FWC says Uber driver not an employee: Where next for the ‘share economy’?

Following a series of conflicting decisions in multiple jurisdictions internationally, the question of whether Uber drivers are ‘employees’ or ‘independent contractors’ has recently been considered by the Fair Work Commission (FWC) in Australia.[1] 

In recent times, rapid technological innovation has led to the emergence of the ‘gig economy’ - an environment in which workers engage in a series of for-hire jobs or task, usually via a platform such as an app. Also referred to as the ‘sharing economy’, this business model has been pioneered by companies such as Uber, which operates on the basis that its driver partners are independent contractors (that is, engaged under a contract for services, rather than as an employee under a contract of service).

But whether Uber drivers are actually employees not independent contractors has been an issue of great contention worldwide, and has been considered in a number of cases in the United States (US) and the United Kingdom (UK).

Below, we offer an overview of some of these US and UK cases, and go on to consider the impact they may have had on the FWC’s recent decision in the context of an unfair dismissal application by a former Victorian Uber driver.

US and UK decisions: An overview 

United States decisions

Conflicting judgements on the question of the legal status of Uber drivers have emerged from various US jurisdictions.

In one example, on 4 June 2014, the California Unemployment Insurance Appeals Board ruled that an Uber driver was an employee eligible to obtain unemployment insurance benefits.[2] In making this determination, the Appeals Board carefully considered a number of factors, including:

• the primary factor of the right to control;
  
  
• the fact that the services provided by the driver were an integral part of Uber’s business; and
  
  
• the fact that without the drivers, Uber’s services would not exist.

In another case, on 3 June 2015, the Labor Commissioner of the State of California (a body comparable to the Fair Work Ombudsman in Australia) ruled that an Uber driver was an employee.[3] Uber argued that the driver was an independent contractor, and was therefore not entitled to recover wages or be reimbursed for her expenses. However, having considered 12 indicia (similar to the Australian ‘multi-factor’ test, discussed below) the Commissioner disagreed, noting that:

• where drivers are providing personal services, as opposed to business services, there is a presumption of employment;
  
  
• Uber had ‘all necessary control’ over the operation by obtaining the clients in need of the service and providing the workers,; and
  
  
• but for Uber’s intellectual property, the driver would not have been able to perform the work.

Further, in June 2017, the State of New York Unemployment Insurance Appeal Board upheld a Department of Labor determination that three Uber drivers were in fact employees, not independent contractors.[4] Uber has appealed the decision, arguing that the Judge’s decision to limit testimony to three drivers ‘hand-picked’ from the New York taxi workers’ alliance resulted in a denial of due process rights.

However, not all US decisions involving the question of the legal status of Uber drivers have been contrary to Uber’s categorisation of drivers as independent contractors. In February 2017, the Third District Court of Appeal of Florida applied a ‘multi-factor’ test similar to one in the Labor Commissioner of the State of California case above, finding that an Uber driver was not an employee for the purpose of reemployment assistance.[5] The Judge acknowledged the difficulty in defining ‘employment’ in the ‘gig economy’, stating that: “we must decide whether a multi-faceted product of new technology should be fixed into either the old square hole or the old round hole of existing legal categories, when neither is a perfect fit.”

United Kingdom decision

In an October 2016 decision, the London Central Employment Tribunal found that two Uber drivers in London were ‘workers’ for the purpose of the Employment Rights Act 1996 (UK),[6] and were therefore entitled to certain benefits such as the minimum wage and holiday pay.

In November 2017, the UK Employment Appeals Tribunal upheld this decision, confirming that the two Uber drivers were ‘workers’ within the meaning of the legislation because they were self-employed people who provide their services as part of a profession or business undertaking carried on by someone else.[7]

The FWC Decision

In Kaseris v Rasier Pacific V.O.F [2017] FWC 6610, the FWC rejected a Victorian Uber driver’s argument that he was an ‘employee’ protected by unfair dismissal laws.

The Facts of the Case

In August 2017, Uber[8] deactivated Mr Kaseris’ Uber driver account citing poor passenger ratings. Mr Kaseris subsequently brought an unfair dismissal claim under the Fair Work Act 2009 (Cth). In response, Uber argued that he was not an employee and therefore the FWC did not have jurisdiction to determine the claim.

Uber argued that its terms of engagement and the lack of a wages-work bargain meant "it can in no way be concluded that an employment relationship [with the driver] existed". Deputy President Gostencnik of the FWC agreed, and dismissed Mr Kaseris’ claim.

Uber and Mr Kaseris had entered into a Services Agreement, which allowed Mr Kaseris to use the Uber software platform to connect with members requiring transportation services. Amongst other things, the Services Agreement provided as follows:

• The relationship between the parties is solely that of independent contractors.
  
  
• Uber grants the Driver a sub-license to use the Partner App.
  
  
• Uber provides the Uber Services (lead-generation services and other ancillary services, such as payment and collection processing, customer support and so on), for which the driver pays a service fee on a per transaction basis.
  
  
• Although drivers are required to meet service standards, they are otherwise able to provide a trip in any manner they deem appropriate.
  
