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Foodora faces court for ‘sham contracting activity’

Adam Zuchetti
Adam Zuchetti
12 June 2018 1 minute readShare
Court, justice

Food delivery service Foodora has been taken to court amid allegations of “sham contracting activity” against workers; it is the latest gig economy provider to attract scrutiny for unfair practices.

The Fair Work Ombudsman (FWO) filed action against Foodora in the Federal Court, pertaining to three delivery workers engaged in 2015 and who worked for the company in 2016.

Foodora is alleged to have misrepresented its terms of employment, telling two bicycle delivery riders in Melbourne and one driver in Sydney that they were independent contractors, when in fact they were direct employees of Foodora.

Each of the workers was required to obtain an Australian Business Number (ABN) and sign an Independent Contractor Agreement.

Having tested the validity of these contracts, the FWO is alleging that the individuals should have been classified as employees because of:

  • The level of supervision and oversight exercised by Foodora
  • Foodora’s requirement that the workers wear its on branded garments and equipment
  • Foodora paying fixed rates on an hourly or per delivery basis
  • The workers “not genuinely conducting their own business”

If found guilty of the FWO allegations, Foodora could face penalties of up to $54,000 for each breach, in addition to repaying the trio in award wage entitlements, casual loading and superannuation.

“Relevant to the decision to litigate in this case is the extent to which contracting arrangements are utilised by this significant business,” said Ombudsman Natalie James said.

“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.”

Ms James suggested it is an all too common practice for businesses to incorrectly label workers as contractors.

“Courts have found again and again that merely labelling the relationship to be one of independent contracting does not make it so, and it is the substance of the relationship that decides the status of the workers and the regulatory requirements that flow,” she said.

“The activity of delivering food from restaurants and fast food outlets to customers is not new, and nor is the ‘test’ for what determines who is and is not an employee entitled to award rates.”

A spokesperson for Foodora declined to comment while the matter is before the courts, other than to say “Foodora will be defending the claims and accusations that have been made against the business”.

The case comes as Foodora competitor Uber Eats is being investigated by the ACCC for alleged breaches of unfair contract provisions.

Foodora faces court for ‘sham contracting activity’
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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