FWO Investigation Decides Uber Drivers Not Classified as Employees

Monday 17 June 2019 @ 11.12 a.m. | Industrial Law | Legal Research

In a recently completed investigation conducted by the Fair Work Ombudsman (“FWO”), relating to Uber Australia Pty Ltd (“Uber Australia”) and its engagement of drivers, the employment watchdog has decided that Uber drivers in Australia are not employees, and thus not entitled to a full range of benefits including sick pay, superannuation and annual leave because of the level of control over the work they perform.

The investigation was launched to determine whether Uber's Australian operations could be considered as that of an “employer” and thus protected by Australian employment law.

Background to the Investigation

According to the Sydney Morning Herald (“SMH”), Sandra Parker (Fair Work Ombudsman) said her agency's investigation found that Uber Australia did not require drivers to perform work at particular times, and that this was a key factor in its decision that the commercial arrangement between the company and the drivers did not amount to that of an employer and employee. Ms Parker said that “drivers had control over their work, including when and for how long they picked up customers on any given day.”

According to the FWO, Australian courts have previously determined that for an employment relationship to exist there must be, at minimum, an obligation for employees to perform work when it is demanded by the employer.

The SMH also reveals the investigation examined a range of materials, including their contracts, log-on and log-off records, payment statements, banking records, pricing schedules and personal interviews.

ABC News also reports that for the last two years, the FWO had been looking into whether the ride-share giant had engaged in "sham contracting". The watchdog wanted to know whether Uber was misrepresenting its drivers as, essentially, people who are running their own business — to avoid paying employee benefits.

Comment from the Ombudsman

Speaking to the SMH, Ms Parker said:

“… The weight of evidence from our investigation establishes that the relationship between Uber Australia and the drivers is not an employment relationship. For such a relationship to exist, the courts have determined that there must be, at a minimum, an obligation for an employee to perform work when it is demanded by the employer.”

The decision means the FWO will not take further action to require Uber Australia to comply with Australian workplace laws under the Fair Work Act 2009 (Cth). The findings were specific to Uber Australia and did not have wider implications for the gig economy more generally.

Public Reaction to the Outcome

Professor Andrew Stewart, Employment Law expert from the University of Adelaide said the decision was "very disappointing", given the significant uncertainty that exists over the legality of Uber's arrangements. Professor Stewart said:

"The central issue is not just whether there must be a pre-existing obligation to work, but whether that obligation can arise in a practical sense from the way Uber structures its operations. That is a matter that could and arguably should have been tested in court, not behind closed doors. As it is, Uber remains vulnerable to claims from drivers and/or unions. But it will rightly feel that the regulator has endorsed its business model."

Joellen Riley, Professor of Labour Law at the University of Sydney, said the decision was "uncontroversial". Ms Riley said a British court has held that Uber drivers were employees under the common law:

"It held that Uber drivers were 'workers' within the extended application of certain regulations, based on EU directives. The common law tests for employment still rely very heavily on the notion of control and the obligation to work at the behest of the employer."

Statement from Uber

A spokeswoman for Uber said the company welcomed the findings:

"We believe that being your own boss does not need to come at the expense of security and support in work. Uber believes that everyone should have access to a set of affordable and reliable social protections, whatever category of employment they are in. We want to work with governments and the community to ensure Australians can access independent and flexible earning opportunities, without limiting their access to the support and security they deserve."

An Uber driver who declined to be identified said that "… the decision is wrong because the drivers are not allowed to set their own rates … Any contractor should be able to set their own rates.”

Potential Impact on the Gig Economy

The Transport Workers' Union (“TWU”) has called for law reform, TWU National Secretary Michael Kaine said:

"Today's decision … is devastating for workers in the gig economy. Last year we had a landmark victory when a Foodora rider won an unfair dismissal case and we know the same control factors are in play for workers in Uber and right across the gig economy.”

Andrew Jewell, Principal Lawyer at McDonald Murholme says while the FWO might be able to claim the ruling “technically” has no broader effect on the gig economy, in reality that’s not the case. Mr Jewell believes other gig economy businesses will now be emboldened with their business models, and with the FWO ruling this way it could be bad news for Uber drivers in Australia. Mr Jewell said:

“Realistically, everyone was waiting on the decision as a decision on the gig economy. Uber now has the right to dictate their terms to drivers and those drivers have no protections, there is no safety nets. While this might have prevented Uber and other operators from exploiting their drivers in the past, now what’s stopping them from pushing their rates down even further?”

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products. Nothing on this website should be construed as legal advice and does not substitute for the advice of competent legal counsel.