The gig economy has arguably revolutionised the labour market, allowing short-term contracts or freelance work as opposed to permanent jobs.
It provides a platform for businesses to offer their services to their clients or customers via the engagement of short term contracts as contractors or consultants.
The most famous examples are Uber and Airtasker however, business consultants and graphic designers are just as prone to this type of engagement.
Though as a business, care should be exercised when attempting to engage labour outside of the traditional labour market model to ensure you minimise the legal risk of being non-compliant with the Fair Work Act 2009 (FW Act).
Are you in danger of being non-compliant?
If a person engaged by a business to provide their services alleges they are truly an employee rather than an independent contractor they may bring a “sham contracting” claim against the business under the FW Act.
The FW Act broadly states that sham contracting occurs when a person knowingly or recklessly misrepresents an employee-employer relationship into an independent contracting relationship. For companies that are found to be engaged in sham contracting the company may be fined up to $63,000.00 per breach and any directors or key persons involved in the breach may be fined up to $12,600.00 per breach.
Notwithstanding the risk, there was a recent case which tested the validity of the gig economy – Michael Kaseris v Raiser Pacific V.O.F.  FWC 6610 (Uber Decision), where an Uber driver alleged that he was an employee, rather than an independent contractor. The facts of the Uber Decision were as follows:
- There was a written Services Agreement between the driver and Uber;
- The driver logged into a partnering App (to Uber) at varying times;
- The driver logged into a partnering App for varying periods;
- The driver logged into a partnering App on multiple occasions on some days and did not log in at all on others;
- Provided varying numbers of trips when he was logged into the partnering App, including providing no trips on some occasions when he was logged into the partnering App;
- Did not accept 33% of the trip requests sent to him via the partnering App (2,961 of a total of 8,877 sent); and
- Cancelled 15% of the trip requests that he had received and accepted via the partnering App (804 of the 5,542 he had accepted).
In the Uber Decision, Deputy President Gostencnik found:
- After applying the “multifactorial test” having regard to:
- The way the work was undertaken (i.e. the use of the partnering App and that the driver had the choice of using an Uber App or any other ride share App of his choice);
- The driver could choose to work or refuse to work;
- The written Services Agreement;
- Notwithstanding the driver argued that the Deputy President ought to have consideration to a UK case of an Uber driver in which it was found the drivers were an employee, Deputy President found that the UK case was based on an entirely different statute which provided for a broad definition of a “worker” and was therefore not persuasive (Aslam and others v Uber B.V. and others  IRLR 4 (ET)) – note the appeal from Uber in the UK case was later dismissed;
- The driver was an independent contractor and not an employee.
However, in the decision Deputy President made the following observations:
“the notion that the work-wages bargain is the minimum mutual obligation necessary for an employment relationship to exist, as well as the multi-factorial approach to distinguish an employee from an independent contractor, developed and evolved at a time before the new ‘gig’ or ‘share’ economy. It may be that these notions are outmoded in some senses and are no longer reflective of our current economic circumstances. These notions take little or no account of revenue generation and revenue sharing as between participants, relative bargaining power, or the extent to which parties are captive of each other, in the sense of possessing realistic alternative pursuits or engaging in competition. Perhaps the law of employment will evolve to catch pace with the evolving nature of the digital economy. Perhaps the legislature will develop laws to refine traditional notions of employment or broaden protection to participants in the digital economy. But until then, the traditional available tests of employment will continue to be applied”.
(Our emphasis added)
Therefore, while the observations made by the Deputy President are not binding, and the driver may appeal the Uber Decision, the observations are a positive indication that there may be a shift in the future in Courts and Tribunals applying the multi-factor approach in determining whether a person is an employee or independent contractor.
In the alternative, the gig economy itself may provide for additional factors not previously taken into account when a Court determines a person is either an employee or independent contractor.
Employee or independent contractor?
With the laws as they currently stand here is some traditional indicia to consider:
|Degree of control over how work is performed.||Performs work under the direction and control of the employer on an ongoing basis.||Has a high level of control on how the work is done.|
|Hours of Work||Generally works standard set of hours (Casual employee’s hours may vary from week to week).||Under agreement, decides what hours to work to complete the specific task.|
|Expectation of Work||Usually has an ongoing expectation of work (some employees may be engaged for a specific task or a specific period).||Usually engaged for a specific task or project|
|Risk||Bears no financial risk (this is the responsibility of their employer).||Bears the risk for making profits or loss on each task.
Usually bears responsibility and liability for poor work or injury sustained while performing the task. As such, contractors generally have their own insurance policy.
|Tools and equipment||The employer generally provides tools and equipment, or a tool allowance is provided.||Uses their own tools and equipment (alternative arrangements may be made within a contract of services).|
|Tax||Has income deducted by their employer.||Pays their own tax and GST to the ATO|
|Method of payment||Paid regularly (for example. Weekly, fortnightly or monthly).||Has obtained an ABN usually and submits an invoice for work completed or is paid at the end of contract or project.|
If your business is considering utilising the gig economy or is considering revenue sharing as an option to the traditional employer-employee labour market model, it is imperative you understand the legal risk and have the best measures in place to mitigate any legal risk to the business.
Considering a non-traditional labour market model? Could your contractors really be employees in disguise? Call NB Lawyers, the lawyers for employers, today on +61 (07) 3876 5111 to protect your business from Sham Contracting arrangements or email email@example.com.
About the Authors
Jonathan Mamaril is the principal and director of NB Lawyers, the lawyers for employers, and a specialist in employment law. Over the last ten years, Jonathan has helped hundreds of employers understand their legal requirements, mitigate risk and liability, protect their reputation and achieve their goals for business growth and expansion.