Deliveroo challenges gig worker’s unfair dismissal case

The Full Bench of the Fair Work Commission has upheld an appeal lodged by Deliveroo Australia Pty Ltd (Deliveroo) concerning an unfair dismissal application for the termination of a delivery driver. In reversing Commissioner Cambridge’s initial decision (the Initial Decision) that Mr Diego Franco was an employee rather than an independent contractor, the Full Bench’s reasoning clarified the factors which are significant for characterising a worker’s engagement, particularly in the gig economy.

Importantly, the recent High Court decisions of Personnel Contracting[1] and Jamsek[2] were critical in reversing the Initial Decision. This article highlights the Full Bench’s considerations of the various contractual obligations when determining a worker’s classification as either an independent contractor or employee. This classification is important as it determines if the worker was able to make an unfair dismissal application, noting that an independent contractor does not have jurisdiction to do so.

Whilst it appears to be a reasonable application of the High Court’s authorities, the Full Bench emphasised that it would have reached a different conclusion but for the High Court’s decisions.

Facts and Initial Decision

Mr Franco commenced working for Deliveroo in 2017 as a delivery rider. In the subsequent years, he was identified as a rider with delayed delivery times, which Deliveroo determined were unacceptable. Deliveroo then purported to inform Mr Franco that he was in breach of his agreement with Deliveroo, putting him on notice that his agreement would be terminated. His access to the Deliveroo Rider App was later disabled.

Mr Franco then brought a claim with the Fair Work Commission, arguing that he was an employee and that he was unfairly dismissed. The Commissioner’s consideration of the nature of their employment relationship stemmed from an analysis of the now-outdated ‘multifactorial test’ and accepted at first instance that Mr Franco was an employee of Deliveroo. This finding that Mr Franco was an employee enabled the Commissioner to subsequently consider whether Mr Franco’s dismissal was harsh, unjust or unreasonable.

The Commissioner took into account the reason for dismissal being a failure to ‘deliver orders in a reasonable time’. Notwithstanding this, the dismissal involved an entirely unjust and unreasonable process including the complete absence of any procedural fairness afforded to Mr Franco. The Commissioner was satisfied that there was no valid reason for dismissal and ordered reinstatement.

Decision on Appeal

The Full Bench considered the Commissioner’s determination to award an appropriate remedy ‘an unorthodox and unremarkable’ exercise of its legislative discretion. However, the question of whether or not Mr Franco was an employee of Deliveroo gave rise to a jurisdictional objection and also one that is of broader potential interest as it is applicable to the ‘gig economy’.

The characterisation of a working relationship that is regulated by a written contract (which is not asserted to be a sham or otherwise ineffective) is to be determined solely by giving primacy to the exclusive rights and obligations of that contract. Specifically, the contractual right for an employer to control the activities of the worker, including how, where and when the work is done, is significantly indicative of an employment relationship.

In assessing Mr Franco’s contractual obligations, the Full Bench analysed the relevance of particular clauses in his signed agreement and identified the following four critical matters which ultimately weighed decisively in favour of the conclusion that Mr Franco was engaged as an independent contractor.

These four aspects are as follows:

1. The contractual lack of control by Deliveroo over the manner of performance of any work which Mr Franco agreed to undertake. The agreement conferred on Mr Franco to ‘determine the safe and efficient route’ to deliver an order within a ‘reasonable time period’, including providing Mr Franco the discretion to determine the type of vehicle and a free choice of the route taken when completing deliveries. Thus, Deliveroo did not ‘have a contractual right to control the mode of performance of work’.
2. Mr Franco’s right ‘to determine what type of vehicle he uses to effect any delivery’ at his expense. As long as the safety, reliability and legal requirements are complied with, Mr Franco had control over the mode of performance of the work. This, the Full Bench held, meant that Delieroo had even less control under this employment agreement than was the case with the contracts considered in Jamsek.
3. The agreement was silent as to the requirement for Mr Franco to provide delivery services personally. He was impliedly provided with an unfettered right, without the need for prior approval from Deliveroo, to delegate the performance of relevant services to another appropriate person.
4. Mr Franco, in addition to his entitlement to be paid a fee for each completed delivery, is required to pay an administrative fee of 4% of the total fees payable to him for access to Deliveroo’s software and provision of other administrative services.

In addition to the factors above, the Full Bench, after giving weight to the approach dictated by the Personnel Contracting decision, identified several other factors which it was forced to ‘close [its] eyes to’ when characterising the working relationship. For example, in practice, Deliveroo has a significant degree of operational control over its drivers because it provided preferential access to particular delivery sessions based on a driver’s performance. Further, the Full Bench held that workers wearing company-branded clothing that displayed company logos was not relevant as it had no effect on the contractual rights which characterised the relationship. This, according to the Full Bench, were factors that did not go to the proper construction of the relevant terms of Mr Franco’s agreement and thus are not to be taken into account.

The Full Bench also drew an important distinction between performance standards when performing services and an employer’s control of the way in which services are performed. There was a requirement for Mr Franco and other delivery drivers to make deliveries within a reasonable time period, act professionally and to provide services with due care and diligence. This, according to the Full Bench, simply constituted blanket performance standards which are generally expected by employees and did not amount to any right of control.

The consequence of the four considerations outlined above was that Mr Franco was engaged by Deliveroo as an independent contractor. Therefore, the Fair Work Commission did not have the jurisdiction to consider his unfair dismissal application and left Mr Franco with no remedy for what the Full Bench observed as ‘unfair treatment on the part of Deliveroo’.

Take Home Messages

The recent Deliveroo decision is a timely reminder to organisations involved with the complexities of engaging contractors and highlights the importance of having properly drafted contracts which incorporate relevant contractual rights and obligations identified by the High Court, and echoed by the Full Bench, as being indicative of a contractual worker relationship or an employee.

If you wish to discuss any of aspect of this article or would like to review and, where relevant, update the terms of your existing written agreements to ensure that they give effect to the appropriate employment relationship, please contact Sathish Dasan on + 61 8 8217 1337 or sdasan@normans.com.au, or Ganesh Krishnan on + 61 8217 1395 or gkrishnan@normans.com.au or Anastasia Gravas on +61 8 8217 1331 or agravas@normans.com.au.

[1] CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1.
[2] ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2.