Australia: Deliveroo is not an Employer: Decision of Full Bench of the Fair Work Commission in Deliveroo Australia Pty Ltd v Franco [2022] FWCFB 156

Summary

In a Full Bench of the Fair Work Commission, the Vice and Deputy Presidents applied recent decisions of the High Court to determine that a Deliveroo delivery worker, Mr Franco, was not an employee and was an independent contractor. The matter in question is Deliveroo Australia Pty Ltd v Franco [2022] FWCFB 156.

The full bench, when applying the rationale in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 ('Personnel Contracting') and ZG Operations & Anor v Jamsek & Ors [2022] HCA 2 ('Jamsek'), found that on a strict interpretation of the terms of the agreement to carry out work, Mr Franco was a contractor and not an employee.

The full bench did say that had they applied the multifactorial test which applied before Jamsek, it would have concluded that Mr Franco was an employee.

Implications

This case shows the practical application of Jamsek and Personnel Contracting and how it may play out in future decisions. It means that the process requires analysis of the terms of the agreement, without going further and analysing how the parties subsequently conducted themselves.

Whilst it appears to be a reasonable application of the High Court authority, the Full Bench clearly wished to clarify that it would have decided the matter differently had the High Court not handed down those decisions.

We can expect more decisions of this nature in the near future, both in the Fair Work Commission and also in relation to injury cases involving workers.

Facts of the case

Mr Franco was retained to provide services to deliver food by Deliveroo in April 2017. He supplied his own motorcycle and mobile telephone. In 2019, the terms of his contract were updated and a new contract was entered into.

Mr Franco was also engaged to provide services for other service providers, including DoorDash and Uber Eats. He did not delegate any of his work to any person. He is entitled to not sign on and to reject any job, even after it had been allocated to him.

Because of alleged poor performance and delays, in April 2020, Mr Franco's contract with Deliveroo was terminated and his access to the application (and thus his ability to obtain jobs) was disabled. Mr Franco brought a claim with the Fair Work Commission alleging that he was an employee, and he had been unfairly dismissed.

By a decision made on 18 May 2021, Commissioner Cambridge at first instance accepted that Mr Franco was an employee and that he had been unfairly dismissed. He ordered reinstatement. In doing so, Commissioner Cambridge applied the old multifactorial test. This application was reasonable, as that decision had been made prior to the High Court's authorities in Personnel Contracting and Jamsek.

Deliveroo appealed the decision of the Commissioner and alleged that Mr Franco was not an employee, and that there was no jurisdiction to hear the claim.

After the appeal was heard, the High Court delivered its decision in WorkPac Pty Ltd v Rossato [2021] HCA 23 ('Rossato'), which initially raised doubts regarding the application of the longstanding multifactorial test to determine if a person is an employee, which has been accepted in the prior decisions of Stevens v. Brodribb Sawmilling Company Proprietary Limited; Gray v. Brodribb Sawmilling Company Proprietary Limited (1986) 160 CLR 16 and Hollis v Vabu Pty Ltd [2001] HCA 44.

In Rossato, the High Court said:

Thus, Rossato was heading to the conclusion that what was written in the document is the main area for enquiry regarding whether a person is a worker. Subsequently, the High Court went further in the decisions of Personnel Contracting and Jamsek in February 2022.

When applying the High Court's authorities in Personnel Contracting and Jamsek, the full bench in Deliveroo Australia Pty Ltd v Franco [2022] FWCFB 156 said that the applicable normal course is to consider the terms of the written agreement between the parties, rather than the course of conduct engaged in.

In particular, the key propositions were that:

• When characterising a relationship created by a wholly written, comprehensive contract which is neither a sham or otherwise ineffective, the question is to be determined solely by reference to the rights and obligations under that contract.
  
• It is not permissible to examine on review the performance of the contract, or the course of dealings between the parties.
  
• The subsequent conduct of the parties may only be considered to ascertain the existence of a variation of contractual terms.
  
• The multifactorial approach only has relevance in respect of the required assessment of the terms of the contract.

It is necessary to focus on the aspects of a contractual relationship which bear more weight upon whether the worker's position was so subordinate to the employer's business that it can be seen to have been performed as an employee of that business, rather than as part of an independent enterprise.

The question is whether, by the terms of the contract, the worker is contracted to work in the business or enterprise of the purported employer.

The existence of a contractual right to control the activities of the worker, including how, where and when the work is done, is a major signifier of an employment relationship.

