Full Bench of Fair Work Commission Overturns Decision that Deliveroo Rider was an Employee

This Insight briefly summarises the Full Bench’s decision in Deliveroo v Franco¹ and its implications for workers in the gig economy.

The Original Decision

On 21 May 2020, Mr Franco, a Deliveroo rider who joined Deliveroo Australia Pty Ltd in about April 2017, filed an unfair dismissal application against Deliveroo. In determining the application, Commissioner Cambridge held that Mr Franco was an employee of Deliveroo, that he was unfairly dismissed, and that reinstatement to Deliveroo would be an appropriate remedy.

The Changed Landscape

In determining that Mr Franco was an employee of Deliveroo, Commissioner Cambridge applied the well-established “multifactorial” approach, weighing up various indicia of employee-employer and principal-contractor relationships and ultimately concluding that in practical reality, the relationship between Deliveroo and Mr Franco more closely resembled the former.

However, following the High Court’s decisions in the Jamsek and Personnel Contracting cases, summaries of which are available here, this “multifactorial” approach is no longer the correct one. Rather, in those decisions, the High Court determined that in circumstances where a written contract comprehensively regulates the relationship between the parties, the validity of which is not challenged by a sham or otherwise, the characterisation of that relationship is to be made by reference to the rights and duties created by the written contract, and not the practical realities of the relationship.

The Appeal

Deliveroo appealed Commissioner Cambridge’s decision to the Full Bench.

Applying the principles of Jamsek and Personnel Contracting, the Full Bench assessed the parties’ rights and duties under Deliveroo’s Supplier Agreement with Mr Franco (Supplier Agreement) to determine whether Mr Franco was in fact an employee of Deliveroo.

There were four aspects of the Supplier Agreement that the Full Bench considered decisively favoured a finding that Mr Franco was an independent contractor of Deliveroo.

1. Control: Deliveroo exercised limited control over the manner in which the work which Mr Franco agreed to undertake was to be performed. Namely, the Full Bench observed that under the Supplier Agreement, Mr Franco could choose any route to make his deliveries which he determined to be safe and efficient. Further, although the Supplier Agreement stipulated that deliveries had to be made within a reasonable time and that all deliveries had to be performed with due care, skill and ability, the Full Bench was of the view that these requirements were more akin to performance standards.
2. Equipment: Mr Franco had the right under the Supplier Agreement to determine the type of vehicle he used for his deliveries, and although Mr Franco used a motorcycle, it was possible under the Supplier Agreement for Mr Franco to instead provide a more “substantial item of mechanical equipment”.
3. Subcontracting: The Full Bench determined that the Supplier Agreement effectively permitted Mr Franco to subcontract to others the services he was required to provide under the Supplier Agreement.
4. Costs: Under the Supplier Agreement, Mr Franco was required to pay an administrative fee (equal to 4% of the total fees payable to him) in order to access Deliveroo’s software, invoices and other administrative services provided by Deliveroo.

The Full Bench also noted that the provisions of the Supplier Agreement relating to safety, compliance with relevant laws or protection against public liability, were not necessarily indicative of an employment relationship as they were equally apt to those arrangements for independent contractors working in the road transport industry.

The Full Bench gave little weight to the provisions which labelled Mr Franco an independent contractor of Deliveroo and the provisions which were consistent with this label (e.g., the taxation provisions). The Full Bench also gave little weight to the fact the Supplier Agreement stipulated that Mr Franco was free to work for competitors of Deliveroo, that Deliveroo was not obliged to make any work available to Mr Franco, and that Mr Franco had the ability to accept or reject work as he pleased, on the basis that similar conditions exist in casual employment arrangements.

For these reasons, the Full Bench held that Mr Franco was an independent contractor of Deliveroo, and therefore not protected from unfair dismissal.

Implications Moving Forward

The Full Bench appeared to express some regret in its finding that Mr Franco was an independent contractor of Deliveroo, noting that “this [decision] leaves Mr Franco with no remedy he can obtain from the Fair Work Commission for what was, plainly in our view, unfair treatment on the part of Deliveroo.”

This sentiment follows the Full Bench’s observation of consequences of the Jamsek and Personnel Contracting cases:

“Had we been permitted to take the [practical realities] into account, as the Commissioner [Cambridge] did, we would have reached a different conclusion in this appeal… However, as a result of Personnel Contracting, we must close our eyes to these matters.”

In Labor’s pre-election Secure Australian Jobs Plan, it was promised that the Albanese Government would introduce legislation to better protect gig economy workers, including by expanding the powers of the Fair Work Commission to cover “employee-like” forms of work. This decision will undoubtedly place more pressure on the Albanese Government to progress this legislation quickly (which will be a topic of discussion during the upcoming Jobs and Skills Summit).

Until then, the principles of Jamsek and Personnel Contracting will continue to apply, and businesses should (for lack of a better word) “capitalise” on this by ensuring that their independent contractors are engaged using properly drafted contractor agreements.

Please contact Addisons’ employment law team if you require any assistance with respect to the engagement of independent contractors.