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Could your Contractors be classified as Employees?

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Could your Contractors be classified as Employees?

Due to a recent case where a Deliveroo contractor was held to be an employee, by Fair Work Australia the short answer is – yes.

Executives and business owners need to pause to consider the implication of this. Why? Because if you unwittingly treat contractors as such, when they should in fact be employees, it could have unanticipated and significant financial implications for your business.

 

Summary of the Deliveroo case

Just last month, the Fair Work Commission determined that a Deliveroo rider was an employee of Deliveroo, rather than an independent contractor. This is despite Deliveroo riders appearing to be independent contractors, as they have an ability to:

  • accept and reject deliveries;
  • work for competitors; and
  • determine their own working hours.

 

Deliveroo Case

(Source: Transport Workers Union of Australia)

The recent decision involved Diego Franco, who worked for Deliveroo for three years before having his supplier agreement terminated due to slow delivery times (a complaint for which he had not previously received warnings).

Represented by the Transport Workers Union, Mr Franco commenced an unfair dismissal application against Deliveroo. The Commission held that Mr Franco was an employee, primarily indicated by the capacity for Deliveroo to exercise control regarding where, when and for how long he could work.

The decision was also supported by a finding that Mr Franco was working as a part of Deliveroo’s business (not his own), as any asset arising from his work had no prospect of an attached goodwill/tangible value.

As a result, Mr Franco was reinstated with backpay. Deliveroo is planning to appeal the decision.

 

What are the potential outcomes?

The consequences of this decision are significant. If the Full Bench upholds the decision of the Commission, it may set an example where a business’s capability for control is sufficient to suggest an employer-employer relationship.

The outcomes for contractors being deemed employees include:

  • back pay for annual leave, personal/carers’ leave, sick leave;
  • overtime pay and public holiday entitlements;
  • long service leave accrual;
  • application of unfair dismissal provisions;
  • an ongoing expectation of work;
  • vicarious liability for negligent acts of an employee;
  • superannuation contributions;
  • all other employee entitlements.

 

Do you engage contractors?

Considering the changing landscape of contractors, it is important to be proactive! If you have contractors which are likely to be or have been engaged for six months or more, you may wish to consider your contract engagement model to mitigate the potential for future disputes and penalties.

Having an up-to-date contractor engagement model will protect your business while assisting with Australian workplace regulation compliance. This has become increasingly important in view of evolving case law.

If you are unsure of the status of your contractor framework, get in touch early with our Senior Associate, Tammi McDermott. 

 


 

The information contained in this blog is general in nature and should not be considered to be legal, tax, accounting, consulting or any other professional advice. In all cases, you should consult with a professional advisor familiar with your factual situation for advice concerning specific matters before making any decisions. By reading this blog, you confirm your understanding of this disclaimer.

Tammi McDermott
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