This month’s Employment Update looks at the recent unfair dismissal decision of the Fair Work Commission (‘Commission’), Diego Franco v Deliveroo Australia Pty Ltd [2021] FWC 2818 (18 May 2021) (‘Deliveroo decision’).

In this decision, the Commission concluded that delivery services provided by a Deliveroo delivery rider and arranged by computer-based applications (Apps), constituted an employment relationship, and not an independent contracting arrangement.

After considering common law principles, Commissioner Cambridge determined that the “overall picture”, whilst “impressionistic and not precise” provided a “compelling conclusion” that the relationship between the delivery rider and Deliveroo looked more like an employment relationship than an independent contractor arrangement.  Having found the existence of an employment relationship, the Commissioner then went on to determine the employee’s termination “by way of email communication and without any proper, prior warning, was unjust, unreasonable, and unnecessarily harsh.”

Background

The Sydney-based delivery rider applied online to provide services to Deliveroo.  After completing an online quiz and providing further details, the delivery rider was provided with a link to set up a personal Deliveroo delivery rider account.   Prior to providing delivery services, the delivery rider electronically signed a Supplier Agreement (2017) and attended an onboarding session at Deliveroo’s premises in Darlinghurst, Sydney.

Deliveroo offered the delivery rider branded clothing and related equipment, which was not compulsory, but which required the payment of a $220 bond.  The delivery rider accepted that offer.

From April 2018, the delivery rider undertook supplementary delivery services for other delivery service providers.  The delivery rider performed the delivery services using his own motorcycles, that were more generally used for his private transportation and that of his family.

Throughout the period of engagement, the rider was required to sign different Supply Agreements which had the effect of fundamentally restructuring the nature of the offer and acceptance of delivery services.  For example, the delivery driver was originally free to log on or off the App and provide services at his discretion.  A later version of the Supply Agreement then required that the delivery rider nominate availability for set timeslots, with higher rated delivery riders having enhanced rights to nominate availability.

After three years, the Sydney-based rider’s Supplier Agreement was terminated by email providing one week’s notice based on “failing to deliver orders in a reasonable time”, which was alleged to be in breach of the Supplier Agreement.

Independent Contractor v Employee

The delivery rider made a claim for unfair dismissal.  Deliveroo opposed the delivery rider’s claim for unfair dismissal on the basis the rider was not protected from unfair dismissal because he was not an employee.

Commissioner Cambridge noted that the independent contractor versus employee argument was difficult as previous Full Federal Court judgments and decisions of the Commission have delivered “vagaries of the application of the common law upon the question of the ordinary meaning of an employee”.

The Multifactorial Test (Overall Picture and the Binary Outcome)

The Commission acknowledged that the common law approach requires the assessment of a multifactorial test, which means that consideration must be given to various factors, but no single factor is to be decisive.  Commissioner Cambridge stated that there is an “overriding requirement for examination of the totality of the relationship between the Parties so as to ultimately provide a sound basis upon which to determine whether the relationship was one of employment or independent contractor.”

The key factors that were considered by the Commission are outlined below.

Control

Deliveroo claimed the company had no control over when the delivery rider worked.  The delivery rider could log on to the Deliveroo Rider App and choose location, time, duration and whether to accept deliveries (without apparent consequences).

On detailed examination, the Commission noted that the freedoms asserted by Deliveroo were not accurate, as most of the work performed by the rider was under the engagement system (booking timeslots).  The Commission considered that the computerised platform used by Deliveroo, provided “an extraordinary vast repository of data relating to the performance and activities of those individuals who perform work” and that data could be used to control those who perform the work.  Commissioner Cambridge concluded that the superficial appearance of “no control”, was in fact a significantly “camouflaged” capacity to control.

The Commission also rejected Deliveroo’s assertion that the capacity to terminate the 2019 Supplier Agreement based on poor performance was not control.  The Commission was satisfied that “control” was illustrated by the number of emails the delivery rider received from Deliveroo concerning performance and quality standards (although not disciplinary in nature).

Work Performed for Competitors (Multi-Apping)

Commissioner Cambridge pointed out that “traditional arrangements for the performance of work would not have envisaged simultaneous employment for two or more employers, and in many instances the physical performance of work would continue to prevent simultaneous employment occurring”, but “multi-apping is an example of the phenomenon of change that new technology is bringing to the traditional arrangement for employment”.

For this reason, despite Deliveroo providing express permission for the delivery rider to work for competitors and engage in multi-apping, the Commission concluded that this did not prevent the “existence of an employment relationships”.

