Sharing is Caring: What Does the "Gig-Economy" Mean for Businesses?

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Sharing is Caring: What Does the "Gig-Economy" Mean for Businesses?

By Aaron Goonrey & Luke Scandrett*


The employment relationship has traditionally been described as similar to that of a master and servant, in which tasks are performed by a servant under the authority and control of the master.  However, the days of labouring in the same factory day after day are over for most modern "servants", as our globalised "gig-economy" encourages a much higher degree of mobilisation of labour, assets and business operations.  A person's apartment is no longer just their living space; it is a potential source of ongoing income as a spare room is rented out through Airbnb.  The commute home can earn individuals a few extra dollars if some time is spent driving others around as an Uber driver.  People looking for help with odd jobs can be matched up with individuals with both the specific skills and available time to assist through Airtasker.

 

It is already apparent that this new world of gig-businesses has a lot of potential for creating highly profitable ventures.   Flexibility and efficiency are required, allowing people's needs to be met faster than ever before.  Innovation is encouraged in what are (as the "gig-businesses" might argue) otherwise stale and traditional markets, such as the taxi industry.  The costs of running an enterprise can be significantly reduced if consumers are matched directly with suppliers.  Services may become far more accessible if people are able to reach them through the touch of a button on their phone.  Gig-workers may perceive that they have much more control over their working schedule.


The gig-economy has seen rapid growth in recent years.  The number of people in the USA working in the gig-economy grew by a multiple of more than 50 between 2012 and 2015,1 and Uber alone grew from having 160,000 active drivers in December 2014 to 400,000 in December 2015,2 and 600,000 in December 2016.3


However, while the existing employment landscape appears to be changing at a rapid rate, the law seems to be having difficulty adapting.  In addition, concerns have been raised in many quarters about worker exploitation and employers’ deliberate avoidance of employee entitlements.  This article will consider some of the ongoing legal issues which are currently in dispute or being placed in the spotlight by the advent of the gig-economy.


Contractors or employees?


In December 2013, a Sydney cleaning operator was fined over AUD$57,000 for breaching sham contracting laws by knowingly misclassifying a cleaner as a contractor, rather than as an employee.4  In the Federal Circuit Court of Australia, Judge Lloyd-Jones held that the sham contracting resulted in the worker being deprived not only of wages but also workers' compensation protection, the right to receive superannuation and statutory leave entitlements.  The Court further reprimanded the company for deliberately using sham contracting arrangements to undercut their workers and avoid their taxation obligations.


If misclassifying a cleaner as a contractor amounted to an A$57,000 fine, could gig-economy businesses such as Uber, Airbnb and Deliveroo fall foul of these penalties on a potentially monumental scale?  Are gig-economy businesses potentially denying workers the same minimum safety net of employment conditions to which employees are entitled under law by classifying them as independent contractors, or are they legally entitled to do so due to the unusual nature of their relationship?


In practice, the application of Australian employment and industrial laws to the gig-economy business model remains to be seen. 


In September 2016, a discussion paper released by an Australian peak trade union body raised concerns about the business model of the job-posting website Airtasker, and its failure to adopt standard employee entitlements, such as penalty rates and the minimum wage.5  Airtasker was formed in 2012 as a "marketplace" that connects people who want small jobs of all kinds to be performed, with workers who want to perform them. 


In the short term, the trade union body asked Airtasker to negotiate better pay and conditions for its "workers", including workers' compensation insurance and superannuation obligations being taken on by Airtasker in return for the fee received by Airtasker for each transaction.6


However, more fundamentally, the potential issue comes down to whether the jobseekers on Airtasker's website can even be considered its employees from the outset.  Airtasker could argue that its function is much like a recruitment consultant or business matchmaker, who introduces jobseekers to other organisations that will hire their services.  On the other hand, it is open for trade unions to assert that the level of dependency of Airtasker's "taskers", combined with its level of control of the "taskers'" activities, points towards an employer-employee relationship.  After all, Airtasker takes a 15% cut of earnings and regulates the behaviour of its "taskers", including by restricting them from further outsourcing tasks. They also reserve the power to remove them from the platform if required.


As test cases are currently being prepared against Airtasker as well as gig-economy companies such as Foodora and Deliveroo, stakeholders in the gig-economy are watching closely.  At the very least, the Airtasker case study serves as an example of the issues waiting to be tested as Australian law begins to grapple with the nature of the gig-economy phenomenon. 


