Jaan Murphy, Law and Bills Digest
Key issue
The gig economy is characterised by workers contracting to complete short-term task-based work via digital platforms which facilitate labour transactions between workers and businesses. The rapid rise of the gig economy represents risks and opportunities for gig economy workers, many of whom are characterised as independent contractors rather than employees and lack workplace entitlements and protections.
The increase in the number of gig economy workers has brought into question the appropriateness of the employee/independent contractor distinction in relation to gig economy workers and whether reforms are needed to provide better job security, income, and retirement savings for gig economy workers.
The policy challenge for the Parliament would seem to be finding a balance that preserves much of the flexibility and advantages of digital platform enabled gig work for both businesses and workers in a way that also provides appropriate protections, rights and benefits for workers participating in the gig economy.
What is the gig economy?
A range of terms describe the gig economy (p. 7): on-demand,
gig, sharing (p. 6), collaborative, crowdsourcing,
and short-term, project-based and outcome defined independent or ‘freelance’ work.
The Productivity
Commission (pp. 5, 9), Actuaries
Institute (p. 9) and Foundation for Young Australians (p. 6)
describe the gig economy as one where workers contract to complete a task via a
digital platform that facilitates labour transactions between workers and
businesses seeking to have tasks completed. Gig economy digital platforms
collect a portion of job earnings, control the brand of the platform, the
worker (via ratings mechanisms) and the worker‑client relationship (for
example, non-circumvention clauses). Gig work, therefore, differs from
freelance work or traditional independent contracting models since workers are
not building or managing their own reputation or ‘business’ (p.
6).
The appropriateness (p. 23) of classifying gig
workers as independent contractors or employees (pp. 10–11) is a contested issue. As such, this Briefing book article defines the gig economy as operating where:
-
work is divided by businesses into specific
tasks with defined outcomes
-
the tasks are made available on a digital platform
-
workers provide on-demand services via the
digital platform and complete the tasks
-
the workers are usually classified by the digital
platform as independent contractors and therefore do not have workplace entitlements.
Why is the gig economy
expanding?
The OECD notes (pp. 18–19) that rise of the
gig economy is powered by digital platforms that facilitate an on-demand-driven
monetisation of underutilised human resources by making them accessible for
temporary use for remuneration. Examples include (pp. 13; 34):
-
Uber and Shebah (private transport)
-
Uber Eats, Delivero and Menulog (meal delivery)
-
Freelancer, Fiverr, OneFlare, Hipages and
Airtasker (task-based services).
In the Australian context (p. 3) the main drivers (pp. 9–11) of the expanding gig economy include:
- digital platform enabled advances in technology
that increase the scope and frequency of transactions, reduce transaction
costs, increase accessibility, and enhance trust regarding payment between
workers and businesses
-
changing economic behaviour and increases in the
number of workers seeking supplemental income
-
workers seeking more flexible and autonomous
work-life environments and businesses seeking more flexible workplace
arrangements
-
demand by consumers and businesses for the
convenience of on-demand services, including improved job matching
-
the absence of (adapted/targeted) regulation and
lower barriers to entry that allow consumers and providers to switch roles
easily and quickly.
How many people
participate in the gig economy?
While it is widely acknowledged that gig economy
is rapidly expanding (p. 4) there is
currently no ‘reliable workforce data’ yet available on gig economy workers
(para 2.58). As noted in the Senate Select Committee report on job insecurity:
On-demand platform work has grown but there
is no real way to measure its true extent at this stage. Some gig workers are illegal, and some are working on the black
market—certainly many of the multiple jobs that gig workers hold are not
captured by official statistics. (p. 40, emphasis added)
In that regard the Australian Bureau of Statistics
confirmed that additional funding provided in the 2020-21 Mid-year economic and
fiscal outlook will be used to invest in new data collection in
relation gig economy workers (para 2.118). Whilst reliable data on the size and
number of participants is unavailable, one recent study concluded:
… 7.1 per cent of the population had
offered to work on a digital platform in the past 12 months, although at
the time of the survey only about 0.2 per cent were doing full-time gig work
and entirely reliant on that source of income. Gig work was concentrated in
transport and food delivery (18.6 per cent), professional services (16.9 per
cent) and odd jobs (11.6 per cent). (p. 15, emphasis added))
Benefits and risks to gig
economy workers
The rise of the gig economy poses both benefits and risks for workers. Benefits
include:
Risks include:
Australian evidence suggests that for
most gig economy workers, the risks generally outweigh the benefits (pp. 4; 59–71; 88; 97).
