Fair Work Ombudsman Commences Legal Proceedings Against Foodora

Monday 18 June 2018 @ 9.27 a.m. | Industrial Law | Legal Research | Trade & Commerce

In a recent Media Release from the Fair Work Ombudsman (the “FWO”), it was announced that legal proceedings against food delivery company Foodora Australia Pty Ltd (Foodora) have commenced in the Federal Court of Australia (NSW Registry).  The FWO alleges that the company has engaged in sham contracting activity that resulted in the underpayment of workers.

Background

The FWO alleges that Foodora engaged three workers in 2015, with the company allegedly breaching sham contracting laws by misrepresenting the workers as independent contractors, rather than employees of the company, this was despite each worker having an ABN and signing an Independent Contractor Agreement with Foodora.

It is also alleged that the workers’ responsibilities and conditions meant they should have been considered employees, and were therefore entitled to minimum wage rates and entitlements as per the Fast Food Industry Award.

Allegations of Underpayment

The FWO also alleges the three workers suffered a loss of $1,620.74 over a four-week period, additionally, it is alleged that Foodora failed to make any superannuation contributions on behalf of the three workers.

Most of the underpayment relates to the Sydney delivery driver, who worked significantly more hours than the two Melbourne workers over the four-week period.

After applying the multi-factor test to consider whether workers were “employees” entitled to minimum wages and conditions under the Fair Work Act 2009 (Cth) (the “Act”) or “independent contractors”, the FWO alleges the three workers were actually employees of Foodora during the relevant period for a range of reasons, including:

  • the level of control, supervision and direction Foodora exercised over the workers’ hours, location and manner of work;
  • the requirement for the workers to wear a Foodora-branded T-shirt and use food storage boxes and/or bike racks supplied by Foodora;
  • Foodora paid the workers fixed hourly rates and/or amounts per delivery and the workers did not negotiate their rates of pay at any time; and
  • each of the workers was not genuinely conducting their own delivery business, in that they did not advertise or promote their availability to perform deliveries to the public; did not delegate their delivery duties with Foodora to any other person; and did not have their own customer base, business premises and insurances.

Comment from the FWO

Fair Work Ombudsman Natalie James says that sham contracting is a priority for her agency, not just because of the direct impact of these arrangements on individual workers but because those adopting sham contracting as a business model are availing themselves of an unfair competitive advantage by depriving workers of their lawful minimum employment conditions and protections. Ms James said:

“Relevant to the decision to litigate in this case is the extent to which contracting arrangements are utilised by this significant business. There has been broad community and academic debate about the status of 'models' using smartphone-driven technology as a means for deploying a workforce that delivers food to consumers from restaurants and fast food outlets. The only way to answer the question of whether the workers delivering the meals are employees or ‘independent contractors’ is for someone to ask a court to consider the specific 'relationships' between a company and its workers. As the national workplace relations regulator, the Fair Work Ombudsman is now putting this question of significant public interest before a court to consider.”

Potential Penalties

It is alleged Foodora committed several breaches of the Act and that they could also face penalties of up to $54,000 per contravention. The FWO is also seeking a Court Order for Foodora to back-pay the workers in full and make superannuation contributions on their behalf.

Response from Foodora

A spokesperson for Foodora said the company was unable to comment, due to the case being before the courts, but said the company would be:

“… defending the claims and accusations that have been made against the business.”

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