Insights + Resources

07 July, 2019

Your freelancer has arrived: Australian Uber drivers held not employees

In much-publicised proceedings, the Fair Work Ombudsman has found that Uber drivers are independent contractors, and not employees.  Uber and other digital disruptive intermediaries working in the gig economy can breathe a sigh of relief, for now.

The investigation

Continuing technological innovation has seen the rise of so-called digital disruptive intermediaries (‘DDIs’), which disrupt incumbent markets by providing exchange platforms which engage the labour of casual workers.  Coined the ‘gig economy’, such new business models challenge the stereotype of the typical employee/contractor distinction.

Uber Australia engages the work of over 100,000 Australians, a not insignificant chunk of the Australian workforce. An investigation into Uber Australia by the Fair Work Ombudsman (‘FWO’) was launched two years ago, when a case was filed accusing the company of “sham contracting”. Sham contracting is when an employer attempts to label an employment relationship as a contractor relationship, thus avoiding a range of legal obligations that attach to employers.

The evidence reviewed in the investigation included Uber drivers’ contracts, activity logs, payments and interviews. The final decision was published on 7 June 2019.

Employee test

The legal paradigm at the core of the FWO’s review was whether the drivers’ services were performed (a) for their own business, or (b) for Uber as their employer.

This key dichotomy stems from a test established in Abdalla v Viewdaze Pty Ltd before the Full Bench of the AIRC in 2003. The relevant test considers the terms of the contract and the totality of the relationship, including factors outside the terms of the contract.

In the Uber investigation, the crucial factor in deciding that drivers are contractors was the fact that “Uber Australia does not require drivers to perform work at particular times”.

The Fair Work Commission reached the same conclusion when it undertook similar investigations in 2017 and 2018, though these investigated the entire rideshare sector rather than Uber Australia only.

Significance 

If an individual is found to be an employee, rather than a contractor, the employer must provide a range of benefits including award rates, annual leave and protections against unfair dismissal. For further discussion about this, see:

Regulating the gig economy and DDIs: snapshot studies of Uber and Airbnb

If the decision had been that drivers are employees, Uber would have significantly increased costs onboarding and managing all employees (which may in turn be passed on to riders, increasing the price of the service).

Importantly, the FWO’s statement is not a rule of law. It reports a decision by the FWO to withdraw further action against Uber Australia. It still remains open to other parties, including individuals, to try to bring claims as employees against Uber Australia. It is also possible that the FWO will investigate other DDIs, such as Ola, GoCatch or DiDi, and makes a different determination.

Concluding Remarks

Decisions by bodies like the Fair Work Ombudsman are vital in defining this new area of employment law within a booming sector or the digital economy. Stay tuned for further developments as the ‘gig economy’ continues to build, fuelled by digital natives for whom the vocational transience of “short term gigs” has replaced their parents’ generational idea of the “job for life”.

The information above is general in nature. For more information about employment law in the gig economy, please contact us below.