Many of the benefits and risks relate, at least in
part, to the characterisation of workers as independent contractors of the
digital platform rather than as employees. Therefore, the gig economy poses
challenges to existing models of regulating employment and work- not all of
which are new.
Employment-related challenges
posed by the gig economy
At issue is whether employment laws do, or should, apply
to gig economy workers, and whether the workers are (or should be) employees or
independent contractors. That distinction impacts on workplace entitlements, superannuation
and other protections and is a key factor underlying lower overall incomes, superannuation and job security of gig
economy workers.
Difference between employee and independent
contractors
Australian law differentiates between employees and independent contractors. The Fair
Work Act 2009 (Cth)
provides that ‘employee’ (generally) has its ordinary meaning (that is, its common law
meaning).
Until recently, the common law used a multi-facet test
for determining whether a worker was an employee or independent contractor-
it considered the substance and reality of the relationship by
considering a variety of factors, of which the terms of any written contract
were only one (see: Hollis
v Vabu Pty Ltd (2001); Australian
Air Express Pty Ltd v Langford (2005); On
Call Interpreters & Translators Agency Pty Ltd v FCT (No 3) (2011)).
Previous interpretation of the law
Several cases have dealt with whether a gig economy
worker is an employee or independent contractor of the digital platform through
which they obtain work by applying the multi-facet test, with differing
results.
The Fair Work Commission (FWC) found Uber drivers were not employees, as did the Fair Work Ombudsman (FWO). In
contrast the FWC and Australian Tax Office (ATO)
found workers of digital platform Foodora were employees, not independent contractors (pp. 3; 11) and the FWC concluded the same about Deliveroo drivers.
As such, prior to 2 recent High Court decisions, misclassification
of gig economy workers as independent contracts was a genuine risk and the appropriateness (p. 439) of such a
classification a contested and unresolved issue.
Latest interpretation of the law
In early 2022 two High Court decisions overturned
the multi-facet test and confirmed the primacy of any written contract when
deciding whether a worker is an employee or independent
contractor, with subsequent conduct relevant only to determining the
terms of vague contracts. The High Court stated (para 59):
Where the parties have comprehensively
committed the terms of their relationship to a written contract the validity of
which is not in dispute, the characterisation of their relationship as one of
employment or otherwise proceeds by reference to the rights and obligations of
the parties under that contract … the task of the court is to enforce the
parties' rights and obligations, not to form a view as to what a fair
adjustment of the parties' rights might require.
The High Court also found the multi-facet test approach
of identifying the ‘substance and reality’ of the relationship by reference to
the history of the parties’ dealings was erroneous, and any disparity in
bargaining power has ‘no bearing on the meaning and effect’ on such written
contracts (paras 45 to 48 and 62).
As a result it will be harder for workers, and in particular gig economy workers to
challenge their characterisation as independent contractors, even where the
relationship has features of employment.
Impact of being an
independent contractor
A worker’s entitlements and protections vary
depending on whether they are an employee or independent contractor, as set out in
the table below.
Table 1 workplace entitlements and
protections of employees and independent contractors
| Entitlement/protection |
Employee[1] |
Independent contractor |
| Minimum wage |
✓ |
X |
| Paid leave |
✓ |
X |
| Minimum/maximum
hours |
✓ |
X |
| Superannuation |
✓ |
X[2] |
| Unfair
dismissal protection |
✓ |
X |
| Workers’
compensation |
✓ |
X – only where deeming
provisions in state legislation applies |
| Collective
bargaining |
✓ |
X – only if authorised
by the Australian Competition and Consumer Commission |
| Covered by work
health and safety laws |
✓ |
Usually (p. 451) but not always (pp. 69–77; 141). |
Source: As compiled by the Parliamentary Library.
Independent contractors are, unlike employees, responsible for their own income tax, GST,
insurance, and superannuation. Generally where a
gig economy worker is an independent contractor the impact is a lack of access to the above entitlements (pp. 4; 69), poor job security, lower overall income and superannuation.
