The gig economy, also known as the on-demand economy, has evolved drastically in the last decade or so. A “gig” usually refers to any kind of casual and sporadic work. However, it is now more commonly associated with the digital platforms that connect workers with jobs.
In 2021, millions of people are part of the gig economy chain – whether as a customer, contractor, employee, investor or anything in between. Airtasker, Freelancer, Uber, Doordash and Deliveroo are some of the more widely recognised platforms.
What are the pros and cons of being a gig worker? Are the current laws in Australia providing enough protection for gig workers? This is important to consider, as for many people, the gig economy is a primary source of income.
The big tech platform companies have been classifying gig workers as independent contractors in many parts of the world, including Australia, the US and the UK. However, questions have been raised about whether they are actually employees in disguise, and there have been legal developments around the world as a result.
Are Gig Workers Independent Contractors or Employees?
Australia has welcomed the gig economy with open arms as seen by its ever-growing user base. Advocates of the gig economy will say it allows individuals to be empowered entrepreneurs who get to work whenever they like and avoid rigid workplace structures. Evidently, people are choosing the flexibility and autonomy that gig work offers over traditional workplaces.
Over the years however, there have been concerns about whether gig workers are employees without the benefits of being an employee.
In Australia, the law is not clear cut on this issue, although recent judgments appear to lean towards the independent contractor classification. In a 2020 case, the Fair Work Commission rejected a claim by Ms Gupta saying that she was unfairly dismissed by Uber Eats. It was found that Ms Gupta was not an employee of Uber Eats. However, there were different opinions within the Commission where some thought she was an independent contractor and some thought she was neither an employee, nor conducting business in her own right.
Regardless, this is authority that gig economy workers associated with Uber Eats are not protected from unfair dismissal. Uber Eats has since reached a settlement with Ms Gupta out of court, and has stated they take this ruling to mean that their delivery partners are independent contractors.
What Does This Mean?
Experiences of gig workers seem to suggest they are more dependent on the platforms than what the term “independent contractor” suggests.
The following are some examples of conditions met by gig economy workers:
- Below minimum wage:
A survey by the Transport Workers Union in September 2020 found that food delivery workers earned $10.42 per hour after expenses. This is well below the minimum wage which is currently $19.84 per hour in Australia.
- Non-negotiable pay:
The NSW inquiry heard that delivery rates were cut during the pandemic, and this was despite a higher demand in food delivery services at the time. (The final report by the NSW Inquiry is expected in late 2021).
- Limited safety and no insurance:
There has also been an increased number of deaths in bicycle delivery workers, with 5 deaths between September and November 2020 alone. The dependents of the late workers were not entitled to any benefits under workers’ compensation scheme as it only applies to employees.
But since they are also not employees, the Fair Work Act 2009 (the main legislation that governs employer and employee relationships), does not apply.
It means they have no security of income, insurance, personal or paid leave of any sort. Moreover, gig workers are expected to have their own equipment, such as a bike to make deliveries, and pay their own maintenance fees.
The digital platform (the company) has no obligation to pay entitlements such as workers compensation, superannuation and certain taxes. This becomes increasingly problematic when the push to enter the gig economy arises out of financial desperation, yet they don’t have the sorts of protections normal employees enjoy.
What Is Gig Work?
Unions NSW says that there are four key characteristics of work in the gig economy:
- The work is split up into specific tasks or jobs and workers are engaged on a task by task basis without any guarantee of continuous work.
- Work is performed by individual workers, but may be commissioned by an individual or business.
- The transaction between workers and customers is facilitated by a for-profit company who charge users for the service (e.g. Uber). The transactions are performed through web-based applications, which are managed and controlled by the company.
- Workers are categorised as independent contractors by the company and not given employment protections or minimum standards in performing the work.
Uber Eat’s newly proposed contract with its drivers (to take effect from 1 March 2021) also sheds light on how gig workers are viewed on their platform:
- Uber Eats drivers are called “Delivery Persons”, not employees or workers
- Accepting the terms means choosing to be a “self-employed contractor”
- Delivery persons to have their own workers’ compensation and motor vehicle insurance
- Delivery persons can be dismissed without notice if they do anything that may cause adverse publicity, media attention or regulatory scrutiny or other issues that could detrimentally impact the reputation, good name or brand of Uber (and affiliated companies).
- Payments can be cancelled if a customer makes a complaint
As you can see from above, there are known features of gig work, but it’s unclear whether it neatly fits into one or the other
A Gap In the Law?
