By Dylan Steel (Partner) and Sarah Legoe (Solicitor)
From Uber to Ola, Uber Eats to Deliveroo along with Airtasker and the many other digital platforms now available, as consumers we have embraced the growth in the ‘gig economy’. At the same time however, it has raised the question as to whether people working in this space are employees or independent contractors. The Fair Work Commission (‘FWC’) has determined that, in Australia at least, these workers are independent contractors rather than employees.
The use of independent contractors is common and does not only arise in the context of the ‘gig economy’. But just when can a worker be classified as an independent contractor as opposed to an employee? As the recent FWC Decision of Gupta v Portier Pacific Pty Ltd; Uber Australia Pty Ltd  FWC 5008 (‘Uber Eats Case’) illustrates, this is not a simple question to answer.
This case concerned Mrs Gupta, a delivery driver for Uber Eats, who whilst required to provide, insure and maintain her own vehicle, was free to determine when and if she performed work. This is because she was free to determine when, if and how often she logged into the Uber Eats App (‘the App’). If she was logged into the App she was free to accept, reject or decline an available job. She was only paid on completion of a delivery; no delivery: no pay. When Mrs Gupta’s access to the App was blocked in accordance with the written agreement between Uber Eats and Mrs Gupta, she claimed she had been terminated and as such unfairly dismissed. Commissioner Hampton of the FWC, ultimately found on the evidence before him, that Mrs Gupta was an independent contractor and as such not protected from unfair dismissal.
As only employees are protected from unfair dismissal, the principle issue the FWC had to determine in this matter was whether Mrs Gupta was an employee of Uber Eats or whether she was deemed to be an independent contractor.
Determining the difference – the ‘multifactorial test’
This distinction is an important one to make as an employee has rights and protections provided for under the Fair Work Act 2009 (Cth) (‘the Act’), whereas as an independent contractor largely operates their own business does not attract those protections. However, as discussed in the Uber Eats Case there is no one single factor that can be used to distinguish one from the other. Rather, the facts and circumstances of a particular relationship need to be assessed against the long established ‘multifactorial test’.
It is not sufficient to refer simply to the terms of the contract between the parties. This may be an important factor, however it is not sufficient for the parties to call the relationship one of contractor and principal for it to be deemed such. Rather, what is required is an assessment of the objective character of the relationship. This is achieved by considering various indicia as set out in the table below, noting the list is not exhaustive, and weighing them against each other depending on the circumstances.
|Level of control over the manner in which work is performed||The more direction and control the employer exerts over the worker (ie as to how and when work is performed), the more likely the worker is to be deemed an employee.|
|Can work be performed for others||If the person is free to choose whether they work for others it is likely to weigh in favour of a contractor arrangement.|
|Responsibility for provision and maintenance of tools and equipment||An employee is usually provided with all the tools and equipment necessary to perform their role, whereas a contractor provides their own tools and equipment.|
|Can work be delegated or subcontracted||An employee must perform their services personally and cannot delegate or subcontract to others.|
|Is income tax deducted from payments made||An employer deducts income tax from payments made to an employee, a contractor is responsible for this themselves|
|Is paid annual and personal leave provided||A contractor is not entitled to paid annual or personal leave|
|Is the worker remunerated by reference to a wage or salary or completion of tasks||A contractor is usually paid by reference to a specific task or period of time as opposed to an employee who is paid a wage or salary in accordance with the hours they work.|
|Expectation of ongoing work||A contractor does not have an expectation of ongoing work after the completion of the particular task.|
|Is the worker required to wear a uniform||As an employee is presented to the world at large as an emanation of the employer's business, whereas a contractor operates as their own business, not that of their principal.|
As the Uber Eats Case illustrates, not all of the above indicia will be relevant, however in this case more weighed against there being an employment relationship than for. This included the fact Mrs Gupta had control over when she performed work and if she accepted work if it was made available, she provided her own equipment (other than an insulated bag provided by Uber Eats), could delegate work to others despite no formal agreement permitting such and was free to work for others at any time. Further, Commissioner Hampton held that the delivery fee did not equate to a wage or associated arrangement and so this too weighed against the finding of an employment relationship.
Why it is important to get it right
Incorrectly classifying employees as independent contractors can have dire consequences for your business. While the Uber Eats Case considered the distinction in the context of the unfair dismissal provisions, incorrectly classifying a worker can also expose a business to the following:
- Underpayment of wages claim (for example a claim for Award entitlements including penalty rates, overtime and allowances, annual leave, personal leave and more).
- A claim for redundancy pay.
- A claim to payment of long service leave, if applicable.
- Penalties for not meeting tax and super obligations.
- If the person is injured whilst at work, a claim for workers compensation.
- Penalties if the arrangement is found to be a sham contracting arrangement pursuant to section 357 of the Act.
It is therefore vital that prior to engagement consideration is given to what the person will be required to do and how they will go about doing so, taking into account the factors set out above.
Contact our Commercial Team for further information on any issues raised in this article or any employment related matter arising in your business.
Disclaimer: This Article provides a summary of the decision and subject matter only. the information contained within is not intended as advice, legal or otherwise, and should not be relied upon as such. Please contact us should you wish to discuss the subject matter of this article further or obtain professional advice on the same.
 Note: the Foodora business model was an exception to this (see Klooger v Foodore Australia Pty Ltd  FWC 6836).
 A Principal may be required to make superannuation payments on behalf of an independent contractor if the contractor works under a contract that is wholly and principally for that persons labour (see Superannuation Guarantee (Administration) Act 1992 (Cth) s 12(1)(3) (definition of ‘employee, employer’).
 Some Independent Contractors are deemed workers for the purposes of the Return to Work Act 2014 (SA).