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Contractors or Employees? Uber Drivers and the Kaseris case

January 19, 2018

In Kaseris v Rasier Pacific V.O.F [2017] FWC 6610 (21 December 2017) (Kaseris), the Fair Work Commission (FWC) held that an Uber driver was an independent contractor, not an employee. This decision could impact all workers and businesses which form part of the so-called “gig economy”. Kaseris summarises the factors which may be considered in distinguishing between employees and independent contractors. Importantly, the Kaseris case also distinguishes the Australian position from a recent UK decision, Aslam and others v Uber B.V. and others [2017] IRLR 4 (Aslam). Multiple rulings in overseas courts have found that Uber owes certain employee entitlements to its drivers. However, the Kaseris decision supports Uber’s argument that it is not an employer, but simply an intermediary connecting drivers with customers.

 

Facts of the Kaseris case

 

Mr Kaseris worked as an Uber driver from 29 August 2016 until 11 August 2017, when his service agreement was terminated for poor passenger ratings. He applied to the Fair Work Commission (FWC) seeking an unfair dismissal remedy. Uber argued that Mr Kaseris was not protected from unfair dismissal because he was an independent contractor, not an “employee” within the meaning of section 386(1)(a) of the Fair Work Act 2009 (Cth) (FW Act). The FWC agreed, holding that the relevant indicators of an employment relationship were absent. The application was dismissed.

 

The work-wages bargain

 

Deputy President Gostencnik stated that an employment contract is fundamentally a work-wages bargain. In other words, the “minimum mutual obligation necessary” to create an employment relationship is a contract where:

  • the worker has an obligation to perform work or services that may reasonably be demanded under the employment contract, and

  • the employer has an obligation to pay the worker for such work or services.

 

Mr Kaseris was held not to be an employee due to the lack of a work-wages bargain in his relationship with Uber.

 

 

Employees or contractors? The multi-factorial approach

 

All employers must ensure that their workers are correctly classified to avoid contravening the sham contracting provisions under the Fair Work Act 2009 (Cth). At paragraph 53 of the Kaseris judgment, Deputy President Gostencnik summarises the multi-factorial approach to distinguishing between employees and contractors. In doing so, he draws upon the earlier Full Bench decision in Jiang Shen Cai trading as French Accent v Michael Anthony Do Rozario [2011] FWAFB 8307.

 

The key question to ask is “whether the worker is the servant of another in that other’s business, or whether the worker carries on a trade or business of his or her own behalf”.

In answering this question, the totality of the relationship must be considered, including the terms of the contract and the nature and manner of the work performed.

 

A contractual term which expressly states that the worker is an independent contractor cannot take effect if it contradicts the effect of the contract as a whole. In other words, the parties cannot deem the relationship to be something it is not.

 

A multifactorial approach must be taken and the weight to be given to each factor “will vary according to the circumstances”. What follows is a non-exhaustive list of factors which may be considered: 

 

  • Whether the putative employer exercises, or has the right to exercise, control over the manner in which work is performed, place or work, hours of work and the like. 

  • Whether the worker performs work for others (or has a genuine and practical entitlement to do so).

  • Whether the worker has a separate place of work and/or advertises his or her services to the world at large.

  • Whether the worker provides and maintains significant tools or equipment. 

  • Whether the work can be delegated or subcontracted. 

  • Whether the putative employer has the right to suspend or dismiss the person engaged.

  • Whether the putative employer presents the worker to the world at large as an emanation of the business. 

  • Whether income tax is deducted from remuneration paid to the worker. 

  • Whether the worker is remunerated by periodic wage or salary or by reference to completion of tasks. 

  • Whether the worker is provided with paid holidays or sick leave.

  • Whether the work involves a profession, trade or distinct calling on the part of the person engaged.

  • Whether the worker creates goodwill or saleable assets in the course of his or her work.

  • Whether the worker spends a significant portion of his remuneration on business expenses.

 

In some cases, a consideration of these factors may overwhelmingly point one way. However, it is incorrect to simply take a mechanical “check list” approach. Rather, “an informed, considered, qualitative appreciation of the whole” is required. If the result remains uncertain, the outcome should be guided by “concerns underlying the doctrine of vicarious liability”.

 

 

Factors relevant to Mr Kaseris

 

Deputy President Gostencnik followed the multi-factorial approach and found that the totality of the relationship indicated that Mr Kaseris was an independent contractor, not an employee. Some of the relevant indicia were: Mr Kaseris had a significant degree of control over when and how he worked. He did not receive a wage, annual leave, sick leave or long service leave. He supplied his own equipment, namely a vehicle, smartphone and wireless connection. He was prohibited from displaying an Uber logo or wearing an Uber uniform. Additionally, Mr Kaseris was responsible for registering for GST and paying tax liabilities. He received no superannuation. The contract expressly stated that Mr Kaseris was a contractor, not an employee.

 

 

“Outmoded” laws

 

Deputy President Gostencnik acknowledged that the multifactorial approach and the notion of a work-wages bargain test may be “outmoded” and “no longer reflective of our current economic circumstances”. He stated that the law may need to evolve to provide greater protection for workers in the “gig” or “sharing” economy.But until then, the current legal tests will prevail.

 

 

Distinguishing the UK case law

 

Significantly, Kaseris was distinguished from a recent United Kingdom (UK) decision, Aslam and others v Uber B.V. and others [2017] IRLR 4 (ET) (Aslam). In Aslam, the UK Employment Tribunal (ET) held that an Uber driver was a “worker” for the purposes of the Employment Rights Act 1996 (UK) (ER Act).

 

However, in Kaseris, the FWC rejected the submission that Aslam should be taken into account. Deputy President Gostencnik held that the Aslam decision was “of no assistance” because of the differences in the UK and Australian legislation.

 

The Deputy President explained that although Uber’s operations in Australia and the UK are similar, Aslam was based on the UK definition of a “worker”. The relevant section of the UK’s ER Act, section 230(3), provides a definition of “worker” which is “self-evidently broader than the definition of an employee”  and “encapsulates some independent contractors”.

 

The UK definition is as follows:

 

Section 230

 

(3) In this Act “worker”…means an individual who has entered into or works under…

 

(a) a contract of employment, or

 

(b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual …

 

Deputy President Gostencnik stated that whilst the Uber driver in Aslam fell within the extended definition in section 230(3)(b), the ET did not expressly conclude that the driver was caught by section 230(3)(a). In other words, Aslam did not expressly hold that a contract of employment existed between Uber and its drivers.

 

Nevertheless, the UK ruling was strongly worded, with Judge Anthony Snelson stating, “The notion that Uber in London is a mosaic of 30,000 small businesses linked by a common ‘platform’ is to our minds faintly ridiculous”. Whilst Uber has lost an initial appeal against the UK decision, it may yet appeal to the UK Court of Appeal or even the Supreme Court. The story is far from over.

 

 

Conclusion

 

The Kaseris case determined that Uber drivers in Australia are independent contractors, not employees, but this contentious issue is far from settled. It can be very difficult to determine whether your workers are properly classified as independent contractors or employees. Contact Henry William Lawyers for specialised advice in this area.

 

 

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