Employee V Contractor – The Debate Rages On!

By James Sanders, Associate, MST Lawyers

Furthering the confusion of whether a worker is a Contractor or an Employee, the Fair Work Commission has recently determined that a Foodora delivery rider, who delegated his responsibilities to other delivery riders, was an Employee for the purpose of making an unfair dismissal claim.

This decision comes on the back of the Fair Work Commission’s previous determination that an Uber driver was a Contractor, and was therefore not entitled to make an unfair dismissal claim.

Summary

Joshua Klooger (Klooger) was a delivery rider for Foodora Australia Pty Ltd (Foodora) between 11 March 2016 and 2 March 2018 and subject to a signed contract titled ‘Independent Contractor Agreement’ (Agreement).

Throughout his engagement, Klooger, as is the case with most ‘gig economy’ workers, was provided delivery jobs by way of various computer-based applications that he accessed via his smart phone.

Prior to undertaking any work, Klooger would log onto a ‘shift app’ which allowed him to identify available shifts in particular geographical locations, and accept the most desirable shifts by way of the shift app.

At the commencement of each shift, Klooger would then obtain an insulated Foodora delivery box, and other branded Foodora attire and equipment.

Upon arriving at the pre-determined geographical location, Klooger would log onto a separate ‘delivery app’ where he would receive pickup and delivery notifications.

Two weeks after beginning his role of delivery rider, Klooger was promoted to ‘Rider Captain’ which involved assisting other riders in arranging shift swaps and dealing with minor administrative issues in addition to Klooger’s delivery responsibilities. Klooger received $100 per week for these additional tasks.

In November 2016, Klooger became a full-time Driver Manager and received a salary of $40,000, while continuing to undertake delivery work. Klooger stepped down from the Driver Manager role in March 2017 due to educational commitments.

From March 2017, until his termination in March 2018, Klooger worked as a delivery rider as he had before his role as a Driver Manager, but also undertook presentations to new riders, for which he received $20 per hour.

As a result of a new ‘batching’ or ‘ranking’ system introduced by Foodora in October 2017, Klooger became the administrator for a Melbourne-based rider/driver chat group through the ‘Telegram app’.

On 22 February 2018, Foodora wrote to Klooger raising concerns that he may be breaching confidentiality and intellectual property rights by maintaining and/or refusing to transfer ownership of the Telegram app chat to Foodora.

On 2 March 2018, Klooger was sent an email which advised that Klooger had not complied with the 22 February 2018 notification and therefore Foodora would not be continuing Klooger’s contract for services.

Sub-contracting

In October 2016, Klooger commenced a scheme where he would allow other riders to log onto his Foodora account, using his details, to allow them to undertake work. Klooger would then deduct 18% of the money received through the app for tax, and a further 1% for his involvement.

Importantly, one of the riders whom Klooger allowed to use his login details had been suspended from the Foodora app due to his Visa lapsing, and therefore his right to work in Australia.

Foodora became aware of Klooger’s scheme in September 2017, but took no action, despite the Agreement requiring written consent from Foodora for any sub-contracting by riders.

Hearing

Foodora initially raised a jurisdictional objection on the basis that Klooger was an independent contractor, not an employee.

Commissioner Cambridge of the Fair Work Commission subsequently sought submissions from both parties regarding the jurisdictional objection raised by Foodora and the merits of the unfair dismissal. A hearing was held on 3, 11 and 12 July 2018.

At the hearing, in addition to further submissions, Klooger’s representatives compared his work for Foodora to that of a bicycle courier and specifically referred to extracts from one of the leading employee vs independent contractor authorities, Hollis v Vabu.

Foodora responded by highlighting Klooger’s ability to delegate, or sub-contract, work to other riders (for which he received a financial benefit), and that Klooger (by allowing other riders to use his details) breached the fundamental requirement of an employment relationship, namely that the employee personally discharges the services.

Decision – Employee v Contractor

In applying the multi-factorial test, Commissioner Cambridge determined that the appropriate relationship between Klooger and Foodora was that of an employee-employer relationship.

The decision was based on a number of factors, including but not limited to:

  1. The nature of the work performed was that of a bicycle courier, and was performed in accordance with the shifts that were offered and selected via the shift app;
  2. Foodora had a considerable capacity to control the manner in which Klooger performed the work. It was noted that while the shifts were offered and accepted freely, Foodora set the start and finish times for the shifts, the geographical area in which the shift was to take place, and with the introduction of the new ‘batching’ or ‘ranking’ system, rewarded those workers who performed work at certain times;
  3. While Klooger delegated work to other riders; it was done in breach of the terms of the Agreement, ultimately with the approval of Foodora, which, in one instance, allowed for a rider to work in breach of Australian Visa requirements, for which Foodora was aware; and
  4. Klooger was presented to the world at large as an ‘emanation’ of Foodora’s business, as the Agreement required that Klooger would dress in Foodora branded attire, and use equipment displaying the livery of the Foodora brand.

Decision – Unfair Dismissal

Evidence was obtained during the process that showed that Klooger’s termination was not as a result of Klooger withholding the administration rights to the Telecom app discussion.

Rather an email chain between Foodora Managers showed that the substantive reason for Klooger’s termination was his conduct involving public agitation and raising complaints about the Foodora model, which culminated with an appearance on The Project.

As a result of this evidence, Commissioner Cambridge determined that the reason for Klooger’s dismissal was not one that was sound, defensible or well-founded and therefore there was no valid reason for dismissal.

Klooger was awarded the full 26-week entitlement under the Fair Work Act, with credit applied for income received after termination of his employment.

Conclusion

If Foodora appeals the decision of Commissioner Cambridge, MST Lawyers will update this article with further developments.

As this case demonstrates, the employee versus contractor question is never an easy one to answer, but nonetheless a question more relevant than ever in light of advancements in technology.  

If you have any doubts about whether your business engages contractors who may be employees, contact the MST Lawyers’ Employment Law team by email or call +61 3 8540 0200 for advice.