As with many industries that go through rapid change, the law doesn’t always keep up with the rate of change. That partly explains why gig workers don’t perfectly fall under the independent contractor category.
Having said that, law and policy makers seem to accept that there is an issue to be addressed. In Australia, governments in all jurisdictions are examining whether the current laws are appropriate. We saw the Senate Inquiry into Corporate Avoidance of the Fair Work Act in 2017, the report of Inquiry into the Victorian On-Demand Workforce and discussion paper by the NSW Inquiry in 2020.
The Senate Inquiry committee recommended that the government should amend the Fair Work Act so it covers all workers. This means they would have access to the labour standards, minimum wages and conditions established under the Act. These rights should apply to dependent and on demand contracting, preventing those arrangements from being disguised as independent contracting.
The Victorian Inquiry also had a similar view, and recommended that better protections must be offered for workers in the gig economy. However, when these changes will be made practically is unknown.
Meanwhile, there have been some very interesting legal developments surrounding gig workers in the international space.
US: 2020 Proposition 22 California
At the start of 2020, there was a new California law that passed requiring gig economy companies to reclassify their workers as employees, not independent contractors. This was known as Assembly Bill 5, and also happens to be quite a different stance to the Australian position.
Understandably, the financial ramification of this bill on gig economy companies would be huge. Corporations such as Uber, Lyft and Doordash and other similar platforms aggressively fought back and started a public campaign. They spent more than $200 million to convince Californians to vote “YES on 22.” It proved successful, as 58% of the state said yes to this ballot.
This is what is known as Proposition 22, and essentially operates as an exception to Assembly Bill 5 which allows workers to remain as independent contractors and not employees. It can also be thought of as a third category of labor for gig workers, where they are still contractors but can get some benefits if they qualify. These benefits are sort of like a middle ground – more than what traditional contractors may be entitled to, but not the full set of mandated employee benefits.
For example, Proposition 22 :
- Guarantees at least 120% of minimum wage on the job
- Healthcare subsidies depending on how much drivers work per week
- Vehicle insurance
- Some protection against discrimination and sexual harassment
However these benefits apply when they are on the job, and not other times such as between rides and deliveries.
Proponents of the proposition say that trying to recategorise drivers as employees threatens independence. Proposition 22 protects the entire reason why people enter the gig economy in the first place – flexibility.
Critics say that it’s all massively misleading and robs gig workers of basic employment rights. The gig economy giants have effectively preserved their business model at the expense of livable wages for an immigrant-heavy worker base, who likely didn’t understand the long-term effects of the proposition.
But what’s done is done – for now, gig workers in California remain independent contractors.
UK: Uber BV v Aslam
Across the pond in the UK, there was a case in the UK Employment Tribunal on this topic.
Essentially what happened was, drivers working for Uber BV (a subsidiary of Uber) claimed that they should be paid minimum wage and annual leave. The contract described the drivers as “partners”, and that nothing would create an employment relationship. The drivers argued that this was a sham and they were “workers.” Of course, Uber argued that they were self-employed independent contractors and they owed no such payments to the drivers.
A “worker” is entitled to minimum wage, paid leave and other benefits under British legislation. A “worker” also personally performs work but not for a client or customer.
The Tribunal decided that Uber was using “twisted language” in its contracts. The drivers were providing labor to Uber’s clients, not the drivers themselves. They were indeed found to be “workers” and hence entitled to worker benefits.
This decision was appealed by Uber and heard in the UK Supreme Court in July 2020. In February 2021, the Supreme Court finally provided its judgment and unanimously dismissed Uber’s appeal. The judges reaffirmed earlier rulings that drivers are workers, not independent contractors.
Implications On Australia’s Gig Economy
Developments such as Proposition 22 and Uber BV v Aslam are vastly different, and it’s difficult to determine where Australia might head. However, given developments like the new Uber Eats agreements, groups such as the Transport Workers Union are looking to the Government for some intervention to better protect gig economy workers.
Up until now, gig economy platforms have shown us their strong desire to keep things the way they are. Due to very different legal systems in California and Australia, it’s unlikely we’d see something like Proposition 22 occuring in Australia. However, we might see companies focus their resources to achieve their interests in a way that fits the Australian context.
There are many benefits of the gig economy, however we should also be mindful of costs borne by gig workers. We won’t know where exactly things will go, but recommendations from Inquiry reports suggest the need for new codes of practice, safety policies, improved remedies and enforcement. In the meantime we can also look to other countries and see how they are able to balance the interests of the companies and workers – what works, and what doesn’t.
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