New Economy Journal

Exploitation in the gig economy: Lee Lin Chin is having Uber Eats, why shouldn’t I?

Volume 1, Issue 2

May 9, 2019

By - Laura Blandthorn

Piece length: 2,355 words

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The ‘gig economy’ describes a recently developed industry of ‘on demand’ workers engaged to complete work through smartphone apps. Download an app, select a service or product, and it’s at your door. The work and services provided vary, and include the delivery of food and alcohol, transportation, trades and accommodation. Well known platforms include Uber, Deliveroo, Foodora, Easi, Tipple and Air tasker. The so called ‘legitimate business’ model has even permeated into the supply of the illicit.[1]

Despite the numerous reports of exploitation and wage theft, the celebrity endorsements seem to be ringing in for gig economy platform Uber. Darlings of the Australian screen including Lee Lin Chin, Ruby Rose, Sophie Monk, Rebel Wilson and Ray Martin are happily selling their smiles in Uber’s ‘tonight I’ll be eating’ campaign.

The gig economy spawned in the neo-liberal afterglow of the global financial crisis (‘the GFC’) and rapid development of smart devices.[2] The wave of job insecurity that flowed from the GFC meant “the fairy-tale” of workers “unshackled from unilaterally imposed work rules and hours and controlling bosses” was an easy sell,[3] particularly for those out of a job or engaged in education and training. The ‘side gig’ pitch is also increasingly appealing to those in the throes of wage stagnation.

Uber is the most prominent corporation in this field. In the modern dialect, Uber is synonymous with people’s movements in cities. It is now one of the “largest used means of private transportation across the globe”.[4] Curiously, when Uber faced challenges, here and in the UK, to its classification of drivers as independent contractors it argued that Uber merely provides “lead-generation software”, which enables users to access drivers and customers, and that they are in no way affiliated with providing transport.” This is in stark contrast to the vision outlined in a recent Four Corner’s program, ‘The Uber Story’, by Uber’s Vice-President and Chief Product Office, Manik Gupta. Mr Gupta said,

‘We want to be the one stop transportation platform for the world. So you as a user come to Uber, you say you want to go from point A to point B and we'll provide you all kinds of options that allow the user to choose the right price point and convenience for themselves and be on their way.”

Why the discrepancy?

Uber and other companies within the gig economy categorically deny engaging or treating workers as employees. Instead, as mentioned, these platforms engage their workers as independent contractors, workers traditionally understood to carry on their own business. There is no precise meaning of the phrase and Australian legislation provides little clarification.[5] In the world of work, an independent contractor is required to have their own ABN, manage their own income taxation and organise their own personal liability insurance. Independent contractors are their own boss; set their own hours; , perform their work as they please; and solicit work from multiple sources.

Uber and the like present their platforms as empowering the modern worker. The reality is, however, that the gig economy has created a wave of precarious work[6] which exploits the vulnerable and undercuts the rights and entitlements of workers, the industrial relations system and law-abiding businesses.[7]

From a legal perspective, gig economy platforms are structured so as to present drivers as small business owners or self-employed persons. So-called ’digital distributors’ engage workers as independent contractors because it allows them to cut the cost of labour, create insecurity (and, hence, dependence) amongst their workforce and avoid paying worker entitlements. Under the Fair Work Act 2009 (Cth) (‘the Fair Work Act’), independent contractors are not entitled to a minimum wage, penalty rates, overtime, minimum and maximum hours of work, personal (sick) leave, annual leave, long service leave, redundancy and protection from unfair dismissal. These benefits are only afforded to workers that are employees at law.[8]

The distinction in entitlements is based on the premise that employees are a servant of their master and should therefore be protected from the inherent power imbalance in that relationship.[9] The entitlements of employees have been hard fought for by workers and their Unions - they did not just fall out of the sky - and their erosion is devastating. In the United Kingdom and France, the window-dressing has been torn down with rulings that Uber drivers are employees. This confirms that these workers, rightfully so, are entitled to things such as minimum rates of pay, paid leave and workers compensation. However, in the United States a win for the workers was short-lived, with drivers found to be independent contractors on appeal.

