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By Bayside Group

Nov 27, 2018

Gig economy delivered warning as FWC rules on Foodora unfair dismissal case

Food delivery company Foodora, a gig economy platform which has since entered voluntary administration, was found to have unfairly dismissed a delivery rider who queried the company’s pay and conditions for Foodora riders on television.

With the backing of the Transport Workers Union of Australia (TWU), the rider filed a claim for unfair dismissal, alleging Foodora terminated his contract via email. Within days of his television appearance, Foodora emailed the rider to allege that he was “potentially breaching confidentiality and intellectual property rights” and terminated the contract.

The matter was heard by Commissioner Ian Cambridge who found the decision to terminate “without any proper, prior warning, was plainly unjust, manifestly unreasonable, and unnecessarily harsh.” The fact the rider was dismissed via email, in addition to not getting the opportunity to be heard before the decision to terminate his contract was made, also significantly helped establish the unfair dismissal claim.

Commissioner Cambridge considered the argument put forward by Foodora that the rider was in fact an independent contractor but dismissed such arguments largely due to the high degree of control Foodora held over its riders. Other factors that were noted were that the start/finish times of shifts were regulated by Foodora, the fact a rider wears a Foodora uniform displaying Foodora branding and that the service contract was remarkably similar to an employment contract.

The control Foodora exercised over its riders was clearly evident through its use of a “batch system”, which gave its best performing riders (Batch 1 – the top 10%) a greater choice of when they wish to work in the next roster whilst simultaneously punishing the remainder (particularly the bottom 40%) by giving the higher batches up to 48 hours extra notice thereby leaving those the others with the last pick of shift times. This created a competitive hierarchical system designed to keep riders motivated by relegating the least attractive times/locations to the lowest batches.

The Commission awarded compensation to the former rider in the amount $15,559. In addition to this action, Foodora also continues to be pursued by the ATO and Revenue offices for denied superannuation and the FWO for both underpayment and sham contracting claims.

 

Key issues to consider: 

Businesses within the ‘gig economy’ have relied upon being able to classify those who perform work for them as either independent contractors or digital platform users/partners. In this case, the merits of the unfair dismissal claim have been upheld in a first for an Australian court or tribunal. It therefore raises questions about the future of labour use via a gig platform and whether more claims of sham contracting and misclassification will arise in the future. For organisations that are seeking to utilise gig platforms, a decision such as this should also give rise to questions surrounding accessorial liability and third party employment liabilities should it be found that platform workers are employees and they have been the subject of prejudicial action in the workplace.

Want to learn more about sham contracting? Click here to download our Independent Contracting White Paper.

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