Foodora charged by FWO over alleged sham contracting

The Fair Work Ombudsman has commenced legal proceedings involving the gig economy, alleging that food delivery company Foodora Australia Pty Ltd engaged in sham contracting activity that resulted in the underpayment of workers.

The legal action, filed in the Federal Court, related to two bicycle delivery riders who delivered food and drinks to customers in Melbourne and a delivery driver who delivered food and drinks by car to customers in Sydney. The Melbourne workers were juniors aged 19 at the time, while the Sydney worker, an Indian migrant who is now an Australian permanent resident, was aged 30 at the time.

The Fair Work Ombudsman alleged that when Foodora engaged the three workers in 2015, and during periods in which they performed work in 2016, Foodora breached sham contracting laws by misrepresenting to them they were independent contractors when they were in fact employees of Foodora.  It is alleged that Foodora required each of the workers to have an Australian Business Number (ABN) and sign a contract titled “Independent Contractor Agreement” on the commencement of work.

The Fair Work Ombudsman examined the nature of the relationship between Foodora and the three workers and found that the three workers were actually employees of Foodora during the period for a range of reasons, including:

  • the level of control, supervision and direction Foodora exercised over the workers’ hours, location and manner of work.
  • the requirement for the workers to wear a Foodora-branded t-shirt and use food storage boxes and/or bike racks supplied by Foodora.
  • Foodora paid the workers fixed hourly rates and/or amounts per delivery and the workers did not negotiate their rates of pay at any time.
  • the workers did not advertise or promote their availability to perform deliveries to the public; did not delegate their delivery duties with Foodora to any other person; and did not have their own customer base, business premises, and insurances.

The Fair Work Ombudsman alleged that the workers were lawfully entitled to receive the minimum wage rates and entitlements that applied to their positions under the Fast Food Industry Award 2010.

The Ombudsman allegedly found that the employees had been underpaid their minimum lawful wage rates, casual loading and penalty rates for night, weekend and public holiday work. The three workers suffered a loss of $1,620.74 over a four-week period and Foodora failed to make any superannuation contributions on behalf of the three workers.

Fair Work Ombudsman Natalie James says sham contracting is a priority for her agency, not just because of the direct impact of these arrangements on individual workers but because those adopting sham contracting as a business model are availing themselves of an unfair competitive advantage by depriving workers of their lawful minimum employment conditions and protections.

Ms James said, “There has been broad community and academic debate about the status of ‘models’ using smartphone-driven technology as a means for deploying a workforce that delivers food to consumers from restaurants and fast food outlets. The only way to answer the question…is for someone to ask a court to consider the specific ‘relationships’ between a company and its workers.”

Ms James also said that all businesses, including those in the gig economy, that treat the individuals who perform work for them as independent contractors must take great care to ensure that the reality of the relationship matches the label.

Foodora may face penalties of up to $54,000 per contravention. The Fair Work Ombudsman is also seeking a Court Order for Foodora to back-pay the workers in full and make superannuation contributions on their behalf.

A case management hearing has been scheduled in the Federal Court in Sydney for 10 July.

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