Foodora for thought! What does the fair work commission's decision that a foodora rider was an employee mean for the 'gig economy'?

Foodora's business model, like many Gig-economy businesses, relies on the riders not being employees as it creates costs the business model does not permit.  Equally, that model supports the very idea behind the 'gig' economy.  People have many 'gigs', and are not engaged under an ongoing contract of service.    

For those reasons this decision is important, even though the FWC has done no more than apply long standing principles around the employee/contractor distinction.  This article looks at the key take-aways from the decision surrounding the true nature of the relationship between Klooger and Foodora.

Was he an employee or merely an independent contractor?

The Facts:

Joshua Klooger worked for Foodora pursuant to a signed document entitled "INDEPENDENT CONTRACTOR AGREEMENT" (Agreement). The Agreement explicitly stated that he was engaged as an independent contractor and not an employee, and specified the services to be performed as 'Delivery of restaurant meals, food, drink and other items to homes and offices, both multiple pick-up and point-to-point.' Access to delivery shifts was arranged through Foodora's smart-phone application. The app displayed shifts identified by start and finish times and by geographical location, and upon logging in, allowed Klooger and other riders to select and commit to undertake them.

In around October 2017, Foodora introduced an arrangement known as the 'Batching System' which established a fortnightly assessment process and introduced a ranking of individual delivery riders as part of the process by which available shifts were offered and subsequently selected. All delivery riders were ranked into one of six batches, with batch ranking determined by individual key performance indicators (KPI's). These included the total number of hours worked, the number of deliveries performed per hour and the number of shifts performed on Friday, Saturday or Sunday evenings.

At different times between March 2016 and his dismissal in March 2018, Klooger also performed the work of a Driver Captain for which he was paid an additional $100 per week. This involved helping other riders arrange to swap shifts and dealing with small administrative issues. From March 2017, he also performed some additional duties such as giving presentations to new riders for which Foodora paid him $20 per hour.[1] However, these additional roles were not discussed at length in the commissioner's consideration of Klooger's employment status.

Employee or Independent Contractor?

The test of whether a worker is an employee or an independent contractor involves the consideration of multiple indicia, with no single element of the relationship being decisive. Fundamentally, the difference that must be identified is rooted "in the difference between a person who services his employer in his, the employer's business, and a person who carries on a trade or business of his own".[2] In determining this question, the relationship must be "viewed from a distance and by making an informed, considered, qualitative appreciation of the whole."[3]

In applying this multifactor test, Commissioner Cambridge found that the correct characterisation of the relationship between Klooger and Foodora was that of employee and employer.  Although the Commissioner did not elaborate on the weight given to each factor, there are several that are more relevant than others to 'gig economy' platforms more broadly.

Firstly, in considering Foodora's capacity to control Klooger and other riders, the Commissioner looked at the practical effect of the batching system and Foodora's implementation of KPI's. In submissions, Foodora had argued that there was nothing in the service contract that enabled or allowed Foodora to direct the applicant to accept a particular shift, and, once he had started a shift, the arrangements enabled Klooger to reject any deliveries.  However, the Commissioner found that, as a matter of practical reality, Klooger and other riders would have to perform a certain number of deliveries during any particular shift and to work a minimum number of shifts on Friday, Saturday and Sunday nights in order to maintain a high batch rating. Consequently, Klooger could not genuinely pick and choose when and where to work. For this reason, the batching system meant that Foodora obtained the level of control that might generally be exercised in an employment relationship.

Secondly, the Commissioner noted that unlike some other 'gig economy' platforms, Foodora delivery riders are presented as part of the Foodora business. Clause 4 of the service contract established an expectation that Klooger would dress in Foodora branded attire and utilise equipment displaying the livery of the Foodora brand (such as the food esky). Furthermore, on their website, Foodora made multiple representations that riders formed a part of their business. For example, they referenced "careful selection of our drivers", and that food is picked up by "our couriers". Finally, the riders' work did not involve any monetary transaction between the applicant and either the restaurants where the order was collected or the customer who placed the order.

These factors can be contrasted with other 'gig economy' businesses that operate merely to provide a platform that connects workers and prospective clients.  

Things to consider:

1. Looking past what the contract says to the 'practical effect' of work arrangements.

   This decision demonstrates the FWC's willingness to look past the wording or preliminary reading of a contract to determine its 'practical effect' on the relationship between master and servant. Just because a contract says 'independent contractor' does not mean the court will take the same view. In particular, gig economy platforms should consider whether the imposition of ranking systems or other KPI's puts such constraints on the activities of workers that they are dictating the volume of work undertaken and the way in which workers perform that work. Such a level of control is indicative of an employment relationship, although, this is not to say that any system of rating or reviewing workers will manifest in the level of control necessary for workers to be considered employees.  

2. Does this have major ramifications for all 'gig economy' businesses?

In short – this is an unremarkable decision.  For the most part, the FWC have restated and applied many long-standing principles of employment law, in particular, that the true nature of the relationship can only be determined by looking at the relationship as a whole. Unfortunately, as Foodora has entered into voluntary administration, it is unlikely we will see this decision appealed and the above considerations applied by a court.

If you have any questions or concerns about the matters raised in this article, please do not hesitate to contact a member of our employment team.

Case: Joshua Klooger v Foodora Australia Pty Ltd [2018] FWC 6836