Foodora taken to court over gig economy underpayment

Contributed from Victoria

Gig economy food delivery giant Foodora is going to court over allegations of under payment of three riders.

The case will be heard in the Federal Court in Sydney on 10 July.

Legal action has been initiated by Fair Work Ombudsman Natalie James, claiming the riders had been engaged as independent contractors, but did the work of employees.

This is an important case, where if the company is found guilty, it will throw doubt on the legality of the increasingly widespread practice.

In this instance, the case involves the non-payment of a significant part of the wages that would have occurred if the three had been engaged as employees.

Two of the alleged victims, worked for Foodora in Melbourne and the third in Sydney, during 2015 and 2016.

The Ombudsman explained in a press release, that the office has “examined the nature of the relationship between Foodora and the three workers,” using the following factors.

  • the level of control, supervision and direction Foodora exercised over the workers’ hours, location and manner of work;
  • the requirement for the workers to wear a Foodora-branded t-shirt and use food storage boxes and/or bike racks supplied by Foodora;
  • Foodora paid the workers fixed hourly rates and/or amounts per delivery and the workers did not negotiate their rates of pay at any time; and
  • each of the workers was not genuinely conducting their own delivery business, in that they: did not advertise or promote their availability to perform deliveries to the public; did not delegate their delivery duties with Foodora to any other person; and did not have their own customer base, business premises and insurances.

Because of this, the three were entitled to receive wages that are appropriate for an employee in the industry.

If the Federal Court rules against Foodora, it could have fines of up to $54,000 for each case. The court also has the power to order the company to back pay the workers the outstanding money.

Other food delivery gig economy companies, such as, Uber Eats and Deliveroo, are  using the independent contracting label to undercut wages as well. Uber found itself before the Central London Employment Tribunal in 2016 for the same practice and ordered to provide the same rights as regular employees.

There has been growing concern over the rise of the gig economy in Australia. Gig work is where people are engaged via the use of digital technology. An app is downloaded into the person’s smart phone. Through this, the person is contracted to carry out a specific task and then paid a fee for this task. There are no wages calculated over a period. Just a new form of piece work. The time between the carrying out of a task goes unpaid, although the person is expected to make themselves available.

Businesses practicing this model save themselves the cost of providing work space, holiday and sick pay, training, insurance, Workcover and more, as well as saving on the wages bill. These costs are transferred to the worker.

The gig economy is therefore less about the application of new technology, than it is taking advantage of a shortage of jobs and the desperation of job seekers. It mainly hurts the younger end of the workforce, where the level of unemployment is the highest.

This case came about, because a few individuals chose to fight back. As the gig economy becomes more widespread, it is not just a problem in the food delivery system. It is emerging in other industries.

An analysis of the 2016 census data shows that there had been a rise of more than 14 percent in the number employed only part-time, since 2011, and part-time accounted for about one third of the workforce.  It is this section of the workforce that is most vulnerable to be pressured into joining the app economy.

The use of the gig economy to cut down the reward for work poses a major threat tow ages and conditions across society. This is what makes it so important for everyone.

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