Thinking | 17 June 2019

FWO finds Uber drivers are not employees

On 7 June 2019, the Fair Work Ombudsman (FWO) announced that it would not pursue Uber Australia Pty Ltd (Uber Australia) for employee entitlements after finding that Uber drivers are independent contractors and not employees of Uber Australia.

During its two year investigation into whether Uber Australia was carrying on a regime of ‘sham contracting,’ FWO investigators examined documents such as the drivers’ contracts, log on log off records, ABN documents, payment statements, banking records and pricing schedules. It also conducted various interviews with Uber drivers and Uber Australia.

In concluding that the Uber drivers are not employees, FWO Sandra Parker stated that:

For such a relationship to exist, the courts have determined that there must be, at a minimum, an obligation for an employee to perform work when it is demanded by the employer… Uber Australia does not require drivers to perform work at particular times and this was a key factor in our assessment that the commercial arrangement between the company and the drivers does not amount to an employment relationship.¹

The outcome of the FWO’s investigation is consistent with the recent decisions of the Fair Work Commission (FWC) in Kaseris v Rasier Pacific V.O.F² and Pallage v Rasier Pacific Pty Ltd³ where the FWC found that Uber drivers were independent contractors and not employees of Uber Australia.

There is no doubt that the FWO confirming the employment status of its drivers is a positive result for Uber Australia.

However, the FWO stressed that its investigation related to Uber Australia specifically and not the gig economy more generally. The FWO will continue to assess allegations of non-compliance on a case by case basis. This means that, to a degree, uncertainty remains for other operators in the gig economy.

This uncertainty was recently demonstrated by the FWC’s November 2018 decision of Klooger v Foodora Australia Pty Ltd⁴ (you can access our update on that case here) in which the FWC determined that a delivery rider engaged by Foodora as an independent contractor was in fact an employee.

Implications for employers

The FWO’s decision and the decisions of the FWC demonstrate the significant challenges facing the gig economy - an industry in which regulation is attempting to catch up with rapidly evolving business models.

With various enquiries into the gig economy underway, and States such as Victoria legislating to further regulate owner-driver businesses, the industry is becoming ever more complex. It also means that it is unlikely we have heard the last of the independent contractor v employee issue.

This is particularly the case with the union movement focused on protecting its members within the industry. The National Secretary of the Transport Workers’ Union, Michael Kaine recently commented that the FWO’s decision not to pursue Uber Australia is “devastating for workers in the gig economy.”

Even though the Uber decision is focused on the gig economy, there are lessons for all businesses who engage independent contractors. Most importantly, that each arrangement will turn on its own unique set of facts.

It is therefore imperative that businesses adopt a pro-active approach when engaging independent contractors to determine that those workers are in fact ‘genuine’ independent contractors and that business arrangements support the independent contractor model.

Also, where the cost of ‘getting it wrong’ is so high, not just with respect to employment entitlements but also with respect to tax and superannuation, it is incumbent upon businesses not to ‘set and forget’. Adopting a proactive approach to monitoring and reviewing independent contractor arrangements will help businesses navigate ever complex laws and minimise their exposure to potential claims.

¹Fair Work Ombudsman Media Release: ‘Uber Australia investigation finalised’, 7 June 2019
²[2017] FWC 6610
³[2018] FWC 2579
⁴[2018] FWC 6836