A recent Deliveroo decision emphasises the importance for organisations to accurately characterise worker engagements in comprehensive, written contracts.

A Full Bench of the Fair Work Commission (FWC) has delivered an important decision, finding that a Deliveroo delivery rider – Diego Franco – was an independent contractor, and not an employee of Deliveroo.

In overturning an earlier decision that said Franco was an employee, the Full Bench applied the reasoning in two recent High Court decisions and reiterated that the terms in a written and comprehensive contract, rather than post-contractual conduct, will determine whether someone is an employee or independent contractor.

Important background for this case

Franco worked for Deliveroo as a delivery rider – as well as working for other delivery platforms, including Uber Eats and DoorDash. Franco signed several ‘supplier agreements’ throughout his three years working with Deliveroo. 

In April 2020, Deliveroo identified Franco as a delivery rider with delayed delivery times. Deliveroo then sent him an email, advising him that the delays breached his ‘supplier agreement’ and terminated the agreement.

Franco lodged an unfair dismissal application against Deliveroo. At first instance, Commissioner Cambridge found that:

• Franco was employed by Deliveroo. He was not an independent contractor. Mr Franco was therefore protected from unfair dismissal;
• Franco was unfairly dismissed; and
• Franco should be reinstated and paid back pay.

Deliveroo appealed Commissioner Cambridge’s decision to the Full Bench, which handed down its decision on 17 August 2022 (Deliveroo Australia Pty Ltd v Diego Franco [2022] FWCFB 156).

What did the Full Bench decide on appeal?

Based on the latest ‘supplier agreement’ Franco signed, the Full Bench decided that Franco was not an employee; rather he was an independent contractor. 

The Full Bench came to this conclusion because the relationship was governed by a comprehensive written agreement that had several features which demonstrated that Franco was an independent contractor, including that the agreement:

• showed Deliveroo’s lack of control over how Franco performed the deliveries he agreed to make (it was up to Franco to determine how he performed the work – including which a ‘safe and efficient’ delivery route to take and what vehicle he would use to make the delivery)
• recorded that Deliveroo could not require Franco to perform any particular delivery – Franco had the right to “unassign” himself from an order even if he had earlier accepted the order
• required Franco to provide a vehicle to make deliveries at his own expense
• did not require Franco’s personal service, as he could arrange, without Deliveroo’s prior approval, for someone else to make his deliveries
• required Franco to pay an “administrative fee” for the cost of accessing Deliveroo’s software and for Deliveroo providing invoices and other administrative services.

As the Full Bench found Franco was not an employee, he was therefore not protected from unfair dismissal.

Why did the FWC change its mind?

The Full Bench said Commissioner Cambridge’s initial decision was ‘correct’ given the law at the time, but recent High Court cases led the Full Bench to reverse its decision.

Deliveroo’s appeal was put on hold pending the High Court decisions in CFMMEU v Personnel Contracting and ZG Operations v Jamsek. As explained in a previous Maddocks’ article, those decisions changed the law. Whether an individual is an employee or independent contractor is now to be almost exclusively answered by reference to the terms of the written contract made between the parties. 

See HRM’s wrap-up of these two high court cases.

When the nature of an engagement is comprehensively contained in that written contract, the ‘substance and reality’ of the working relationship and how the parties later interact is irrelevant. It is only when the written contract is less than comprehensive that the parties’ working relationship and interactions may come into play in deciding the true nature of that working relationship.

After these cases were decided in the High Court, the appeal resumed and the Full Bench found that the terms of Franco’s supplier agreement with Deliveroo rendered him an independent contractor. 

Interestingly, had the High Court decisions not been made, the Full Bench stated that it would have found that Franco was an employee of Deliveroo by reference to the reality of the relationship between the parties.

What are the key takeaways from this decision?

This case serves as an important reminder that:

1. Drafting is critical. Organisations need to clearly record the terms and conditions of an engagement in a comprehensive written contract which identifies whether an individual is an employee or an independent contractor, and includes terms appropriate for a contracting relationship. If this is done, it no longer matters how the parties interact after the contract is signed.

2. A job label is insufficient. Attaching a superficial label to the relationship as one of an ‘independent contractor’ – and imposing tax and insurance obligations on an individual because of that label – will be insufficient if the agreement contains terms which are characteristic of an employment relationship.
3. If there is a less than comprehensive contract, the ‘totality of the relationship’ matters. How the parties interact with each other will determine the relationship if a contract is less than comprehensive, or is ineffective or a sham. This creates uncertainty for organisations that do not have comprehensive contracts in place, with the potential for disputes, liability for employee entitlements and prosecution.
4. If you are intending to engage an independent contractor ensure the contract minimises the level of control and direction you have over the provision of the worker’s services. You could do this by, for example, including terms that:

• Allow discretion as to how services are provided
• Require the worker to purchase specific equipment to provide the services
• Do not require personal service
• Require payment of fees to use systems and access administrative services

5. Watch this space. The Full Bench’s decision will give greater momentum to calls for the Federal Government to take steps to introduce greater regulation and protections for workers in the gig economy and independent contractors more generally – to address what even the Full Bench itself described as the unfair treatment of Franco.

This article has been re-published with permission. It was originally published on the Maddocks website. You can view the original article here. Michael Nicolazzo and Bruce Heddle are Partners in the Employment Safety & People team at Maddocks law firm, and Emily Peachey is a graduate lawyer.