The label or characterisation placed on the relationship by the contract is not relevant, even as a tiebreaker.

Effectively, this meant that the way that Deliveroo and Franco had conducted themselves was largely irrelevant. What was more important was a clear and careful analysis of the terms of the written agreement between the parties, with regard to their meaning and effect.

However, the definition of employee or contractor in that agreement was not of itself relevant.

Analysis of the circumstances

There was an analysis of the terms of the 2019 agreement entered into between Deliveroo and Mr Franco. Deliveroo relied on clause 2.2, which said that Mr Franco was not obliged to do any work for Deliveroo and may accept or reject any work; and said that this was indicative of a lack of control over how long or when the work could be performed.

The full bench said that this did not assist either way as it may also be indicative of a casual employment relationship.

The contract also provided that Mr Franco could work for any other person at the same time - which he did in working for Uber Eats and for DoorDash. The full bench said this was not necessarily indicative either way, as it could also be indicative of a casual employment relationship.

However, the full bench gave significant weight to clause 2.3, which provided that Mr Franco could decide both when and where he logged in to provide the services, and there was no control by Deliveroo of the times he worked or the place he worked. That was entirely at Mr Franco's election. Mr Franco could also unassign himself from a job even after it is accepted, anytime up until he collected the food order.

The full bench said that this term strongly suggested that Mr Franco was a contractor and not an employee, and there was no control by Deliveroo.

The Court went on to say that there were 4 important aspects which weighed in favour of him being an independent contractor. These were set out in the agreement.

These were that:

• Once an order had been picked up, it just needed to be delivered in a reasonable time period. The agreement did not specify how, in what manner, by which route or in what means. The full bench said this weighed in favour of an independent contractor arrangement as there was lack of control.
  
• Mr Franco was obliged to incur the expenses of purchasing his equipment, including his motorbike, which was said to be a substantial item of mechanical equipment. That was found to weigh in favour of a contractor agreement.
  
• There was no requirement that the services be provided personally by Mr Franco - he was able to delegate the work to another person. This also weighed in favour of a contractor agreement.
  
• The method of remuneration was a fee for each completed delivery and Mr Franco was obliged to pay a fee to Deliveroo of 4% of his total fees in return for access to the IT system. This strongly suggested a contractor arrangement in which fees for services were provided - which is inconsistent with employment.

The full bench went on to say that in view of that material, on an analysis of the contract in accordance with Jamsek and Personnel Contracting, it found that Mr Franco was an independent contractor and not an employee.

The full bench therefore rejected Mr Franco's appeal and said that there was no jurisdiction in the Commission to hear his unfair dismissal claim.

A caveat

Notwithstanding this, the full bench went on to say that if it had applied the pre-Personnel Contracting and Jamsek law of the multifactorial approach (by which it could take into account what actually happened once work was performed,) it would have reached a different view.

This was because in practicality, many of the items in the 2019 agreement were not enforced and were not actually applied.

To the contrary, Mr Franco was:

• not able to delegate his work;
• obliged to sign on for certain periods in advance; and was
• encouraged to wear a uniform with a Deliveroo logo.

Additionally, the cost of maintaining his equipment was not high.

Sham contract

The full bench went on to consider whether it could ignore the 2019 agreement because it was a sham arrangement. It concluded that it could not.

It said that this was because in applying the High Court authority in Equuscorp Pty Ltd & Anor v Glengallan Investments Pty Ltd & Ors [2006] QCA 194, a 'sham' referred to cases where a form of legally effected transaction is in place with parties, with the intention that it should not have any apparent or any legal consequences.

This did not assist Mr Franco because there was no evidence that he entered into the 2019 agreement with an intent that it would not have any legal consequences. Thus, a sham could not be proved.

Final thoughts

This case shows the practical application of Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations & Anor v Jamsek & Ors [2022] HCA 2 and how it may play out in future decisions.

The decision in Deliveroo Australia Pty Ltd v Franco [2022] FWCFB 156 clarifies that the process is one of analysing the terms of the agreement, without taking the further step of analysing how the parties subsequently conducted themselves.

It appears to be a reasonable application of the High Court authority, although the Full Bench clarified that it would have decided the matter differently had the High Court not handed down those decisions.

We can expect more decisions of this nature in the near future, both in the Fair Work Commission and also in relation to injury cases involving workers.

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.