In Australia, the gig economy is accused of ‘sham contracting’, or drafting employment contracts disguised as independent contractor arrangements. This which constitutes an offence under the Fair Work Act, [10] and the courts have stated that “parties cannot create something which has every feature of a rooster, but call it a duck and insist that everybody else recognise it as a duck”.[11] However, establishing that an independent contract arrangement is a sham is not a clear cut affair because the term employee is not defined under the Fair Work Act.[12] When courts or tribunals are asked to determine the status of a worker they must apply what is called a “multi-factor test”, which looks to the “totality of the relationship between the parties”.[13] Such an approach muddies the waters for workers trying to determine their rights, entitlements and obligations. The table below summarises the factors presently considered in determining when a worker is an employee or an independent contractor.

Table 1.1 [14]

Factors that indicate an employment relationshipFactors that indicate a contracting relationship
  • The hirer has the right to detailed control over the work including how and when it is done.
  • The hirer has the right to sanction, suspend or dismiss the worker.
  • The worker is integrated into the organisation.
  • The worker is an emanation of the hirers business through the display of material that associates the worker with ‘hirer’ such uniforms and logos.
  • The worker does not bear the risk of loss.
  • The worker has no freedom to contract with others or sub contract out their duties.
  • The worker does not manage taxation deductions.
  • The worker is paid sick leave, holiday pay and superannuation.
  • The work involves a profession, trade or distinct calling on the part of the person engaged.
  • The workers supplies their own equipment (the greater the cost, the greater weight this factor bears).
  • The worker is paid on task completion rather than hours worked.
  • The worker bears the risk of loss, is responsible for insurances and is not covered by workers compensation schemes.
  • The worker performs work for others (or has a genuine and practical entitlement to do so).
  • The worker creates goodwill or saleable assets in the course of his or her work.
  • There is a right to delegate the work and subcontract that can actually be used.

The need to apply a multi-factor test generates a grey area which legitimises worker exploitation. Gig economy platforms seize on this ambiguity and impose conditions on their workers beneficial to themselves and their shareholders, while denying workers access to the employment indicators that most benefit them. Workers enter into standard form contracts and are given very little bargaining power. For example, in the case of Foodora riders, the exchange of job security for flexibility is implicit in the arrangement. In reality, riders are not allowed to subcontract their work, change work times without sanction or control the way the work is performed.[15] The multi-factor test encourages ‘gig economy’ platforms to have their cake (delivered to their door) and eat it too.

The assessment is not a mechanical tally; it requires the decision maker to step back and ask ,“does the relationship look like an employment relationship or a relationship between a principal and a contractor?” Ultimately, “the distinction … is rooted fundamentally in the difference between a person who serves his employer in … the employer’s business, and a person who carries on a trade or business of his own”.[16]

This fundamental difference is being obfuscated when the factors are applied in the context of the gig economy. The Fair Work Commission has twice concluded that Uber drivers are independent contractors.[17]

However, the decisions regarding Uber in Australia do not mean that the matter is settled. Both decisions were made at the tribunal level and therefore lack the judicial weightiness required to resolve such a significant issue. This is particularly so in the case of Mr Pallage, where the driver was self-represented and the Tribunal member stated in their decision that evidence on various factors was not presented.

In addition, the Fair Work Commission emphasised that cases involving sham contracting in the gig economy need to be decided on a case by case basis as a change in factual circumstances can easily shift a reading of the true nature of the relationship.[18] Furthermore, Deputy President Gostencnik noted the problem with multi-factor tests in the context of the gig economy by stating that law had not kept pace with the evolving nature of the digital economy.[19]

There is increasing pressure from the union movement to change the rules to close loopholes that undercut the wages and conditions of workers. With an election around the corner, the shelf life of the sham may soon expire.

