An increasing number of Australian workers seeking permanent jobs are taking casual, part-time or short-term contracts instead of securing full-time employment. But what happens when the line becomes blurred between the classification of a worker as a contractor or an employee?

Contractors miss out on benefits and protections enjoyed by employees

Accepting individual short-term contracts can give workers the benefit of flexible hours and varied work. However, contractors can often find themselves working as employees, but with none of the associated benefits such as superannuation, sick leave and holiday pay.

There are also no legally protected conditions or minimum wage, and no security to obtain a home loan or sometimes even a rental agreement.

Delivery rider for Foodora employed as independent contractor

A recent decision by the Fair Work Commission could set a new legal precedent in determining whether a person classified by the employer as an individual contractor is, in fact, undertaking the role of an employee.

The case involved a sacked delivery rider for Foodora who was classified by the company as an independent contractor but was deemed by the Fair Work Commission to be an employee who was unfairly dismissed. (See Joshua Klooger v Foodora Australia Pty Ltd [2018] FWC 6836.)

Foodora rider found to be employee working as part of the business

Foodora argued that the rider was a contractor and not an employee, because he sub-contracted work and swapped shifts with other workers. However, the Fair Work Commission disagreed. It found that Foodora had sanctioned this arrangement and the rider was working as part of the business and not as an independent operation.

The Commissioner stated that because Foodora exercised control over the rider's shift work, he was an employee and was not carrying on a business of his own. The Commissioner also said that the abrupt dismissal by email was "plainly unjust, manifestly unreasonable, and unnecessarily harsh".

The determination that the rider was an employee meant that he was entitled to protection under section 394 of the Fair Work Act 2009.

Foodora was ordered to pay the rider $15,559 compensation.

Contractors could be found to have same rights as employees

The distinction between whether a worker is a contractor or employee is causing much concern in the modern economy, and the definitions that govern employment could potentially change to accommodate workers in the future.

While some workers choose to work as contractors and enjoy the flexibility of choosing their own hours, this case shows that they could also have rights granted by law to employees.

Not all contractors in gig economy are necessarily employees

This is an important decision for contractors who undertake the role of an employee within a business, instead of operating independently. However, it doesn't mean that all independent contractors working for similar gig economy companies such as Deliveroo and Uber Eats automatically have the same rights as employees.

If you're an employer, it's beneficial to seek legal advice on whether your workers should be classed as contractors or employees, as a mistake can prove to be costly. Or if you're a contractor and feel you've been unfairly treated in the workplace, it's also well worth obtaining advice from a lawyer with expertise in employment law.

Nathan Luke
Employment law
Stacks Law Firm

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.