Legal issues surrounding ‘gig economy’ companies

The ‘Gig economy’ involves businesses that operate in an environment where they engage workers through digital means (usually via tablets or smart phones) to perform on-demand work for short-term engagements, according to Joe Murphy, director at Australian Business Lawyers & Advisors.

This includes the likes of Uber, Airtasker, Deliveroo and Foodora who are immediately recognisable in today’s media and have generated significant buzz around what they do and how they do it.

“These red-tape busting and regulation avoiding businesses have also attracted a significant degree of scrutiny from regulators in many countries, including Australia, the UK and the US,” said Murphy.

“The manner in which these companies engage their workforce has attracted much attention and debate as to whether the individuals performing the work are being paid fairly and according to law.”

So are these individuals really contractors or are they employees missing out?

Murphy explained that when these issues are brought before the Courts and Tribunals, they will look at a range of factors.

These include whether they are truly entrepreneurial in nature operating a business, contracting with others, using their own equipment, are able to contract with others, whether they can dictate their own hours and the degree of control they exercise over the work they perform.

Uber recently received some bad news from the Employment Tribunal in the UK when it was held that a small group of Uber drivers were not contractors but actually Uber employees.

In coming to that decision, the Tribunal considered the drivers’ lack of control over pricing and other requirements placed on them by Uber, such as preferred routes, meant that the drivers should properly be considered to be employees and not contractors.

The result was that Uber was ordered to make back payments of employment entitlements for 20 drivers, including payment for each hour they received less than the minimum wage, as well as other employee payments.

“The attraction for Australian employers to the Gig economy models is the same as that in the UK or the US,” said Murphy.

“That is, if you employ contractors, the outgoings in terms of fees are usually less than paying wages and other employment entitlements to employees. Other benefits include reduced legal risk and other costs (often those ‘contractors’ must have their own insurances etc).”

Many businesses that employ staff (usually one of the highest costs of running a business) might be asking themselves whether they should be looking to strategies that embrace the technology and ‘disrupting’ type of business models embraced by the likes of Uber and Deliveroo.  

Murphy said the UK Employment Tribunal’s decision should cause Australian businesses to pause.

“Australian Courts and Tribunals continue to hear cases every year where businesses are regularly caught out (some innocently, others not so much) and they often end up wearing significant damages and penalties,” said Murphy.  

One of the most significant Australian cases involved similar circumstances to Deliveroo and Uber, he added.

In Hollis v Vabu the High Court of Australia held that bike couriers in that case were in fact employees despite keeping their own hours and supplying their own equipment.  

He added that the Australian Fair Work Ombudsman continues to clamp down on businesses who avoid the costs associated with paying employees under workplace laws.

“The vigour with which the Ombudsman has pursued these cases has paid off in the Courts with a number of significant decisions resulting in significant damages and penalties being awarded against businesses,” said Murphy.

Deliveroo and Foodora have also recently been identified by the union and labour law firm, Maurice Blackburn, as being a target for them.

The firm has indicated "We think these companies are exploiting ambiguities in the law to underpay these workers and we are going to bring a case to make sure it stops".

“If you are a business looking to restructure your employment arrangements and you ask us, we will take you back to the tests the Courts and Tribunal continue to apply and that is a better gauge of how to structure your business, not the latest fad of Gig economy businesses which are starting to run into trouble as we have seen in the recent decision in the UK,” concluded Murphy.

Joe Murphy is a Director at Australian Business Lawyers & Advisors (ABLA). Call Joe on 1300 565 846 or [email protected] if you have any questions about matters raised in this article.