In the United Kingdom, the law is different: there is a legislative definition of an employee which focuses on the control between the parties and whether the worker is operating their own business.[20] The narrower legal test resulted in a Court of Appeal judgement against Uber, which concluded that drivers are in fact employees and entitled to the benefits that flow from that status, such as a minimum wage. The factors indicating that the driver was not really running their own business received a more nuanced analysis and was given more weight. This included a discussion of how Uber presented workers to the world as an emanation of their own brand: we do not say “let’s get a personal driver”, we say “let’s get an Uber”.

The manner in which the Uber app operated to direct the worker was critical to the UK decision. The reality of the manner in which the app was used came to the fore because, contrary to the analysis that was required by the Fair Work Commission in Australia, the UK Court of Appeal could confine the question of control to when the worker was at work (logged into the app). [21] As a consequence, a more realistic picture of the manner in which the app directed the worker was painted. In addition, the question of control was not muddied by the plethora of traditional factors required by Australia’s multi-factor approach.

Although the law in Australia could certainly be improved, legal reform is not enough. Society needs to side with the worker and make sure advancements in technology mean the rights and entitlements of workers are also advanced – or, at the very least, maintained.

Independent contractors in Australia are not entitled to collectively bargain; this means they cannot band together like employees to negotiate pay and conditions.[22] Nevertheless, they are able to join their relevant trade union. The union movement has been effectively organising workers in the gig economy; is successfully campaigning against sham contracting and the exploitation of riders and drivers; and has made significant ground in bringing their concerns to the attention of Parliaments.[23]

In 2018, a Foodora rider name Joshua Klooger attended a “rights for riders” rally, organised by the Transport Workers Union (TWU). He subsequently spoke out against Foodora’s reduction of pay rates on television, which caused Foodora to terminate his contract. Mr Klooger, with the support of the TWU, challenged the termination of his contract, arguing that he was in fact an employee and therefore protected from unfair dismissal. He was successful..

This is an important win against a company that significantly undercuts the protections and rights that have been hard fought for and won by Australian workers. The glaring issue in Foodora’s business model is that of wage theft and the absence of equal pay for equal work. In terms of wage theft, the rates of pay are lower than those under the applicable Award. Initially drivers received $14.00 per hour plus $5.00 per delivery. Making at least one delivery an hour means that a worker could earn about $21.00 or more depending on how fast they rode, the distance between the jobs and the restaurant and the number of jobs available. However, over time, and as more drivers signed on, the rates reduced. In 2016, the hourly rate for new workers dropped to $13.00 per hour plus $3.00 per delivery with a $1.00 delivery payment for Friday, Saturday and Sunday night work. Late in 2016, the hourly rate was removed and there was a flat $10.00 delivery payment. This dropped to $7.00 per delivery in February of 2018.

The difference in the outcome for the Uber drivers and Mr Klooger can be attributed to the fact that the contracts between Foodora and its riders have more factors that are considered to indicate an employment relationship - a good reminder of the need to examine each gig economy arrangement on its facts, which can change over time.

As a result of their loss, and an impending case for sham contracting brought by the Fair Work Ombudsman, Foodora has ceased to operate in Australia. Foodora say the reason for their swift exit was to 'shift [its] focus towards other markets where the company currently sees a higher potential for growth'. Reading between the lines, it is fair to say their ability to grow their business would be significantly disrupted by cases, like Mr Klooger’s, alleging wage theft and multiple breaches of the Fair Work Act.

Next time the likes of Lee Lin Chin and Rebel Wilson are encouraging you to join them in “eating in”, pause and consider the precariousness of the worker delivering you your meal. All of us in the New Economy Network Australia should be supporting changes that protect workers in the gig economy and educating our friends about the fallacy of the fairytale.

Foodora, Deliveroo and Uber were contacted for comment but did not provide a response.


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