Supplier Agreements – fait accompli

Deliveroo argued that the Supplier Agreements established an independent contractor arrangement.  The Commission noted that the agreement contained provisions in both “form” and “substance” that resembled employment contract provisions:

• Provision of services with due care, skill and ability
• Comply with all applicable work-related health and safety legislation and guidelines
• Equipment to be used for food transport to meet Deliveroo safety standards
• Deliveroo to obtain and maintain workers compensation insurance (relevant State or Territory)

Of importance was also the fact that the delivery rider had “no capacity to negotiate any of the terms of the supply/supplier agreements” and the agreements were presented as a fait accompli (completed before queried).

Commissioner Cambridge concluded that the supply/supplier agreements were important, however they must be treated with caution.  The Commissioner referred to the United Kingdom Supreme Court decision of Autoclenz v Belcher, which stated “the true nature of a work contract, as distinct from commercial contracts, often involves inequity of bargaining power, where the organisation offering the work is in a position to dictate the terms of the paction of a “take-it-or-leave-it” basis”.

Personal Services

The Commission considered that despite the fact the Supplier Agreement authorised the delivery rider to “delegate” or “sub-contract” which may be inconsistent with an employment relationship, such authority did not prevent an employment relationship.  Commissioner Cambridge reasoned that a casual employee unable or unwilling to work, may be authorised by the employer to find a replacement, for example by swapping shifts.

Presentation as Part of the Business

Commissioner Cambridge concluded while clothes and equipment displaying the Deliveroo brand was optional, the delivery rider was “clearly encouraged to present himself to the world as part of the Deliveroo business”.

Mode of Remuneration

The delivery rider was paid per delivery by invoice.  However, upon examination, the Commission noted that Deliveroo generated a template invoice for the rider and that Deliveroo had access to all the data (recorded times) via the Deliveroo Rider App.

Taxation

The delivery rider was responsible for taxation and all the costs involved in maintaining motorcycles and business expenses.

Holiday and Sick Leave

The deliver rider was not provided with leave entitlements.

Distinct Profession or Trade

The Commission found that the work carried out by the delivery rider did not involve an established profession or trade, but also noted that low skill work does not necessarily prevent the finding of there being an independent business.

An Entrepreneurial Business with Potential Goodwill

The Commission rejected Deliveroo’s argument that the delivery rider conducted his own business because there was “no prospect for [the delivery rider] to have developed any goodwill or tangible value that could be attached to any asset that arose from the work that he was conducting as a food delivery rider”.

Conclusion – Employee

Commissioner Cambridge, after careful examination, evaluation and balancing of the factors determined the delivery rider to be an employee.

No Valid Reason for Dismissal

The Commission found that the delivery driver was not provided with any information about delivery time expectations, and furthermore, that his failure to meet expectations would result in termination.  On this basis, the Commission concluded that there was not a valid reason for dismissal.

Notification of Reason for Dismissal

The delivery rider was dismissed and provided 7 days’ notice of termination by email.   The Commissioner reiterated the Commission’s stance that terminations should be carried out “personally” and with “basic human dignity”.  Commissioner Cambridge stated, “access that digital platform businesses have to extensive quantities of data and which provide the capacity for detailed examination of performance metrics, should not translate into a license to treat individuals, whether they be employees or contractors, without a level of fundamental, human compassion”.

Remedy – Reinstatement

The delivery rider sought reinstatement and despite the delivery rider publicly criticising Deliveroo by participating in the Transport Workers Union “gig worker” campaign, the Commission considered the rider “had every justification for being aggrieved by the callous and perfunctory termination of his services, and any criticism of Deliveroo’s conduct was understandable”.

The Commission considered that restoration of the employment relationship was possible given the nature of Deliveroo’s business, where the delivery rider is not subject to day-to-day Deliveroo management or supervision.  Deliveroo supported the Commission’s finding saying “there has not been a genuine loss of trust and confidence such that the employment relationship could not be successfully and harmoniously re-established”.

In addition to reinstatement, the Commission ordered continuity of service without loss of pay.

Lessons for Employers

The Deliveroo decision reinforces the importance of properly assessing relevant factors to determine the status of an engagement, and whether a worker is an employee or independent contractor.

Importantly, regardless of the type of engagement, the Commission reminded businesses to treat people with “human compassion”.  As the world digitalises, employers are reminded that important communications such as communicating the termination of an employee’s employment should be done face to face wherever possible.  Employers should seek legal advice about terminating by other means, and before making that decision, as the Fair Work Commission has been scathing of employers who have terminated employees by electronic means, such as text message or email.

The Deliveroo decision highlights the impact technology is having on terms of engagement in Australian workplaces.  ‘Multi-apping’ technology now paves the way for workers to be potentially engaged by more than one entity simultaneously, and to be considered employees of each entity.  It has never been more important to take advice in relation to the status of your present or intended contracting  arrangements, particularly for sole trader arrangements, but also for all intended independent contracting arrangements.