Foodora faces allegations of sham contracts and underpaying workers
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Foodora faces allegations of sham contracts and underpaying workers

The question of whether food delivery bicycle riders are employees or contractors will be tested in what is expected to become the most significant legal case on the issue in more than 15 years.

Food delivery company Foodora will face allegations that it engaged in sham contracting that resulted in the underpayment of workers who were classified as contractors instead of employees.

National workplace watchdog, the Fair Work Ombudsman, is questioning whether online platform workers are in fact employees not contractors, as Foodora has claimed.

The Ombudsman has launched legal action in the Federal Court that relates 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 Fair Work Ombudsman alleges Foodora engaged the three workers in 2015, and during periods in 2016, who were misrepresented as independent contractors when they were in fact Foodor employees.

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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.

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It is alleged Foodora required the workers to have an Australian Business Number (ABN) and to sign a contract titled ‘Independent Contractor Agreement’ when they started work.

The Fair Work Ombudsman looked at the nature of the relationship between Foodora and the three workers using the multi-factor test to consider whether workers were "employees" entitled to minimum wages and conditions under the Fair Work Act or "independent contractors".

The Fair Work Ombudsman alleges the three workers were employees of Foodora 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 workers were required to wear a Foodora-branded t-shirt and use food storage boxes and/or bike racks supplied by Foodora. The company 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 Ombudsman alleges the workers were not genuinely conducting their own delivery business, in that they did not advertise or promote their availability to perform deliveries to the public. They did not delegate their delivery duties with Foodora to any other person and they did not have their own customer base, business premises and insurances.

This will be an opportunity for the court to consider these cases in today's economy and how they should be properly categorised.

Fair Work Ombudsman Natalie James

The leading legal High Court of Australia authority on whether bicycle riders are employees or contractors was the 2001 case of Hollis v Vabu which considered the level of control a courier company exercised over its workers in its determination that they were employees.

Fair Work Ombudsman Natalie James said sham contracting was a priority for her agency and the Foodora case shared some similarities with the High Court case but would be decided in the context of a different economy.

“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," she said.

"This will be an opportunity for the court to consider these cases in today's economy and how they should be properly categorised.

“The only way to answer the question of whether the workers delivering the meals are employees or ‘independent contractors’ is for someone to ask a court to consider the specific 'relationships' between a company and its workers."

A spokeswoman for Foodora said: "As the matter is currently before the courts, foodora is unable to comment. However, foodora will be defending the claims and accusations that have been made against the business".

Workplace Minister Craig Laundy said all businesses, including those in the gig economy, that treat workers as independent contractors "must take great care to ensure that they have categorised those workers correctly".

“The FWO is doing what it should do as the regulator and taking action on these matters when there are concerns about an employment relationship," he said. “It is now up to the courts to decide if those concerns are justified."

The FWO alleges the Foodora workers were lawfully entitled to receive the minimum wage rates and entitlements that applied to their positions under the Fast Food Industry Award 2010 – and that Foodora awarded them less. The Ombudsman's investigation allegedly found the employees had been underpaid their minimum lawful wage rates, casual loading and penalty rates for night, weekend and public holiday work.

It is alleged that the three workers were underpaid $1620.74 over a four-week period. The Ombudsman has also alleged Foodora failed to make any superannuation contributions on behalf of the three workers.

Most of the underpayment ($1168.50) relates to the Sydney delivery driver, who worked significantly more hours than the two Melbourne workers over the four-week period.

The Ombudsman alleges Foodora committed several breaches of the Fair Work Act. The company faces penalties of up to $54,000 per contravention. It 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 July 10.

The Fair Work Ombudsman is taking Foodora to court for alleged sham contracting.

The Fair Work Ombudsman is taking Foodora to court for alleged sham contracting.

Photo: Jason South

Anna Patty is Workplace Editor for The Sydney Morning Herald. She is a former Education Editor, State Political Reporter and Health Reporter. Her reports on inequity in schools funding led to the Gonski reforms and won her national awards. Her coverage of health exposed unnecessary patient deaths at Campbelltown Hospital and led to judicial and parliamentary inquiries. At The Times of London, she exposed flaws in international medical trials.