Ride with me – Food delivery bicycle riders and sham contracting

Last month, the Young Workers Centre in Victoria and Maurice Blackburn Lawyers announced their partnership in a new campaign called Rights for Riders. The campaign will aim to improve safety, pay and conditions and job security for food delivery bicycle riders engaged by on demand food delivery services.

In addition to Rights for Riders, Maurice Blackburn has also flagged the possibility of running a test case centred on sham contracting and minimum entitlements for food delivery bicycle riders. The case will be based on concerns that riders are not being properly classified as independent contractors and may in fact be employees. The implication is that the companies may be engaging in sham contracting.

What is sham contracting?

Sham contracting occurs when an employer tells an employee that they are not an employee, but an independent contractor. In effect, the employer misrepresents the employment relationship to the worker and leads them to believe that they are not entitled to employment benefits, when in fact they are.

Why is sham contracting such an issue?

Firstly, it is a contravention of the Fair Work Act 2009 (Cth) for an employer to represent to an employee that they are an independent contractor when they are in fact an employee.

Workers engaged as independent contractors are not entitled to the same minimum safety net of conditions that employees are entitled to under Australian law. So, in classifying an employee as an independent contractor, an employer is denying that employee access to the minimum wage, annual leave and other basic employment entitlements.

How can you tell the difference between an independent contractor and an employee?

In very simple general terms, independent contractors are their own boss – they enter into a contract for services with another party (in this case the on demand food delivery services) and use their own equipment to carry out a task or project that they are then paid for. Usually, independent contractors will have their own ABN and will invoice the other party for their services.

Employees on the other hand are subject to a contract of service where they use the equipment provided by an employer to do work as directed by the employer. In essence, the employer exerts a level of control over how the work is done that is greater than the control exerted over someone delivering services under a contract for services.

One of the reasons the issue of misclassification comes up frequently is because of the challenges associated with the “multiple indicia test” – the common law legal test used by the courts to establish whether a worker is an employee or an independent contractor. As the name suggests, the test involves assessing a range of factors and weighing those factors against each other to reach a conclusion about the classification of the worker. There is no set list of factors and the factors that are considered will be different in each case.  

Some of the factors that a court might consider for a test case such as the deliver riders case include:

  • Who decides when and for how long the riders work?
  • Do the riders invoice the company for their services, rather than get paid a wage?
  • Do the riders wear a uniform?
  • Do the riders provide all their own equipment, such as their bike and delivery boxes?
  • Who pays for insurance?

What would the test case mean for employers?

The test case is likely to centre specifically on “disruptive” companies that are focused on new business models such as on demand and share economy operations.  If it goes ahead, the case could provide some valuable guidance for other disruptive businesses entering the market on how to engage workers without breaching Australian workplace laws. 

Shane Koelmeyer is a leading workplace relations lawyer and Director at Workplace Law. Workplace Law is a specialist law firm providing employers with legal advice, training and representation in all aspects of workplace relations, employment-related matters and WH&S.

02 9256 7500 | sydney@workplacelaw.com.au

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