Implications of the landmark Klooger v Foodora decision

The facts

Josh Klooger commenced employment with Foodora as a food deliverer on 11 March 2016.  The contract specified that Mr Klooger was being engaged as an independent contractor, not an employee, and stipulated that Mr Klooger would be paid $14 per hour plus $5 per delivery.

By February 2018, Foodora deliverers were being paid only $7 per delivery and no hourly wage. Mr Klooger made public complaints about these rates and on 22 February 2018 Foodora management wrote to Mr Klooger raising concerns about him breaching confidentiality and intellectual property rights but maintaining and refusing to transfer ownership of a Telegram chat group to Foodora. On 2 March 2018 Foodora management wrote to Mr Klooger again and gave notice of termination effective immediately.

Mr Klooger made an Unfair Dismissal application on 14 March 2018. Foodora raised a jurisdictional objection, that is, it claimed that the Fair Work Commission did not have power to deal with the application, on the basis that Mr Klooger was not an employee but an independent contractor.

The decision on 16 November 2018

Fair Work Commissioner Ian Cambridge applied a multifactorial test to determine the question of whether Mr Klooger was an employee or an independent contractor. The following factors, among others, contributed to the determination that Mr Klooger was a Foodora employee:

• The work performed by Foodora deliverers was performed in accordance with shifts that were offered and selected via an app. The shift start and finish times and locations were fixed by Foodora.
• Foodora had the capacity to control the manner in which Mr Klooger performed work including location and start and finish times. This control was reflected in the batching system, which provided deliverers with available shifts based on how their performance ranked against other deliverers. The batching system meant that in order to maintain a high ranking, deliverers were expected to perform a certain number of deliveries during any particular engagement and to work a minimum number of shifts per week.
• Mr Klooger did not have a separate place of work nor did he advertise his services to the world at large. His arrangements with individuals who he allowed to use his Foodora account were confined to work for Foodora.
• Foodora presented Mr Klooger to the world as representation of its business. The contract established an expectation that deliverers would dress in Foodora branded attire and use equipment displaying the Foodora brand.

The Commissioner then went on decide the Unfair Dismissal application and held that there was no valid reason for the dismissal of Mr Klooger relating to his capacity or conduct. Furthermore, Mr Klooger’s dismissal by email and without warning was ‘plainly unjust, manifestly unreasonable, and unnecessarily harsh’. Foodora was ordered to pay Mr Klooger almost $16,000 as compensation for his unfair dismissal.

Implications for those working in the gig economy

New technologies and business models are changing the nature of employment relationships and this landmark decision will have implications for those working in the gig economy. Drivers for food delivery services like Foodora may more properly be described as employee with the entitlements that follow notwithstanding that the contract states that the relationship is that of independent contractor.

Factors that point to an employer-employee relationship include:

• the company has substantial control over the manner in which the individual performs work;
• the individual does not perform work for or provide the same service to other companies;
• the individual does not have a separate place of work and does not advertises their services to the world;
• the individual does not have a substantial investment in the equipment used to perform the work;
• the individual does not delegate or sub-contract their work;
• the individual is presented as part of the business;
• the company deducts income tax from the remuneration paid to the individual;
• the individual is paid for holiday and sick leave; and/or
• the individual’s work involves an established profession or trade.

As employees, deliverers and couriers would be able to access the work rights and entitlements as provided in the Fair Work Act 2009 (Cth) and modern award such as minimum wage rates and allowances, paid leave, superannuation, procedural fairness and the right to lodge an application to the Fair Work Commission.