​Australia's Fair Work Ombudsman commences legal action against Foodora

On-demand delivery service in hot water over alleged 'sham-contracting' of three workers.

The Fair Work Ombudsman (FWO) has commenced legal proceedings against online food delivery service Foodora, alleging the local arm of the company engaged in "sham contracting" activity, resulting in the underpayment of workers.

The legal action, filed in the Federal Court, relates to three workers contracted by Foodora Australia. If found in breach of the Fair Work Act, the startup faces penalties of up to AU$54,000 per contravention.

It is alleged by the FWO two 19 year-old bicycle delivery riders who delivered food and drinks to customers in Melbourne and another 30 year-old now-permanent Australian resident who delivered by car to customers in Sydney for the company in 2016 were incorrectly treated, with the FWO saying Foodora breached sham contracting laws by misrepresenting to them they were independent contractors when they were in fact employees.

It is alleged that Foodora required each of the workers to have an Australian Business Number (ABN) and sign a contract titled "Independent Contractor Agreement" on the commencement of work.

However, after examining the nature of the relationship between Foodora and the three workers, the FWO alleges the individuals were actually employees of Foodora during the relevant period.

"The Fair Work Ombudsman alleges that the workers were lawfully entitled to receive the minimum wage rates and entitlements that applied to their positions under the Fast Food Industry Award 2010; and that the amounts Foodora paid them were not sufficient to meet those rates and entitlements," the FWO wrote in a statement.

"As a result of its investigation, the Fair Work Ombudsman allegedly found that the employees had been underpaid their minimum lawful wage rates, casual loading, and penalty rates for night, weekend, and public holiday work."

The FWO alleges the three workers suffered a loss of AU$1,620.74 over a four-week period. Additionally, it is alleged that Foodora failed to make any superannuation contributions on their behalf.

Fair Work Ombudsman Natalie James is also seeking a court order for Foodora to back-pay the workers in full and make superannuation contributions on their behalf.

"There has been broad community and academic debate about the status of 'models' using smartphone-driven technology as a means for deploying a workforce that delivers food to consumers from restaurants and fast food outlets," James said.

"The only way to answer the question of whether the workers delivering the meals are employees or 'independent contractors' is for someone to ask a court to consider the specific 'relationships' between a company and its workers."

James said all businesses, including those in the gig economy, that treat the individuals who perform work for them as independent contractors must take great care to ensure that the reality of the relationship matches the label.

"Courts have found again and again that merely labelling the relationship to be one of independent contracting does not make it so, and it is the substance of the relationship that decides the status of the workers and the regulatory requirements that flow," she said.

The Australian Trade Workers Union (TWU) national secretary Tony Sheldon welcomed the legal action commenced by the FWO, saying the sham-contracting comes as no surprise to the thousands of delivery riders who are working in the on-demand economy.

"The on-demand economy is a tired example of old-fashioned exploitation with tech billionaires reaping the benefits at the community's expense," Sheldon said. "The federal government is refusing to regulate rights for all workers regardless of being alleged contractors.

"This area is crying out for regulation."

A case management hearing has been scheduled in the Federal Court in Sydney for July 10.

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