  
• Drivers are prohibited from wearing a uniform, or any other form of clothing displaying Uber’s name, logo or colours.

Work-wages bargain

To be protected from unfair dismissal under s 382 of the FW Act, a person must be ‘an employee who has completed a period of employment with his or her employer’. In determining whether Mr Kaseris was an employee, the FWC considered that:

“A contract of employment is, at its essence, a work-wages bargain, so that the “irreducible minimum of mutual obligation” necessary to create such as contract is an obligation on the one side to perform the work or services that may reasonably be demanded under the contract, and on the other side to pay for such work or services.”[9]

Deputy President Gostencnik determined that the wages-work bargain was missing in this instance.

Uber had no legal obligation "except to provide access to the partner app and remittance of the fares and cancellation fees that the rider pays to the driver".[10] As outlined in the Services Agreement between Uber and Mr Kaseris, Mr Kaseris was also not required to perform any work or provide any services for the benefit of Uber, with his driving services provided to passengers only when, where and for whom he saw fit.

Multi-factor test

The FWC applied the well-established common law ‘multi-factor’ test to distinguish between employment and an independent contractor relationship. This approach involves consideration of a range of aspects of the relationship between the parties.[11] The main relevant factors in this case, and Deputy President Gostencnik’s application of them to confirm his view that Mr Kaseris was not an employee, were as follows:

• Control: Mr Kaseris had complete control over the way he conducted the services. He chose when to log on and log off from the Partner App, had control over his hours, could generally accept or refuse trip requests and chose how to operate and maintain his vehicle. Although the Services Agreement indicated some level of control by Uber over drivers (e.g. service standards and vehicle maintenance), these were not overwhelmingly strong factors.
  
  
• Equipment and Uniform: Mr Kaseris provided his own vehicle, smart phone, etc. and carried the costs of registration and insurance of his vehicle. He did not wear a uniform and was not permitted to display Uber’s logo or colours.
  
  
• Taxation: Under the Service Agreement, Mr Kaseris had to register for GST and remit all tax liabilities, and his income was not considered (by the parties) to be subject to PAYG tax. He did not receive a wage, but rather a proportion of the fee for each trip. The Australian Taxation Office requires ride sharing drivers to obtain an ABN, register for and remit GST on full fares, and only claim GST credits for transporting passengers.
  
  
• Charging for Fares: Mr Kaseris argued that if he was truly an independent contractor, he would be able to charge a lower or higher fare, whereas the Services Agreement only permitted him to charge a lower fare. The Deputy President accepted that this was a relevant factor, but was outweighed by the other factors indicating an independent contractor relationship.

Relevance of UK Decision

Mr Kaseris argued that the decision in Aslam and Farrar v Uber B.V., Uber London Ltd and Uber Britannia Ltd should be taken into account in his case. However, Deputy President Gostencnik considered the decision to be of no assistance to Mr Kaseris. In the UK decision, the two London Uber drivers were found to be operating under a ‘worker contract’ within an expanded definition of “worker” in the relevant legislation (whereby they undertook to personally perform services for Uber).

Deputy President Gostencnik considered that the UK legislation is materially different from the relevant FW Act provisions governing Mr Kaseris’ application.[12] Neither at first instance nor on appeal did the UK decisions consider that the drivers were employees based on the common law multi-factor test.

Looking ahead

In his decision, Deputy President Gostencnik raised questions as to whether the traditional legal tests of employment can be applied to the gig economy:

“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 to distinguish an employee from an independent contractor, developed and evolved at a time before the “gig” or “sharing” economy. It may be that these notions are outmoded in some senses and are no longer reflective of our current economic circumstances. These notions take little or no account of revenue generation and revenue sharing as between participants, relative bargaining power, or the extent to which parties are captive to each other, in the sense of possessing realistic alternative pursuits or engaging in competition. Perhaps the law of employment will evolve to catch pace with the evolving nature of the digital economy. Perhaps the legislature will develop laws to refine traditional notions of employment or broaden protection to participants in the digital economy. But until then, the traditional available tests of employment will continue to be applied.”[13]

The decision in Kaseris is the first determination in the Australian context of the employment status of workers in the gig economy.[14]

The conclusion that Mr Kaseris was an independent contractor, if applied beyond the unfair dismissal context, would also mean that he is not covered by a range of other employment protections such as statutory and/or award minimum conditions and the right to be represented in bargaining for an enterprise agreement.

More broadly, the decision may also indicate that other platform-based workers are likely to be considered to be independent contractors. However, this will depend on the circumstances and terms of engagement applicable in each case. For example, in other forms of gig economy work, there may be stronger factors pointing to an employment relationship such as:

• a higher level of control by the platform over when, where and the work is performed; and
  
  
• minimal capacity of the worker to delegate or sub-contract performance of the work.

While legislative intervention of the kind referred to by Deputy President Gostencnik in Kaseris (quoted above) is unlikely to emerge under the Coalition Government, the Labor Opposition has committed to conducting an inquiry into the future of work – including the gig economy – if it is elected to government.

A Senate Select Committee is currently examining these issues, with a report due by 21 June 2018.[15]