Yesterday's decision by the Full Bench of the FWC in Deliveroo Australia Pty Ltd v Diego Franco [2022] FWCFB 156 (in relation to which we acted for Deliveroo), is the most recent example of the application of the new approach to determining whether workers are employees or contractors adopted by a majority of the High Court in Personnel Contracting and Jamsek earlier this year. It is also the most significant decision to date applying this new approach to the characterisation of workers operating in the gig economy. Accordingly, the conclusion by the Full Bench that the relevant delivery rider, Mr Franco, was correctly characterised as an independent contractor (and the associated reasoning) provides useful guidance to organisations in relation to the factors which are likely to be significant for the purpose of characterising relevant workers moving forward.
Application of principles from Personnel Contracting and Jamsek
The Full Bench confirmed that the approach adopted by the majority of the High Court in Personnel Contracting and Jamsek meant that it was required to focus on the contractual rights and obligations of the parties under Deliveroo's Supplier Agreement (Supplier Agreement) rather than undertaking a broader assessment of how the relationship between Deliveroo and Mr Franco operated in practice (as had been permitted under the traditional 'multi-factorial' test applied prior to the recent High Court decisions).
Critical / decisive factors resulting in characterisation as contractor
In assessing these contractual obligations, the Full Bench undertook a detailed analysis of the relevance of various clauses in the Supplier Agreement and ultimately identified four aspects of the Supplier Agreement which it considered weighed decisively in favour of the conclusion that Mr Franco was engaged as an independent contractor. These four critical matters were:
- The lack of control by Deliveroo over the manner of performance of any work which Mr Franco agreed to undertake. In this respect, when Mr Franco did elect to provide services, he exercised a substantial degree of discretion in relation to the performance of those services. Amongst other things, this discretion extended to the type of vehicle and other equipment used and the route taken when performing deliveries.
- The requirement to provide, at his expense, the vehicle used to make deliveries which, because the Supplier Agreement allowed this vehicle to be something other than a bicycle, could have involved Mr Franco providing a 'substantial item of mechanical equipment' (albeit that the Full Bench concluded that, in practice, this was not the case for Mr Franco who primarily used a motorcycle which cost him around $1,500).
- The absence of a requirement to provide the services personally. The Supplier Agreement provided Mr Franco with an almost unfettered right to delegate the performance of relevant services.
- The requirement to pay an administrative fee for access to Deliveroo's software and for Deliveroo providing Mr Franco the service of rendering invoices and other administrative services.
Other factors indicative of contractor relationship
In addition to the matters identified above, the Full Bench identified that the capacity for Mr Franco to determine whether, when and where to log into the Deliveroo platform was a factor which weighed in favour of him being characterised as a contractor, but was not determinative. In this respect, the Full Bench acknowledged that in the case of casual employment, the employer generally had control over the parameters of the work offered to its casual employees in the sense that it could offer work at a particular time and place, and the employee was then free to accept or reject the offer at their discretion. However, under the Supplier Agreement, it was Mr Franco who, to some extent, controlled the parameters within which Deliveroo could offer him work by determining when and where he logged into the Deliveroo platform.
Distinction between performance standards and control
It is broadly accepted that the existence of a contractual right to control the activities of a worker (including how, where and when work is done) is a strong indicator of an employment relationship. However, the Full Bench drew an important distinction between requirements to meet certain 'performance standards' when performing services and the existence of capacity to control the way in which services are performed.
For example, in this case, the Full Bench considered the requirements imposed on Mr Franco under the Supplier Agreement to make deliveries within a reasonable time period, to act professionally or courteously when dealing with others, and to provide services with due care, skill and ability each simply constituted performance standards which were entirely consistent with an independent contractor arrangement and did not amount to a right of control.
Matters considered to be irrelevant or to be given little weight
In assessing the balance of the Supplier Agreement, the Full Bench also usefully identified a number of factors which it considered to be irrelevant or which should be given little weight for the purpose of characterising the relationship between Deliveroo and Mr Franco. In addition to the way in which the relationship operated in practice (in relation to which the Full Bench indicated it was required to 'close its eyes'), these matters included:
- terms which 'label' or 'describe' the nature of the relationship rather than establishing substantive contractual rights or obligations;
- provisions which are merely consequential of the parties' labelling of the relationship (e.g. arrangements regarding taxation, leave, superannuation and insurance);
- requirements to comply with safety standards and / or applicable laws – which were considered to be equally apt to apply to both employees and contractors;
- the capacity to use GPS technology to track the performance of deliveries – which the Supplier Agreement expressly stated was for the purpose of allowing customers to track the progress of their deliveries (i.e. not to direct / control performance of work); and
- the capacity to terminate the Supplier Agreement in certain circumstances (including breaches of the agreement) – which was considered to be an entirely unexceptional provision for the termination of a commercial contract.
The Full Bench also indicated that little weight should be given to the fact that Mr Franco had the right to accept or reject work which was offered to him. In adopting this approach, the Full Bench departed from the reasoning of a previous Full Bench in Gupta v Porter Pacific Pty Ltd [2020] FWCFB 1698 that concluded a similar capacity to accept or reject offers while logged into the Uber Eats platform was one of three critical matters which resulted in the worker in that case being characterised as an independent contractor.
