Deliveroo rider deemed an employee by Fair Work Commission

The recent decision of Diego Franco v Deliveroo Australia Pty Ltd [2021] FWC 2818 by the Fair Work Commission found that a Deliveroo rider was an employee. This will be a relevant and important decision for many employers and employees.

Commissioner Cambridge of the Fair Work Commission was asked to decide whether the Applicant was an employee of Deliveroo Australia Pty Ltd (Deliveroo) for the purposes of his unfair dismissal application.

The Applicant said that he was dismissed by Deliveroo with effect on 30 April 2020. Deliveroo responded that the Applicant was an independent contractor, not an employee, and that the Applicant was not dismissed.

Background

The Applicant submitted an online application to provide services for Deliveroo which stated he owned a motorcycle and after successful completion of an online quiz, signed a Deliveroo supply agreement on 18 April 2017.

The Applicant commenced providing services for Deliveroo on 22 April 2017 and continued to regularly perform delivery services until his services were terminated with effect on 20 April 2020.

Deliveroo provided training to the Applicant including how to use the Deliveroo Rider App, where services could be performed, and requirements in respect of safe operation.

Deliveroo provided the Applicant with Deliveroo branded clothing and related equipment for a bond of $220 which was deducted by way of four $55 fortnightly instalments.

The Applicant owned and used his own motorcycles to provide the services. He also used his motorcycles for personal transportation.

The Applicant also performed what the Commissioner described as “supplementary delivery work” for Uber Eats from 6 April 2018 and for Door Dash from March 2020.

The supplier agreements between the Applicant and Deliveroo stipulated that:

• the Applicant was a supplier of business on his own account;
• was free to provide the services personally or through a delegate;
• was not obligated to do any work for Deliveroo;
• was free to choose when and where he worked;
• was free to work for any third party including competitors;
• was required to use his own mobile phone and vehicle for the purposes of providing the services.

A 2019 supplier agreement also required the Applicant to pay a fee for administrative services from Deliveroo such as preparation of invoices, to provide the services efficiently and safely, and to be responsible for his own tax and insurance. However, Deliveroo did provide certain insurance cover.

The Termination

Deliveroo identified four separate occasions over four years in which the Applicant had been marked as having stated an order was delivered where it was not received by a customer.

On 3 February 2020, Deliveroo’s weekly analysis of the average rider experience time and the actual rider experience time identified that the Applicant’s average delivery times for the previous two weeks were between 10 and 30% slower than comparable riders. Deliveroo sent an email to the Applicant warning him his supplier agreement may be terminated due to these delays.

In April 2020, Deliveroo undertook a review of rider accounts which were associated with customer complaints and identified the Applicant as having significantly delayed delivery times. Deliveroo therefore made the decision to terminate their supplier agreement with the Applicant.

Consideration of whether the Applicant was an employee

The Commission considered the “Overall Picture” of the Applicant’s relationship with Deliveroo in order to determinate whether he could be considered an employee and found that when properly considering the overall picture, the Applicant was an employee. The level of control Deliveroo had over the Applicant was said to be a very important factor in this determination.

The consideration of the various factors which can determine whether an employment relationship exists was as follows:

Control

An important factor in this decision was the factor of control and how much control Deliveroo had over the Applicant.

The Commission acknowledged that the Applicant was in effect free to work when he wanted to work, continue working for whatever period of time he decided, and to choose not to complete particular work or unassign from a delivery. However, the Commission found that despite the “appearance of the apparent freedoms that were provided”, Deliveroo had an extraordinarily high level of control of the Applicant.

The Deliveroo application (app) provided preferential treatment to riders who booked in to ride at desirable times and desirable booking times were provided to riders who met performance metrics determined by Deliveroo such as attendance rate, number of late cancellations, and the rider’s preparedness to work at times of peak demand.

Accordingly, the Commission found that while it appeared that the Applicant had the freedom to decide when he worked, in practice the Applicant was compelled to undertake work at particular times of peak demand. Even though Deliveroo had changed its practices throughout the time the Applicant worked for them and at certain times exercised lesser amounts of control, the important factor was that Deliveroo could exercise this control if it chose to.

The other performance metrics which Deliveroo tracked and used in different ways provided Deliveroo with the ability to exercise a high level of control over engagement and performance of the work of its riders.

