Foodora NoMora – implications for the gig economy

Key Points
  • Scrutiny of the nature of engagement of delivery riders likely to heighten in light of test cases being put on permanent hold.
  • This will have implications for the gig economy generally.
  • Legislative reform likely.

Two sets of proceedings involving food delivery company Foodora have been put on hold with the appointment of voluntary administrators to the company. These cases, if determined, could have had big implications for the gig economy.

In the first set of proceedings a bicycle courier (backed by the TWU) was seeking to convince the FWC that he was an employee rather than an independent contractor[1] of Foodora, and therefore entitled to bring unfair dismissal proceedings.

The courier claims that his pay starting at a rate of $14 an hour + $5 a delivery (February 2016), was reduced over time to $13 an hour + $3 a delivery (July 2016), falling again to $7 a delivery (February 2018). It is alleged he was dismissed for raising IR issues with the company failing to afford procedural fairness.

In concurrent proceedings brought by the Fair Work Ombudsman, the Ombudsman was prosecuting the company for alleged sham contracting and underpayments[2].

In both cases the multi-factor test was relied upon to argue that Foodora couriers were in fact employees. The reasons for arguing the couriers were employees included:

  • the level of control, supervision and directions Foodora exercised over the workers;
  • the requirement for the workers to wear Foodora branded clothing and use storage boxes provided by Foodora;
  • Foodora paying the workers fixed hourly rates and/or amounts per delivery and the workers not negotiating their rates of pay; and
  • each of the workers were not genuinely conducting their own businesses (not promoting themselves, their availability, not delegating their duties and not having their own customer base, business premises or insurance).

The Fair Work Ombudsman alleges these workers were entitled to receive the minimum wage rates and entitlements that applied to their positions under the Fast Food Industry Award 2010.

With the appointment of voluntary administrators to the company and its plans to exit the Australian market these proceedings have been permanently stayed.

Separately the Australian Tax Office and Revenue NSW have come to the conclusion that Foodora Australia Pty Ltd couriers were employees, not contractors. The ATO’s decision, based on an employee assurance audit which had commenced more than two years ago, appears to have been made in response to Foodora’s announcement of their withdrawal from the Australian market. The ATO has also advised the administrators of Foodora that they are in the process of raising an assessment for outstanding PAYG and superannuation for the period whilst Foodora was active in the Australian market together with penalties and interest. Revenue NSW has followed suit and notified Foodora that they were starting an investigation with respect to State taxes payable by the company.

Meanwhile the TWU has called for Foodora to be required to establish a fund to compensate riders for unpaid entitlements and wages before it exits the Australian market.

Implications: The commencement of these Fair Work proceedings and decisions by the ATO and Revenue NSW will likely have ramifications on other food delivery services including Uber Eats, Menulog, Deliveroo as well as other players in the gig economy generally.

The Parliamentary Inquiry into Corporate Avoidance of the Fair Work Act report (issued 6 September 2017) made numerous recommendations relating to legislative reform to better regulate the gig economy. These recommendations are yet to be acted upon but it is anticipated the pressure to do so will mount in light of the unfinished Foodora litigation.

Until there is a definitive decision by a Court or legislative reform it is likely that participants in the gig economy will review and adjust their business models to address the factors that have been relied upon to determine that their workers are employees rather than contractors.

With the FWO continuing to prioritise sham contracting investigations and prosecutions and the ATO stating it is reviewing the gig economy to confirm the tax and superannuation obligations for businesses and workers in the sector it is critically important that all business operators take care to ensure that they have categorised their workers correctly and taken steps to minimise the risk of exposure to unexpected liabilities.

[1] Klooger v Foodora Australia Pty Ltd, U2018/2625
[2] Fair Work Ombudsman v Foodora Australia Pty Ltd ACN 605 948 052, NSD999/2018

Post by Sarah Jones and Stephanie Horton 

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