Employment and Industrial Law

Employee or independent contractor?

In Australia, the law has struggled to explain the concept of employment. The legal test for working out whether someone is an employee or an independent contractor is complex and unpredictable. A recent decision of Gostencnik DP in the Fair Work Commission has suggested that the law has failed to keep up with the changing employment trends in modern day Australia. This article will briefly summarise Gostencnik DP’s decision in Kaseris v Rasier Pacific V.O.F [2017] FWC 6610.

The issue in the case

The parties to the proceedings were:

  • Mr Kaseris; and
  • Rasier Pacific V.O.F.

Mr Kaseris was an Uber driver. He had entered into a services contract with Rasier Pacific V.O.F.

Rasier Pacific V.O.F was a Dutch partnership. It fell under the Uber brand. Rasier Pacific V.O.F provided Uber drivers with access to the software that allowed those drivers to connect with passengers. It also provided invoicing and money collection services to Uber drivers.

In the unfair dismissal proceedings, Mr Kaseris alleged that Rasier Pacific V.O.F was his employer. Rasier Pacific V.O.F denied that claim. It argued that Mr Kaseris was an independent contractor.

Only an employee is eligible to make an unfair dismissal application under the Fair Work Act 2009 (Cth). This meant the issue of whether Mr Kaseris was an employee or an independent contractor was of vital importance to the case.

The work-wages bargain

A necessary element of any employment relationship is the “work-wages bargain”. That is, there needs to:

  • an obligation on the worker to perform the work or services that the employer may reasonably demand under the employment contract; and
  • an obligation on the employer to pay the employee for that work or those services.

Without a work-wages bargain, the law (at least as it currently stands) will not recognise a worker as being an employee.

In the case of Mr Kaseris and Rasier Pacific V.O.F., Gostencnik found that there was no work-wages bargain between the parties. This is because:

  • the contract between the parties did not require Mr Kaseris to perform any work or services for Rasier Pacific V.O.F.; and
  • Rasier Pacific V.O.F. did not pay Mr Kaseris for any work or services.

Rasier Pacific V.O.F. charged Mr Kaseris a service fee. That fee was calculated as a percentage of the fare that Mr Kaseris charged his passengers. The service fee was consideration for services that Rasier Pacific V.O.F provided to Mr Kaseris.

The absence of a work-wages bargain between Mr Kaseris and Rasier Pacific V.O.F. meant that there was no employment relationship between those parties. For this reason, Mr Kaseris’ unfair dismissal application wholly failed.

The multi-factorial approach

Courts and tribunals in Australia will consider and balance the factual circumstances of a relationship between a principal and a worker to work out whether the worker is an employee or an independent contractor. This is called the “multi-factorial approach”. As Gostencnik said in paragraph [46] of his decision, “there is no single decisive criterion, to determine whether a contractual relationship is one of employment or one subject to a contract for services.”

A summary of the multi-factorial test can be found in Jiang Shen Cai trading as French Accent v Michael Anthony Do Rozario [2011] FWAFB 8307 at [30]. Because of its length, the test will not be replicated in this article.

Despite having found that Mr Kaseris was not an employee of Rasier Pacific V.O.F because of the absence of the work-wages bargain, Gostencnik DP went on to apply the multi-factorial test to further supplement his decision.

Control

Gostencnik DP accepted that Rasier Pacific V.O.F. had a small degree of control over Mr Kaseris. This is because Rasier Pacific V.O.F. could multiply the fares to be charged by Uber drivers at peak times, and it required its drivers to meet certain vehicle maintenance, and safety requirements.

However,  the Deputy President found that Mr Kaseris had a significant amount of control over how and when he did work. He could pick his own hours, pick which passengers he picked up, and decided whether he wanted to work at all. The high degree of control that Mr Kaseris had over his activities as an Uber driver indicated that he was an independent contractor.

Equipment

Mr Kaseris supplied his own vehicle, mobile phone, and internet connection. These factors indicated that Mr Kaseris was an independent contractor.

Uniform

Under the service contract, Mr Kaseris was not allowed to display Uber’s logo. The service contract did not require Mr Kaseris to wear a uniform. These factors indicated that he was an independent contractor.

GST

Mr Kaseris was responsible for registering for GST and passing that GST on to the Commissioner of Taxation. This indicated that Mr Kaseris was an independent contractor.

The terms of the contract

While not decisive, the terms of the contract between Mr Kaseris and Rasier Pacific V.O.F. set out that Mr Kaseris was a contractor and not an employee.

Other factors

Gostencnik DP found that the following other facts also indicated that Mr Kaseris was an independent contractor:

  • Mr Kaseris did not receive a wage from Rasier Pacific V.O.F.;
  • Mr Kaseris was responsible for managing his own tax affairs;
  • Rasier Pacific V.O.F did not provide Mr Kaseris with annual leave, sick leave or long service leave; and
  • Rasier Pacific V.O.F did not make any superannuation contributions to Mr Kaseris’ superannuation fund.

Gostencnik DP also found that while Rasier Pacific V.O.F. needed Uber drivers to make money, Mr Kaseris was not an integrated part of Rasier Pacific V.O.F.’s business. He found this consideration to be a neutral factor.

Summary of the outcome of the multi-factorial test

The application of the multi-factorial test to the relationship between Mr Kaseris and Rasier Pacific V.O.F indicated that Mr Kaseris was an independent contractor. As such, he was not entitled to bring an unfair dismissal application under the Fair Work Act 2009 (Cth).

Interesting remarks by Gostencnik DP

Gostencnik DP made the following remarks at paragraph [66] of his decision:

The notion that the work-wages bargain is the minimum mutual obligation necessary for an employment relationship to exist, as well as the multi-factorial approach to distinguishing an employee from an independent contractor, developed and evolved at a time before the new “gig” or “sharing” economy. It may be that these notions are outmoded in some senses and are no longer reflective of our current economic circumstances. These notions take little or no account of revenue generation and revenue sharing as between participants, relative bargaining power, or the extent to which parties are captive of each other, in the sense of possessing realistic alternative pursuits or engaging in competition. Perhaps the law of employment will evolve to catch pace with the evolving nature of the digital economy. Perhaps the legislature will develop laws to refine traditional notions of employment or broaden protection to participants in the digital economy. But until then, the traditional available tests of employment will continue to be applied.

Author’s comments

The digital and gig economies are disrupting the workforce, and undermining the minimum standards of employment that exist in the traditional employment relationship. Uber is a prime example of a large, multinational company using legal mechanisms to structure its workforce so that it does not need to pay basic entitlements such as annual leave, sick leave, long service leave and superannuation.

Gostencnik DP was right to suggest that Australia’s employment laws need to be modernised to capture the digital and gig workforce. The question is how does society achieve that change. Is it as simple as expanding the concept of employment to include the digital and gig workforce? If so, how is that expansion achieved in a practical sense?