Ability to work for competitors

Deliveroo emphasised the Applicant’s ability to work for other competitors simultaneously as going against the existence of an employment relationship. The Commission found that in modern times and the prevalence of remote working, this could not prevent the existence of an employment relationship.

Contract terms

The supplier agreements between Deliveroo and the Applicant were said to go to some lengths to establish a relationship of principal and independent contractor. However because Deliveroo was a dominant party and determined the terms of the contract unilaterally, the contracts were not determinative in and of themselves.

Provision of equipment

While the Applicant was required to have his own smartphone and motorcycle for his work with Deliveroo, the Commission stated that it is likely that he would have required a smartphone and vehicle for his own personal use in any event. Therefore, there was no large outlay of capital or investment by the Applicant to complete the work.

Additionally, there is not a high degree of skill or training required to use or operate a vehicle in the performance of the work.

Ability to delegate the work

While the Applicant was expressly permitted to delegate the work, he did not do so and the Commission found that there were clear financial constraints against the Applicant being able to hire any employees to delegate to.

Accordingly, while the capacity to delegate the work was an indicator of an absence of an employment relationship, the Commission found it did not prevent an employment relationship from existing.

Presentation as part of the business

The Commission found that Deliveroo established an expectation that the Applicant would wear Deliveroo branded attire and utilise equipment displaying the Deliveroo logo. He was found to be encouraged to present himself as being a part of the Deliveroo business even if he was not expressly required to do so and this was indicative of him being an employee.

Mode of remuneration

Deliveroo generated an invoice template from the rider app based on the recorded time and date for each delivery and produced the invoices upon which the Applicant was paid.

Taxation

Deliveroo did not deduct income tax from the Applicant and the Applicant was responsible for all costs associated with maintaining his vehicle and he claimed these expenses as business deductions on his income tax return. The Commission found that this is a factor that points towards the Applicant being an independent contractor.

Distinct trade or profession

The Applicant’s work did not involve any established skills or trades. It was not a distinct profession. However, low skilled work is not necessarily preventative of a finding that the worker is an independent contractor.

Business goodwill

The Commission found that there was no ability for the Applicant to develop any goodwill or tangible value in relation to his work as a food delivery rider that could be considered an indication of the existence of his own entrepreneurial business.

Recent decisions in the United Kingdom

The Commission considered recent decisions of the United Kingdom Supreme Court in coming to its decision. It was found that the decisions confirmed that the engagement of workers to provide services for digital companies had been challenging to traditional ideas of employment however they referred to a very different statutory regime from that which exists in Australia. Ultimately, the decision was reached applying the precedents which relate to the Australian statutory regime.

Unfair dismissal

Having found that the Applicant was an employee, the Commission then went on to consider whether his dismissal was harsh, unjust or unreasonable.

The Commission found the following:

1. The Applicant was not provided with any clear expectation of actual delivery times he was required to meet and his slower than average delivery times were therefore not a valid reason for dismissal relating to his conduct.
2. Due to the gravity of the communication, the Applicant should have had his dismissal conveyed to him personally rather than via email.
3. The Applicant was not provided with any opportunity to respond to or provide any explanation for the slowness of his delivery times.
4. The Applicant was not provided with the opportunity to bring a support person to any meeting discussing his potential termination because there was no meeting.
5. Due to the fact that no actual delivery time expectations were provided to the Applicant, he was not sufficiently warned of his unsatisfactory performance.
6. Deliveroo is not a small business and therefore has sufficient capacity to adopt more professional employment related procedures and it also had the internal expertise to adopt such procedures.

Remedy

The Applicant sought reinstatement and coverage of lost wages as a remedy.

The Commission found that in the circumstances given the lack of interaction required between the Applicant and Deliveroo, reinstatement would be an appropriate remedy.

The Applicant’s employment with Deliveroo was therefore reinstated and Deliveroo was ordered to pay him for the period in which he was not employed.

Conclusion

This is an interesting decision which may be appealed.

It shows the importance of considering the overall picture when determining whether a person providing services is an independent contractor or an employee and that control over the delivery of the services is a crucial factor.

If you hire independent contractors, we strongly recommend obtaining legal advice regarding your relationship and what obligations you may have. Similarly, if you are an independent contractor you may have reason to consider your entitlements. We invite you to contact Alexandra Vrdoljak or one of our other experienced lawyers to discuss.