The Full Bench indicated that this departure was now necessary given the observation in the judgment of the plurality in Personnel Contracting that the right to accept or reject work which is offered may be indicative of casual employment. However, we anticipate that this approach is likely to be the subject of further debate in the future as it fails to take into account the unique context of workers operating on platforms in the gig economy. For example, once a casual employee agrees to perform work, they are required to work at the direction and control of the employer for the duration of the agreed period of work. This is fundamentally different to the arrangements that typically apply to workers performing services through platforms such as Deliveroo and Uber Eats (as described in the various cases determined by Courts and Tribunals to date), who are able to log in and out of the platforms at their leisure and determine whether to accept or reject work while they are logged into the platform.
Again having regard to the judgment of the plurality in Personnel Contracting, the Full Bench indicated that the right to work for other parties, including competitors was not determinative because it was not inconsistent with casual employment. While this is undoubtedly true as a general proposition, Deliveroo argued that the unique capacity for workers operating on platforms such as Deliveroo to work for competitors simultaneously (by delivering meals for two or more different companies in the same vehicle at the same time) was indicative of a contractor relationship and that the concept of simultaneous employment was inherently problematic.
The Full Bench did not need to deal with this issue in any substantive sense as it concluded that the capacity to work for competitors simultaneously was not apparent from the provisions of the Supplier Agreement and impermissibly relied on evidence regarding the operation of the relationship in practice. Therefore, it remains to be seen whether there might be a different conclusion in relation to this factor if the agreement under which workers are engaged expressly acknowledges the capacity to work for competitors simultaneously.
Rejection of argument that some or all of Supplier Agreement was a 'sham'
In addition to the unsuccessful submission that the rights and obligations established under the Supplier Agreement demonstrated the existence of an employment relationship, Mr Franco made an alternative submission that some or all of the provisions in the Supplier Agreement were a 'sham' – which was one of the limited exceptions identified by the majority of the High Court in Personnel Contracting and Jamsek to the general primacy of the written contract. If Mr Franco had been successful in establishing the existence of a 'sham', this would have justified the Full Bench looking beyond the terms of the written contract for the purpose of characterising the relationship between Deliveroo and Mr Franco.
In assessing this submission, the Full Bench adopted the well understood meaning of 'sham' that is applied by Courts in other contexts – being 'steps which take the form of a legally effective transaction but which the parties [mutually] intend should not have the apparent, or any, legal consequences'. Having clarified the approach to be adopted in relation to alleged 'shams', the Full Bench went on to reject the submission that any provisions in the Supplier Agreement were a sham because there was an absence of the requisite mutual intention.
Appeal upheld
The consequence of the conclusions outlined above was that Mr Franco was found to have been engaged by Deliveroo as an independent contractor and, therefore, the FWC had no jurisdiction to entertain his unfair dismissal application. Accordingly, the Full Bench upheld Deliveroo's appeal, quashed the initial decision of Commissioner Cambridge (which has included a finding that Mr Franco was an employee) and dismissed Mr Franco's unfair dismissal application.
Anticipated legislative change
The Full Bench's decision is an important development in providing organisations, particularly those operating in the gig economy, with greater certainty and confidence regarding their capacity to continue to engage certain workers as independent contractors. However, it is far from the end of the matter.
For some time now, judges and members of the FWC have, when determining matters regarding the characterisation of workers in the gig economy, identified the limitations associated with applying traditional concepts of employment to workers in this emerging industry. In doing so, they have commonly referred to the potential for these limitations to be addressed by the legislature updating the legislative framework to refine traditional notions of employment or broaden protection to participants in the gig economy.
With a new federal government now in place, some form of legislative change appears almost inevitable. A key component of the ALP's Secure Australian Jobs Plan is the extension of the FWC's powers to deal with "employee-like" forms of work – including the setting of minimum standards for new forms of work such as gig work. The recently released issues paper for the Jobs and Skills Summit that will be held in early September indicates that these matters will be further canvassed in that forum.
This combination of the recent High Court and Full Bench decisions, with the anticipated legislative reform, means that we are likely to see a change in the narrative regarding the regulation of workers in the gig economy. As a Deliveroo spokesperson said following its receipt of the Full Bench decision 'it’s time now to move on from the topic of status and instead look at developing the right national reform framework to allow us to give riders the security and benefits they deserve alongside the unprecedented freedoms that on-demand work offers'.
Ultimately, the decision of the Full Bench is a further reminder of the need for organisations to ensure that contractors are engaged under carefully drafted contracts which incorporate the key contractual rights and obligations identified by the High Court, and now the Full Bench, as being indicative of an independent contractor relationship.
Organisations that engage independent contractors should now carefully review – and, where relevant, update – the terms of their written agreements to ensure that those agreements actually give effect to an independent contractor relationship. They will, of course, also need to be prepared to adapt relevant arrangements to meet any new requirements following the implementation of anticipated legislative reform.