Foodora Flees Australian Market

It has been widely reported that food delivery company Foodora Australia Pty Ltd (Foodora) recently closed its Australian operations. Foodora’s closure had created great uncertainty over two significant cases recently brought against Foodora for alleged use of sham contracting to underpay its workers. The two cases were expected to be pivotal in the ongoing battle over whether food delivery workers are classified as employees instead of independent contractors.

However, in breaking news as of today, 3 September 2018, the Fair Work Ombudsman (FWO) has dropped their prosecution of Foodora, being a sham contracting case in the Federal Court of Australia (FCA).

The FWO’s decision was perhaps surprising given that the Australian Taxation Office (ATO) and Revenue NSW recently investigated Foodora and formed the view that their workers are classified as employees at common law. The purpose of their investigations was to determine whether Foodora owed outstanding superannuation and payroll tax respectively. The classification of Foodora workers as employees by the government bodies has been labelled “highly significant” by experts. It is also likely to have influenced Foodora’s decision to exit the Australian market, given that they were aware of the investigations (and possibly its likely findings) prior to announcing the company’s closure.

In today’s breaking news, the FWO has elected not to continue with its prosecution of Foodora in the FCA after the company’s recent retreat into voluntary administration. The FWO’s case had claimed that Foodora engaged in sham contracting when it misrepresented to its workers that they were classified as independent contractors when they were in fact employees. The FWO conducted analysis and identified several factors which suggested an employer-employee relationship.

The case was anticipated to be a significant test of the ‘gig economy’s’ employment relationships in Australia, potentially effecting numerous companies, including UberEats. The ‘gig-economy’ industry classifies workers as independent contractors, avoiding paying minimum wages. However, the FWO argued that these workers are truly employees and deserve to be protected by minimum wages and conditions under the Fair Work Act 2009 (Cth).

The second case against Foodora, which remains active, may yet still have a significant impact upon the ‘gig economy’ in Australia. A former Foodora worker, Mr Klooger (the Applicant) has commenced unfair dismissal proceedings in the Fair Work Commission (FWC). The Applicant alleges that despite signing an Independent Contractor agreement prior to working for Foodora, he was in fact an employee and is therefore entitled to pursue an unfair dismissal claim.

The Applicant claims that the significant control Foodora held over his work and the “time-based payments” he received were indicative of employment. Foodora dismissed the Applicant after he refused to surrender control of a worker’s chat group to the company. The case is still being heard before the FWC, although given the FWO’s unwillingness to prosecute Foodora it is possible that the FWC may also drop their case.

However, if Foodora chooses to not fight these proceedings, or fights and loses, it could establish a new precedent on the rest of the ‘gig economy’ market in Australia. It begs the question; can these emerging ‘gig economy’ companies survive without being able to classify and pay their workers as independent contractors?

If you have any further questions regarding whether to classify workers as independent contractors or employees, please do not hesitate to contact Nick Stevens, Jane Murray or Angharad Owens-Strauss.