Given the recent changes to how the common law
determines if a worker is an employee or independent contractor, there is a
risk that the proportion of gig economy workers without access to workplace
entitlements may increase. Increasing numbers of gig economy workers having
no or low superannuation balance will result in lower
retirement income levels (p. 17) and will, in the
long-term, put pressure on Australia’s social security system and, as a result, the Australian budget.
Possible gig economy
employment law reforms
Under section 51(xx) of the Constitution (the corporations power) the Commonwealth can regulate any relationship that
corporations (including those that operate gig economy digital platforms) have with third parties (pp. 8;16–17; 20), including employees, other corporations, trade unions or independent contractors.
Many of the issues raised by the gig economy,
including the nature of the relationships are not new (p. 105). While digital
platforms have altered the way (and ease) in which gig economy workers are
engaged to complete tasks, relevant legislation has not been amended to clarify
how gig economy workers are to be classified. Importantly though, they are
issues that the Commonwealth can regulate and hence the rapid expansion of the
gig economy presents an opportunity to provide greater certainty to participating
parties.
The ’do nothing’ option is to make no changes, and
let the courts apply existing laws to disputes regarding gig economy workers.
This retains the advantages for businesses in terms of increased flexibility including:
- responding quickly (p. 59) to changes in
demand, funding or business requirements, their need for different expertise or
skills, and changing relationships
-
the ability to rapidly deliver new products and
services
- reduced recruitment (p. 16), staffing
costs and under-utilisation of worker resources.
However, this option may result in the risks to
workers impacting on greater numbers of individuals, albeit with the potential
accompanying benefits to workers. Alternatively, the Parliament could consider reforms to reduce
the risks posed to gig economy workers while preserving some of the benefits
to businesses such as:
The ALP’s National Platform for the 2019 and 2022 election included policy
commitments to:
- ensure ‘appropriate coverage and
protection for all forms of work’ and that gig economy platforms ‘are not used
to circumvent industrial standards, or to undermine workers’ rights to
collectively organise and access their union’ (p. 26)
- regulate the gig economy and allow the
FWC to ‘turn insecure jobs into more secure ones’ (p. 7)
-
ensure gig economy workers are ‘paid properly’ by ‘changing the legal
test for sham contracting’ (p. 2)
The Coalition 2022 election policy platform did not
deal directly with the issues posed by the gig economy discussed in this article.
The Morrison Government noted in its Digital strategy it would ‘consider
issues relating to emerging digital industries, like the gig economy’ with a
view to ensuring ‘that the regulatory framework for these industries remain
fit-for-purpose and allow digital industries to maximise their productivity and
utility to Australians’ (p. 37).
The Australian Greens policy platform for the 2022 election included commitments to
provide the FWC the power to extend minimum wages, entitlements and conditions
to contractors by requiring ‘the FWC to give effect to the principle that
workers are entitled to the same minimum wages and conditions whether or not
they are classified as employees’ (p. 3).
Further reading
Productivity Commission (PC), Digital Disruption: What Do Governments Need to Do?, (Canberra: PC, 2016).
Organisation for Economic Co-operation and Development (OECD), The Impact of the Growth of the Sharing and Gig Economy on VAT/GST Policy and Administration, (Paris: OECD, 2021).
Senate Select Committee on Job Security, First Interim Report: On-demand Platform Work in Australia, (Canberra: The Committee, 2021).
Senate Education and Employment References Committee, Corporate Avoidance of the Fair Work Act 2009, (2017), Chapter 8.
[1] I. Dosen and M. Graham Labour
Rights in the Gig Economy: An Explainer, Research Note no. 7, (Melbourne:
Parliamentary Library and Information Services, 2018), 6; D. Freudenstein
(2020). The
Rise of the Gig Economy and its Impact on the Australian Work Force: Green Paper,
(Sydney: Actuaries Institute, 2020), 22; Senate Select Committee on Job
Security, First
Interim Report: On-demand Platform Work in Australia, (Canberra:
The Committee, 2021), 69.
[2] In some circumstances independent contractors may be entitled to be paid
superannuation contributions, most notably where a person ‘works under a
contract that is wholly or principally for the labour of the person’: Superannuation
Guarantee (Administration) Act 1992, subsection 12(3).
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