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Time to go off menu? Senate Committee criticises food delivery platform model

Workplace Relations & Safety
Food delivery cyclist standing next to bike, holding a takeaway container and checking his phone.

Summary

The popularity of food delivery services has continued to grow in recent times, particularly with COVID-19 lockdowns, but the sector's success has been marred by concerns over low pay rates, unsafe working conditions and few employment rights for workers.

Those who work for food delivery platforms are typically engaged as independent contractors, which provides certain benefits for businesses, consumers and workers, particularly in the climate of COVID-19 disruption, but does create insecurity and limit conditions and protections for workers. Growing calls for workers in the sector to instead be recognised as "employees" has in part prompted the Senate Select Committee on Job Security (Committee) to inquire into the effect of insecure employment.

The Committee's first interim report (Interim Report), released on 24 June 2021, focused on the gig economy with particular attention given to food delivery platforms. The Committee made 15 recommendations, including that definitions of "employment" and "employee" in the Fair Work Act 2009 (Cth) (FW Act) be expanded to capture new and evolving forms of work; that the powers of the Fair Work Commission (FWC) under the FW Act be extended to allow it to provide minimum standards and conditions in relation to all forms of work; and that an accessible low-cost national tribunal be established to oversee non-standard employment relationships involving low-leveraged independent contractors.1

So how do Australia's favourite food delivery platforms compare in their engagement of workers?

What is the gig economy?

Food delivery platforms such as Menulog, Uber Eats and Deliveroo are often associated with the gig economy, a term used to refer to the labour market where workers are engaged to complete individual jobs or "gigs" and paid for each separate job, rather than performing continuous duties for an employer.2 There are two models of gig work: crowd-work systems where workers "apply, or bid competitively" for work, and work on-demand systems, where a service platform allocates tasks to workers registered with the platform.3 Food delivery platforms are an example of the latter.

Traditionally, those working for food delivery platforms in the gig economy have been classified as independent contractors, and therefore are not covered by the FW Act. This model provides flexible and convenient work opportunities for individual workers and efficient services for businesses and consumers. It also provides opportunities for workers to gain work experience and improve their skills, which may lead to more traditional work opportunities.4 However, those engaged in this sector, often some of the most disadvantaged people in our community, are denied job security, a minimum wage, leave and superannuation entitlements and exposed to unsafe conditions with little or no support.5

Business model of the major players

In its Interim Report, the Committee highlighted that platform companies, like food delivery services, currently use complex legal arrangements and invest heavily in defending cases and paying settlements to maintain their position that workers are independent contractors, despite evidence of their significant control. Notwithstanding this criticism and continued pressure, there is currently no legal obligation for food delivery platforms to move away from the traditional engagement model and employ their couriers. Despite this, one platform has committed to doing so in Australia.

Menulog

Menulog, Australia's second-largest food delivery service, has historically paid workers per order and provides them with the delivery fee paid by the customer, a "transit fee" and any supplement as compensation for wait times.6 On average, workers' pay ranges from $22 to $24 per hour, falling just shy of the national minimum wage for casual workers of $24.80.7 Menulog then receives a commission charged to food outlets.8

However, in an industry first, Menulog has implemented a pilot "employment model" for couriers in the Sydney CBD, moving away from the traditional independent contractor model.

The program provides riders employment benefits such as the minimum wage, superannuation and safe work equipment. Menulog's managing director Morten Belling told the Committee that Menulog had a "moral obligation to do more" and indicated that it intends to work towards employing all workers, including by making an application to the FWC, in consultation with the Transport Workers Union (TWU), for a new modern award.

Uber Eats

Uber Eats, the largest food delivery platform in Australia, engages workers as independent contractors, requiring drivers and riders to have an ABN, and allows them to work for other platforms. In Gupta v Portier Pacific Pty Ltd & Uber Australia Pty Ltd the FWC upheld that Ms Gupta was an independent contractor on the basis that she had significant control of when and how long she worked for, could perform work for other platforms, and did not appear to be an emanation of the Uber Eats business.9 Ms Gupta took her case to the Federal Court, however, she reached a confidential settlement with Uber Eats before a decision was handed down by the Court.

