Has Uber got the recipe right to avoid the regulatory challenges of employment?

By Kristy Peacock Smith, Leila Moddel


In employment law circles, the first Australian case in relation to the employment status of Uber drivers has been highly anticipated. Given the claims made against Uber in other jurisdictions including the UK and the US, a decision by Australia's workplace umpire, the Fair Work Commission, seemed a foregone conclusion.

The decision has much wider implications than just for Uber, as what the Commission considered was whether the historic and long standing foundations of a master/servant relationship can be applied or construed to gig economy work.

In the Uber case (Kaseris v Rasier Pacific V.O.F [2017] FWC) the Commission was asked to consider an unfair dismissal claim brought by a former Uber driver. In order to establish standing to bring the claim, the driver had to first meet the threshold test of being an employee. If he failed on this, then the Commission had no jurisdiction to determine whether or not the termination by Uber was unfair.

The multi-factor test

In making his decision, Deputy President Gostencnik applied the traditional, common law multi-factorial test for distinguishing an employee from an independent contractor, including matters of control, equipment, uniform, tax, a description of the relationship and other indicia. He confirmed, "a contract of employment is, at its essence, a work-wages bargain" and the irreducible minimum of mutual obligation necessary to such a contract was the obligation on one side to perform the work or service and on the other to pay for such work or services.

Having considered the service agreement between the driver and Uber, the mechanics of how the ride-sharing application operates and the multi-factorial criteria, the Deputy President concluded that the overwhelming weight of the relevant indicia pointed against a finding of the existence of an employment relationship. He also agreed with Uber that the work-wages bargain which is essential to the employment relationship was missing.

UK Uber decision

During the course of the hearing the unrepresented driver asked the Commission to consider the 2016 UK Employment Tribunal Decision (upheld last year), which found an Uber driver to be a 'worker' under the UK's Employment Rights Act. Whilst Deputy President Gostencnik recognised that Uber's UK and Australian operations were similar, he ultimately found the judgement of "no assistance" given the material differences between the legislation.

Time for reform?

The Deputy President's decision concluded with a commentary on the gig economy and questions as to whether 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 used to distinguish between employees and contractors, was "outmoded in some sense and … no longer reflective of our current economic circumstances".

He went on to say that "perhaps the legislature will develop laws to refine traditional notions of employment or broaden protection to participants in the digital economy".

Natalie James, the Fair Work Ombudsman shares Deputy President Gostencnik's view that for now, the law to be applied with respect to a number of platform economy models is that set out under the traditional framework and that what is required for the gig economy is innovation around traditional concepts of employment.

In a keynote speech to the 2018 conference of the Association of Industrial Relations Academics of Australia and New Zealand, Ms James stated that work organised through digital platforms is now established in the labour market and is "challenging our century-old industrial relations system." She then asked, in such circumstances, "Why hasn't our system evolved, for example, like the British system from which it sprung, to more comprehensively deal with new forms of work?"

Has Uber got the recipe right to avoid the regulatory challenges of employment?

It certainly appears so, for now.

However, experts argue that ultimately, the crucial issue is whether international courts accept Uber's portrayal of itself as a technology company rather than a transport business. This is relevant in deciding whether the drivers are in effect running their own businesses or whether Uber is running a business and using their labour.

For its part, Uber says legal distinctions between employees and independent contractors are discouraging it from offering training and "other perks and benefits" to drivers, while also emphasising the company's intent to work with policymakers to provide "new models of social protection". In a submission to the Senate inquiry into the future of work, the company claims current employment classifications create significant disincentives to offering training to drivers, as the training and other benefits "can compromise the self-employed status of the individual".

There are certainly interesting arguments on both sides. On one we have a voice against the exploitation of workers and a recognition that the regulators can only act within the framework of the legislation. And on the other we have disruptors who state they are providing opportunities for independence, flexibility and entrepreneurship.