Uber in the spotlight


It is helpful to look to other jurisdictions for their view on this issue.  In the US, for example, legal battles about employment classifications of this kind are not a new phenomenon.  In 2014, FedEx lost a long-standing legal battle brought by its drivers, in which it was forced to reclassify the workers as employees. 


Recently, Uber has faced more law suits in the US federal courts than any other US start-up valued at $10 billion or more, and again, the question of employment classification is being raised.  For example, in June 2016, a pair of former Uber drivers filed dual class action law suits against Uber and Lyft over the companies' abrupt exit from the Austin market, claiming that the companies failed to properly notify their alleged "employees", being the Uber and Lyft drivers. 7  Uber and Lyft contend that their drivers are not employees, but independent contractors.  The companies ended operations in Austin in May 2016 after new city regulations required ride-hailing drivers to undergo fingerprint-based background checks.  The claim could potentially force the companies to pay out the drivers' wages and entitlements during the requisite 60-day notice period. In any event, the claim represents yet another challenge to Uber's assertion that the drivers do not fall into the category of employees and are therefore not entitled to these benefits. 


Looking beyond the written word


In the UK, an employment tribunal recently considered whether two Uber drivers were "workers" and not independent contractors for the purposes of determining their entitlements to minimum wages, holiday pay, sick pay and breaks at work.8  In making its findings, the tribunal determined that the terms of the contract between Uber and its drivers were mere "fictions" when compared with the reality of the parties' relationship of employment.  Uber's documents were further described as using "twisted language and…brand new terminology” which “bears no relation to the real dealings and relationships between the parties”.  The Tribunal further added that "The notion that Uber in London is a mosaic of 30,000 small businesses linked by a common ‘platform’ is to our minds faintly ridiculous… Drivers do not and cannot negotiate with passengers… They are offered and accept trips strictly on Uber’s terms.”  Uber is currently challenging this decision.


This UK decision draws attention to the fact that gig-businesses should pay careful attention to how the work is actually being performed, as the contractual provisions describing the relationship may not be enough to convince a court or tribunal.  It is possible that they may be found to be in breach of laws, such as Australia's sham contracting legislation, which prohibits passing off an employment relationship as being that of an independent contractor.  The decision may also have repercussions in the long term for how similar issues are dealt with around the world. 


Discrimination and safety in the gig-economy


Aside from employee misclassification suits, gig-businesses could also be susceptible to discrimination law battles, particularly in the disability sphere.  For example, the Attorney General of Massachusetts is investigating whether Uber and Lyft ensure equal access for people with disabilities.9  Uber initially contended that it was not bound to comply with the relevant disability laws because it was primarily a technology company.  However, it subsequently took steps to improve conditions for the disabled community, such as offering a Wheelchair Accessible Vehicle product.   


There have also been questions raised in relation to gig-businesses' obligations under safety regulations.  Claims have been brought across Europe challenging the assertion that Uber is primarily a technology company and instead arguing it is a transportation company that should be subject to local safety and transport regulations governing professional taxi drivers' activities.  Australia's model work health and safety legislation may provide some support to this contention.  These laws are not just confined to employers. They apply to any 'person conducting a business or undertaking',10 and impose obligations on those people to do what is 'reasonably practicable' to minimise risks and ensure health and safety,11 whether that be Uber or its drivers.


Moving forward in the gig-economy


There are many opportunities for innovation in the gig-economy.  Entrepreneurs and businesses are continually searching for new ways to generate revenue from a flexible workforce.  It may be the norm in the future for the majority of people to be engaged on a "gig-basis".  While numerous sections of the community stand to benefit from the many advantages of these new models of work, issues such as employment/contractor relationships, discrimination and safety obligations must first be considered and addressed by businesses and legislators.


4 Fair Work Ombudsman v Jooine (Investment) Pty Ltd & Anor [2013] FCCA 2144 [118].

5 Unions NSW, Innovation and Exploitation? Busting the Airtasker Myth (September 2016).

10 For example, see section 5 of the Work Health and Safety Act 2011 (NSW).

11 See section 18 of the Work Health and Safety Act 2011 (NSW).


 

* Aaron Goonrey is a partner and Luke Scandrett is a solicitor in the Workplace Relations & Safety Practice Group in the Sydney office of Lander & Rogers.  Mr Goonrey can be contacted at agoonrey@landers.com.au.  Mr. Scandrett can be reached at lscandrett@landers.com.au.  

 

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Melbourne,
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Sydney,
Friday, March 31, 2017
Labor & Employment