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The Full Bench of the Fair Work Commission (the Full Bench) has handed down one of the first decisions on the question of whether a food delivery driver was an independent contractor or an employee following the recent High Court decisions of CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 (Personnel Contracting) and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA2 (Jamsek).

In the matter of Deliveroo Australia Pty Ltd v Franco [2022] FWCFB 156, the Full Bench was required to consider an appeal by Deliveroo Australia Pty Ltd (Deliveroo) against an initial decision in May 2021, which had found that Mr Franco was an employee and subsequently unfairly dismissed.

At first instance, and in accordance with the law at the time of the decision, the Fair Work Commission used a multi-factorial test in concluding that Mr Franco was an employee. In doing so, it considered the totality of the working relationship between Mr Franco and Deliveroo – not just the Supplier Agreement which was in place at the time of the termination of Mr Franco’s engagement.

Deliveroo then lodged its appeal against that decision on a number of grounds. Of relevance, it submitted that the Commissioner had erred in failing to apply, or properly apply, the multi-factorial test, and that insufficient weight had been given to certain factors.

However, before the Full Bench published its decision on the appeal, it decided to defer determination until after the High Court published its decisions in Personnel Contracting and Jamsek. The High Court determined these matters in early 2022 (the effect of these decisions has been summarised in a previous Special Edition E-Update).

As a result of these decisions, the Full Bench was required to assess whether Mr Franco was an employee or independent contractor by reference to the rights and obligations of the parties under the Supplier Agreement.  

Ultimately, the Full Bench quashed the initial decision and found instead that Mr Franco was an independent contractor and not an employee. In doing so, the Full Bench found that, whilst there were some elements of the Supplier Agreement that were indicative of an employment relationship, there were a number of other elements which weighed decisively in favour of the conclusion that Mr Franco was an independent contractor. These included:

• The Supplier Agreement provided Mr Franco with the right to elect not only when but also where he chose to work, and Deliveroo was to offer work within those parameters determined by Mr Franco. In addition, Mr Franco could “unassign” himself from an order after initially accepting it. This went beyond the usual operation of casual employment, where the employer offers work at a particular time and place at its discretion, which the employee can either accept or reject.
• The terms of the Supplier Agreement indicated a lack of control over the manner of performance of work which Mr Franco agreed to undertake. In particular, the Supplier Agreement only established “performance standards”, such as a requirement that orders be delivered within a reasonable time period, and that Mr Franco comply with safety, reliability and legal requirements governing vehicle usage. Mr Franco still had the right to determine the most appropriate routes to take and what type of vehicle he used. The Full Bench considered that these arrangements were typical for independent     contracting arrangements in the road transport industry.
• Mr Franco was obliged to provide, at his expense, the vehicle by which deliveries may be effected.
• The Supplier Agreement did not require Mr Franco to personally provide the services. It provided him with the right, without the need for prior approval from Deliveroo, to arrange for someone else to perform the services.
• The method of remuneration provided by the Supplier Agreement required him to pay an administrative fee as a percentage of the total fees payable to him for access to Deliveroo’s software, which was inconsistent with the existence of an employment relationship.

Interestingly, in coming to this decision, the Full Bench remarked there were a number of practical matters which it was now obliged to ignore because of the decisions in Personnel Contracting and Jamsek. It stated that, had it been permitted to consider these practical matters, it would have likely found Mr Franco to be an employee. These included:

• Deliveroo had a system in place between February 2018 and January 2020 which did not resemble what was referred to in the Supplier Agreement. The system required riders to book sessions to be worked in advance and provided preferential access to particular sessions based on a rider’s performance as well as incentivising riders not to cancel engagements. In practice, it provided Deliveroo with a significant degree of operational control over its delivery workers.
• Mr Franco used two motorcycles to perform delivery work and discharge his obligations, which he also utilised for personal use. The principal motorcycle cost him about $1,500.00, which did not constitute a substantial capital outlay. In practice, this could not be said to be a case where “the personal is overshadowed by the mechanical”.
• Mr Franco was strongly encouraged by Deliveroo to use a Deliveroo-branded insulation bag, polo shirt, rain jacket and rain pants in return for a bond. He used those items whenever he performed work for Deliveroo and therefore presented himself to customers as an emanation of its business. Earlier versions of the Supplier Agreement provided a dress code consistent with this, however, it was removed from the version which applied to Mr Franco at the time his engagement was terminated.
• Also, in earlier versions of the Supplier Agreement, there was a general rule that Mr Franco was expected to provide the services personally (even though they allowed for delegation with prior approval). This was removed from the latest version of the Supplier Agreement, but it was never commercially practical to delegate work and Mr Franco never did so.
• The various iterations of the Supplier Agreement were drawn up unilaterally by Deliveroo without any negotiation or consultation. This could lead to an inference that this was done by Deliveroo with an eye to maintaining its position that delivery workers were contractors and not employees. Many of the changes in the agreements were apparently intended to remove any indication that it controlled the performance of work, and this was against a background where there was no significant practical change to the way in which the work was conducted, apart from the introduction and withdrawal of Deliveroo’s booking system.

Not withstanding these matters, the Full Bench found Mr Franco was an independent contractor and not an employee. He was therefore not entitled to make a claim for unfair dismissal and his application was dismissed.

Lessons for employers

This decision highlights the importance of a comprehensively drafted contract when it comes to engaging independent contractors. It also highlights the importance of ensuring that the terms of the contract are reflected in practice.

In the absence of a contract which clearly sets out the rights and obligations of the parties, a Commission or Court may look at the totality of the relationship (including what is done in practice) in determining whether a person is an employee or independent contractor.

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