Delivery Giant Loses Landmark Case
In a recent case before the Fair Work Commission a Deliveroo rider (“Mr Franco”) has been deemed to be an employee and not an independent contractor, and therefore a person protected from unfair dismissal. This case is a major breakthrough for the Transport Workers Union’s continuing bid to establish that gig workers are employees within Australia.
Background
Mr Franco initially began work as a food delivery driver for Deliveroo, an online food delivery company, on 22 April 2017 as an independent contractor under a “supplier agreement”. On 23 April 2020, Deliveroo advised Mr Franco by email that he had breached his supplier agreement due to his alleged “slow deliveries” and was subject to 7 days’ notice of termination of his contract. Mr Franco ceased providing services for Deliveroo on 30 April 2020. Mr Franco subsequently lodged an application to the Fair Work Commission alleging that he had been unfairly dismissed by Deliveroo. He sought reinstatement, continuity of service and backpay as remedy for his alleged unfair dismissal. Deliveroo lodged a jurisdictional objection to his unfair dismissal application on the basis he was an independent contractor, not an employee, and was not dismissed.
Judgment
- Contract Arrangements
The Commissioner identified that the supplier contract, “clearly attempt[s] to establish a relationship of principal and independent contractor“, as it directly stipulates that the supplier is not an employee, and that the relationship is one of principal and independent contractor. The Commissioner held that the agreements’ written terms “are an important factor in any determination of the correct characterisation” of the relationship. However, he found that “Deliveroo, determined the terms unilaterally“, and that the evidence “clearly established” the rider had “no capacity to negotiate any of the terms of the supply/supplier agreements“.
- Unconscionable Termination
Commissioner Cambridge held that it was unconscionable for Deliveroo to terminate Mr Franco without first hearing from him. Turning to the validity of the rider’s dismissal, for which Deliveroo notified Mr Franco by email with a week’s notice for breaching his supplier agreement by failing to deliver orders in a reasonable time, Commissioner Cambridge said Deliveroo never told Mr Franco what delivery times it expected. Therefore, failure to deliver within a reasonable timeframe “could not represent a reason that was sound, defensible or well-founded” and there was consequently “not a valid reason for the dismissal of Mr Franco related to his capacity or conduct“. Commissioner Cambridge said the “procedure that Deliveroo adopted whereby it advised Mr Franco of the termination of his services by way of email communication and without any proper, prior warning, was unjust, unreasonable, and unnecessarily harsh“. Commissioner Cambridge ordered Deliveroo to reinstate Franco by 8 June 2021, with continuity of employment and restoration of lost pay.
- Complete picture is that of employee and employer according to Commissioner Cambridge
The Commissioner took into account the following in his decision:
- The rider was permitted to and did work for Deliveroo’s competitors, as permitted by its service terms.
- The significant level of control Deliveroo possessed strongly supported the existence of employment.
- Mr Franco was required to present as a Deliveroo employee by wearing their branded clothing and equipment displaying their logo.
- Mr Franco was paid an amount per delivery.
- The program directed Mr Franco to undertake work at particular times and regularly make himself available for work.
- Although Deliveroo permitted Franco to delegate or subcontract, Commissioner Cambridge said there were “clear financial constraints” upon it as his remuneration “would be unlikely to cover payment of the national minimum wage to any delegate”.
- He noted also that Deliveroo provided branded equipment but paid per delivery by generating a templated invoice and did not deduct tax or pay leave entitlements.
What does this mean for you?
This decision means that employees may be currently misclassified as independent contractors under supplier agreements (or similar instruments). Although the terms of a supplier agreement may go to significant lengths to establish a relationship of principal and independent contractor, there are other factors that must be considered to determine the true nature of the relationship between parties. In this case, the FWC determined that despite being labelled as an independent contractor under the agreement Mr Franco was in fact an employee.
This case clearly demonstrates that even contracts which expressly provide for independent contractor and principal, and that the relationship is not that of employment, may be vulnerable to misclassification of employment.
If you have any questions relating to employment classification, please do not hesitate to contact Nick Stevens, Luke Maroney, or Daphne Klianis.
