Digital disruption means it may well be time for a clear
statutory definition of independent contractor - or for the courts
to develop a new common law definition.
The rise of the digital disrupters is changing the face of the
global economy. It's also giving rise to new legal claims,
particularly in the context of employment law. Traditional methods
of engaging workers are unable to keep up with the flexibility
being demanded by both worker and employer.
The ride-sharing phenomenon Uber is a case in point. Uber's
business model is based on having a network of independent
"taxi" drivers: anyone who owns or has access to a car
and meets Uber's safety requirements can become an Uber driver,
offering their services to consumers, wherever and whenever.
It's taking on the highly regulated taxi industry by offering
consumers a lower-cost independent choice.
The distinction is an important one.
If Uber drivers are considered, legally, to be employees, Uber
has an obligation as their employer to provide them with minimum
employment entitlements. Further, Uber would be responsible for
meeting all their operating expenses such as driver's licence
fees, petrol and car servicing costs, and insurance.
This case may provide guidance on the engagement process for
other sharing economy companies ?where companies, usually via an
electronic platform such as an app, link consumers with providers
of goods and services. Think Airbnb, Lyft, Task Rabbit.
At home, it is unclear which category Uber drivers legally sit
in. The Productivity Commission's Draft Report on
Australia's Workplace Relations Framework released earlier this
month considered the current test for determining whether a worker
is an employee or independent contractor.
There is no statutory definition of an independent contractor.
The courts have developed a complex "multifactor" test
for determining a worker's legal status, including the way work
is performed, how it is paid for, whether the worker is free to
work for anyone, the provision of tools of trade and the
worker's reporting obligations.
One of the hot trends in employee engagement is offering
employees flexibility in how and where they perform their work.
However, the lack of an employment relationship when work is being
performed by one person for another can lead to problems. What it
usually means is that the worker does not have the benefit of the
protection of minimum conditions of employment contained within the
National Employment Standards and Awards.
This becomes a bigger problem when there is a mismatch in the
bargaining power between the parties.
As proposed by the Productivity Commission, it may well be time
for a clear statutory definition of independent contractor to be
established ? or for the courts to develop a new common law
Ultimately, it will benefit both companies and workers to know
where their relationship stands and how to keep it on the right
For Uber and similar companies, the outcome will either give a
green light to drive ? or put a brake on ? how they conduct their
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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An employee that refused a reasonable offer of settlement was ordered by the FWC to pay his ex-employer's legal costs.
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