An employee or a contractor? A FWC landmark ruling

An employee or a contractor? The Fair Work Commission has made a decision in the case of a Deliveroo driver that has wide reaching significance for employers and workers.

In a decision highlighting the significance of the recent High Court decisions on the distinction between employees and independent contractors, a Full Bench of the Fair Work Commission has concluded that a delivery driver was not an employee of Deliveroo and therefore not eligible to pursue an unfair dismissal claim.

The Full Bench decision overturned an earlier decision of a single Commission member who had applied the ‘multifactorial test’ which was the relevant test at that time.

The ‘multifactorial test’ has evolved through a body of case law over the past three decades. It involved looking at the nature of the relationship between two parties and weighing up a range of factors before coming to a conclusion as to whether the relationship is one of employment, or principal and independent contractor.

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At first instance, it was found that Mr Franco had worked for Deliveroo for three years before receiving an email from the company indicating his “supplier agreement” would be terminated within the week due to slow deliveries, without any prior warning and without having an opportunity to respond. Franco subsequently filed an unfair dismissal application in the Fair Work Commission.

In applying the ‘multifactorial test’, the first instance Commission member looked at each element of the relationship between the parties and the degree of control exercised by Deliveroo and concluded that Franco was an employee. Deliveroo was ordered to reinstate Franco with backpay.

However, on appeal, the Full Bench noted that the ‘multifactorial test’ has now effectively been replaced with a new test as enunciated in the recent High Court decisions of Personnel Contracting and Jamsek.

Under the new High Court authorities, where a relationship is regulated by a contract which is wholly in writing, the assessment of whether the person is an employee or contractor must be determined solely by reference to the rights and obligations between the parties under that contract, and not by reference to any subsequent conduct during the course of the relationship.

Accordingly, the Full Bench observed that it was required to “close [its] eyes” to the factors that pointed to an employment relationship, including Deliveroo’s degree of control over Franco, and instead focus on the terms of the written contract. A proper examination of the contractual rights and obligations led the Full Bench to conclude that Franco was not an employee, and therefore his unfair dismissal claim was dismissed.

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The Full Bench did not hide their feelings about the outcome, closing out their judgment with the comment that: “Regrettably, this leaves Franco with no remedy he can obtain from the Fair Work Commission for what was, plainly in our view, unfair treatment on the part of Deliveroo”.

Key takeaways

This decision provides a good example of how the new test for determining whether someone is an employee or contractor can lead to very different outcomes, as well as highlighting the importance of having robust written agreements in place with both contractors and employees.

Finally, in the current political environment under a new Federal Labor government, the comments of the Full Bench in this decision will likely be relied upon in support of further regulation in the on-demand or gig economy workforce.