. Absent an allegation that the contract is a sham, or that the terms of the contract have been varied by the conduct of the parties, businesses can now have greater certainty that the terms of their written contracts will be upheld by the courts.
In Deliveroo Australia Pty Ltd v Franco,3 the Full Bench of the Fair Work Commission applied the principles in Personnel Contracting and Jamsek in the context of an unfair dismissal application made by Diego Franco, a worker in the gig economy.
Background
Mr Franco commenced working for Deliveroo’s meal delivery business on 22 April 2017 as a delivery driver pursuant to a ‘supplier agreement’ (Agreement), using motorbikes which he had purchased himself. For the majority of Mr Franco’s engagement, Deliveroo used a self-service rider engagement system which required Mr Franco to book the sessions he would work in advance and provided preferential access to particular sessions based on his performance, as well as incentivising him not to cancel engagements.
Mr Franco worked regularly for Deliveroo until 30 April 2020. He also performed work for Uber Eats and Door Dash whilst he worked for Deliveroo. In April 2020, Mr Franco was identified by Deliveroo as a driver with delayed delivery times. Deliveroo determined the delays were unacceptable and emailed Mr Franco on 23 April 2020 advising that, as he failed to deliver orders within a reasonable time, he was in breach of his agreement with Deliveroo and his agreement would be terminated. On 30 April 2020, Mr Franco’s access to the Deliveroo Rider App was disabled.
Mr Franco subsequently made an unfair dismissal application against Deliveroo pursuant to section 394 of the Fair Work Act 2009 (FW Act).
Issues
The principal issue in this case was whether Mr Franco was an employee of Deliveroo, and therefore entitled to protection against unfair dismissal under the FW Act.
Deliveroo alleged that, at the time of the termination of Mr Franco’s engagement, he was an independent contractor providing services to Deliveroo.
Mr Franco alleged that, properly construed, the Agreement demonstrated that he was Deliveroo’s employee because he was subordinate in the business and was serving in it (rather than any business of his own), he was subject to Deliveroo’s authority and right to exercise control over his performance of work, and his performance of work was dependent on Deliveroo’s business.
Decision at first instance
On 18 May 2021, prior to Personnel Contracting and Jamsek being handed down, the Fair Work Commission determined that Mr Franco had been unfairly dismissed and ordered Deliveroo to reinstate Mr Franco and restore his lost pay. In making that determination, the Commission found that Mr Franco was an employee of Deliveroo based on a consideration of the totality of the working relationship between Mr Franco and Deliveroo (in accordance with the reasoning in Stevens v Brodribb Sawmilling Co Pty Ltd4 and Hollis v Vabu Pty Ltd5). The Commission considered the level of control that Deliveroo possessed, and which it could choose to implement or withdraw, over Mr Franco’s performance of work (via its self-service driver engagement system) strongly supported the existence of an employment relationship rather than an independent contracting relationship. In addition, the Commission found that the fact that Mr Franco could and did work for competitors of Deliveroo was not inconsistent with an employment relationship bearing in mind the context of a modern, changing workplace impacted by our new digital world.
Decision on appeal
Deliveroo appealed the decision on the basis that, among other things, the Commission erred in concluding that Mr Franco was an employee.
In upholding the appeal and dismissing the unfair dismissal application, the Full Bench found that Mr Franco was not an employee of Deliveroo for four reasons:
- The terms of the Agreement indicated a lack of control by Deliveroo over the manner of performance of any work which Mr Franco agreed to undertake. The Agreement provided that once an order has been picked up for delivery, it must be delivered in a reasonable time period but that Mr Franco may use any route which he deems safe and efficient. Further, the Agreement did not require Mr Franco to perform any particular delivery work and did not specify the type of vehicle to be used in the delivery. Therefore, Mr Franco had control of the mode of performance of the work, not Deliveroo.
- The Agreement provided that Mr Franco was to supply, at his expense, the vehicle used to make deliveries. Therefore, it is possible that Mr Franco may provide a ‘substantial item of mechanical equipment’ such that ‘the personal is overshadowed by the mechanical‘.6
- The Agreement did not require personal service on the part of Mr Franco. Mr Franco had the right, without the need for prior approval from Deliveroo, to arrange for someone else to perform the services he was contracted to provide.
- The Agreement provided that Mr Franco was required to pay an administrative fee of 4 per cent of the total fees payable to him for access to Deliveroo’s software and for Deliveroo providing invoices and other administrative services. This requirement was considered by the Full Bench to be inconsistent with the existence of an employment relationship.
Key takeaways
The decision demonstrates the importance of having comprehensive written contracts with all workers and carefully drafting the written terms of those contracts to reflect the intended relationship between the parties. The Full Bench recognised the fundamental shift brought about by the High Court decisions in Personnel Contracting and Jamsek, observing that they would have decided the matter differently had they applied the now-outdated multifactorial test which gave significant weight to the conduct of the parties rather than to the terms of the contract.
While companies which engage independent contractors can now have greater certainty that their independent contractors will be unable to claim entitlements reserved for employees, any complacency will still pose a significant risk to business, noting:
- A failure to enter into a written contract, or a poorly drafted written contract, may result in a finding that a worker is an employee rather than an independent contractor;
- A failure to comply with the terms of the contract may result in a finding that the contract has been varied so as to render the worker an employee rather than an independent contractor;
- The Courts will look to the reality of the relationship between the parties if there is a finding that the contract was a sham; and
- Even if a worker is genuinely an independent contractor, companies must also consider whether the worker is an ‘employee’ for the purposes of superannuation legislation noting any failure to properly characterise and pay superannuation to employees can result in significant penalties.
1 [2022] 398 ALR 404.
2 [2022] 398 ALR 603.
3 [2022] FWCFB 156.
4 [1986] 160 CLR 16.
5 [2001] 207 CLR 21.
6 Jamsek at [88]-[89].
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The material contained in this publication is in the nature of general comment only, and neither purports nor is intended to be advice on any particular matter. No reader should act on the basis of any matter contained in this publication without considering, and if necessary, taking appropriate professional advice upon their own particular circumstances.
