Uber and the Gig Economy

Fair Work Australia, the Australian Employment Regulator, has completed its two-year investigation into Uber Australia.  The Fair Work Ombudsman, Sandra Parker, determined that drivers for Uber Australia were not subject to any formal or operational obligation to perform work. Therefore, in Fair Work Australia’s opinion, the commercial relationship between the company and the drivers does not amount to an employment relationship.

In short, Fair Work thinks that Uber drivers are independent contractors and not employees.

We believe that this classical definition fails to account for the nuanced way in which workers engage themselves in the modern economy. There is a move away from standard employment relationships to a transactional model of worker engagement. In the gig economy, an individual worker is engaged by a company (commonly via an app) to undertake single or standalone tasks (the gig) for set fees. The terms of engagement for that job is exclusively set by the company. Workers then rely exclusively on that one company for their livelihood.

The negative for workers is that under this system the risk is moved away from organisations and on to the individual. As a modern workers in non-traditional employment being classified as an independent contractor means that they have none of the protections offered by so-called minimum entitlements under the Employment Relations Act. 

Currently, the gig economy is allowing large corporates to exploit loopholes in our employment law. Corporations are being allowed to use their considerable power to dictate terms to individual workers.  Without the protection of the law or the power to negotiate on an individual basis, workers have no ability to determine or enforce the terms of their employment. This has the result of creating unfair bargains, poor outcomes for workers and a triumph of profits over individual rights.

The employment law paradigm needs to be reviewed. A wholesale change needs to occur.  There appears to be no legislative prerogative to implement these changes. Therefore it is beholden on the employment court, unions, and employment lawyers to hold these employers to account for their exploitation of workers’ rights and choosing profits over people.

Xmas Contracting Sham

Coming into the holiday season those independent contractors or on labour hire agreements will be feeling the pinch.

Independent contractors are not employees.  As such they are not entitled to any of the same benefits offered to employees. Shine Lawyers are concerned about employers who use these arrangements as a way to undermine workers conditions and pay. In particular without any leave or holiday entitlements what happens to those families over Christmas?

In New Zealand, there is a growing prevalence of alternative employment arrangements. These commonly involve an intermediary between the employee and the employer. First Union has indicated that they represent over 2500 workers on Labour Hire contracts. A Labour Hire contract is where a person is paid by a labour-hire business to perform work or services directly for clients of that business, instead of performing work or services for the business itself.  

However, these arrangements are not limited to the construction industry. Hayes, a white collar recruitment firm, says that 30% of New Zealand’s workforce is now a temp, contractor or freelancer.  Many commentators have indicated that the move to the ‘gig economy’ will only increase the use of these type of agreements.  So what does this mean for workers rights?

The Government has seen this trend and is trying to address it through the Employment Relations (Triangular Employment) Amendment Bill.  This bill will attempt to allow employees an avenue of redress against a ‘primary’ and ‘secondary’ employer. Thus allowing them to pursue the end user employer as well as the party they are directly contracted to. 

This bill appears to have been in the pipeline since 2007. In the intervening period both the use of temporary workers and the fundamental nature of the “employment relationship” has changed.  We do not believe that the bill in its current form meets the needs of the changing workplace.

One of the major criticisms about the bill is that it does not do enough to address the underlying incentives for employers to exploit the current system. Our concern is that these type of arrangements keep workers in poverty.   The 2018 University of Auckland study found that workers on temporary work arrangements became trapped.  It found that once in this type of alternative employment the worker is unlikely to transition to full-time work.

Our courts have looked at this issue and determined in the worker's favour. In LSG Sky Chefs the court found that the workers, under a triangular arrangement, were not independent contractors and were in fact employees of the end-user LSG Sky Chefs (Prasad v LSG Sky Chefs New Zealand Ltd [2017] NZEmpC 150).

So we are left asking why are these arrangements still happening?

We believe that employers are deliberately disguising an employment relationship as an independent contracting agreement – so-called sham contracting.

Shine Lawyers in Australia has recently launched a class action, based on a sham contractor arrangement, against a company involved in the National Broadband Network. This has the potential to involve up to 4,000 employees and is claiming up to $400 million in unpaid wages.

The New Zealand Employment Relations Authority have stated they’re ready to take a firm stance on sham contracting and are willing to prosecute those employers in breach.

One of the effects of the change in government is that it has brought workers’ rights to public attention. We believe that this will be the catalyst in 2019 for a rapid increase in the scrutiny of labour hire and sham contractor agreements. 

Sham Contracting

Shine Lawyers in Australia has launched a class action against a company involved in the National Broadband Network. This has the potential to involve up to 4,000 employees and is claiming $400 million in unpaid wages.

Shine claim that the employer used sham contractor agreements.

In New Zealand the ERA has been critical of sham contracting arrangements. They have blankly said that “simply put if employment is disguised as contracting, it’s sham contracting and the Labour Inspectorate will take enforcement action and seek penalties” .

In a recent case a Taxi driver was awarded $100,000 in missed wages.

The purpose of this decision was to “send a strong message that employers need to be very clear about the difference between contractors and employees – you can’t remove minimum employment standards if, in essence, you’re treating staff in any way as employees”. 

If you are involved in a contractor arrangement that does not feel right please get in contact.