News & Insights

In a recent decision, the Fair Work Commission (FWC) has ruled that a Deliveroo driver was an employee, rather than an independent contractor, of the food-delivery giant.

While Deliveroo has indicated it will look to appeal the decision, if upheld, the decision may have wide-reaching ramifications for gig workers and the regulation of digital platform companies throughout Australia.

diego franco v deliveroo australia pty ltd

The case involved an unfair dismissal application brought by Deliveroo driver, Mr Franco, against Deliveroo Australia Pty Ltd (Deliveroo).

Mr Franco had worked for Deliveroo for three years when he received an email notification from Deliveroo indicating his “supplier agreement” would be terminated within a week due to his slow deliveries. Mr Franco sought to challenge his termination.

was mr franco an employee or independent contractor?

Deliveroo objected to the unfair dismissal application on the basis that Mr Franco was an independent contractor, rather than an employee, and that Mr Franco did not therefore have standing to bring an unfair dismissal application.

The FWC rejected Deliveroo’s claim and found Mr Franco was in fact an employee. The FWCs decision was based on Deliveroo’s level of actual control, as well as its potential to control, the work that Mr Franco performed, including in relation to when, where and for how long Mr Franco worked.

was mr franco unfairly dismissed?

In relation to Mr Franco’s dismissal, the FWC noted that Deliveroo did not provide Mr Franco with a valid reason for dismissal or an opportunity to respond to the allegations against him, as required under the Fair Work Act 2009 (Cth). In particular, Deliveroo did not inform Mr Franco of the delivery times it expected. As a result, a failure to deliver food within a reasonable time was not a valid reason for dismissal. Further, Deliveroo admitted that it did not seek a response from Mr Franco prior to terminating his “supplier agreement”.

reinstatement order

The decision is also significant because the FWC took the unusual step of ordering that Mr Franco’s employment with Deliveroo be reinstated. Although technically the primary remedy, reinstatement orders are only awarded in approximately 15% of Unfair Dismissal cases brought before the FWC. Mr Franco also received restoration of lost pay and continuity of service.

In making the reinstatement order, the FWC noted that “irrespective of whether Mr Franco was a contractor or an employee, it was plainly unconscionable to terminate what would be well understood to be his primary source of income, without first hearing from him.”

key lessons

Digital platform companies, such as Deliveroo, frequently classify their workers as independent contractors, rather than employees based on the particular terms of their engagement. As a result, workers are not entitled to receive the protections and entitlements afforded to employees, such as unfair dismissal, sick leave, and the minimum wage.

If the FWCs decision is upheld on appeal, many digital platform companies are likely to consider restructuring their existing business models and further pressure will be placed on the federal government to implement legislative reforms to regulate the gig-economy.

If you engage independent contractors and particularly if your business is in the gig-economy, and would like practical and tailored advice regarding the implications of this decision for your business, please contact our Employment, Safety and Migration team.