Uber Eats pays its workers per order, providing a base amount (reflecting delivery time, distance and pick-up and drop-off points), a surge or promotion amount, if applicable and, in some circumstances, a trip supplement where, for example, there are unfavourable traffic conditions or increased wait times.10 Uber Eats then receives the commission paid by the restaurant.11 According to Uber Eats' customer terms the delivery fee paid by the customer is provided to the rider,12 however it is not clear how this is calculated into the worker's pay.13

The Committee was presented conflicting views as to the average per-hour earnings of Uber Eats drivers, ranging from $21.55 per hour after costs to $17.11 per hour before taxes and other deductions.14 Even on the most generous view provided by Uber Eats, workers are paid substantially less than the national minimum wage for casual workers once costs are deducted.

Deliveroo

Deliveroo currently engages workers as independent contractors, despite the FWC finding in Diego Franco v Deliveroo Australia Pty Ltd (2021) that one of their workers, Mr Franco, was an employee given the "practical reality" of Deliveroo's control. Given that the Commission must consider the individual circumstances of the matter before them when determining whether a worker is an employer or independent contractor, this decision does not necessarily signify that all Deliveroo workers are in fact employees.14 Further, Deliveroo has indicated that they will appeal the decision.

In its submission to the Committee, Deliveroo highlighted the following key features it provides workers as independent contractors:16

  • There are no obligations to work and workers choose their own availabilities for deliveries
  • Workers can appoint delegates at their discretion
  • Workers can perform services for different platforms, even on a concurrent basis
  • Workers can accept or reject orders offered to them
  • Workers choose their own vehicle, routes, clothes and safety equipment whilst completing deliveries

Deliveroo workers are paid on the basis of their route and the time taken to complete the order, with Deliveroo retaining the customer’s delivery fee and restaurant commission.17 On average, workers earn more than Uber Eats drivers with an average of $23.40 per hour pre-costs, but still less than the national minimum wage for casual workers. However, workers are afforded accident insurance that reflects the various state-based WorkCover schemes.18

Will Menulog set a trend?

Some are hopeful that public perception and pressure will push Menulog's competitors to follow suit. TWU national secretary Michael Kaine said that he hopes the trial is a turning point that signifies an "important deviation from the deliberate misclassification model introduced by Uber and replicated by tech startups across the world, which was purposefully designed to circumvent industrial laws and exploit workers”.

This seems unlikely, with food delivery platforms staunchly defending the independent contractor model that has made them so profitable, to the Committee. Uber Eats argued that reclassifying workers would reduce opportunities in the employment marketplace and Deliveroo stated that workers valued the flexibility of the contractor model,19 despite such arguments seemingly being contradicted by evidence given by workers and the practical reality of work arrangements.

In its Interim Report, the Committee called for greater regulation to counter the potential for exploitative conditions and practices in the sector, including codifying a more expansive definition of employer and employee, providing the FWC with broad powers to resolve disputes, make orders for minimum standards and conditions in relation to all forms of work and establishing a national tribunal to advise on, oversee, and make rulings relating to employment relationships involving low-leveraged independent contractors, such as those in the food delivery sector.

As outlined in the Interim Report, the popularity of the platform model is growing, and given that conflicting decisions of the FWC have done little to clarify the position of delivery riders, it seems inevitable government regulation will increase. So, whilst delivery platforms like Uber Eats and Deliveroo are unlikely to fold to public pressure to shift away from the traditional model, it is likely statutory change will eventually force them to do so.



1 The Senate Select Committee on Job Security, First interim report: on-demand platform work in Australia, June 2021 (Senate Committee Interim Report), p. 2 (accessed 28 July 2021)

2 Victorian Government Department of Premier and Cabinet, Report of the Inquiry into the Victorian On-Demand Workforce (Victorian on-demand workforce report) June 2020, p. 11, (accessed 28 July 2021)

3 Senate Committee Interim Report, p. 13

4 Victorian on-demand workforce report, p. 10

5 Senate Committee Interim Report, p. 3

6 Menulog, Submission 50 to Victorian on-demand workforce report, p. 10

7 Senate Committee Interim Report, p. 42 citing Mr Belling, Menulog, Proof Committee Hansard, 12 April 2021, p. 57

8 Victorian on-demand workforce report, p. 81 citing Ben Carter, Menulog, Individual Consultation, 16 August 2019

9 C2019/5651, paragraph 69

10 Senate Committee Interim Report, p. 39

11 Gupta v Portier Pacific Pty Ltd; Uber Australia Pty Ltd T/A Uber Eats [2019] FWC 5008 at [64]

12 Portier Pacific Pty Ltd, Uber Portier B.V., Services Agreement [website], 2017, Cl. 4

13 Victorian on-demand workforce report, p. 81

14 Senate Committee Interim Report, p. 40 citing Uber, Submission 19, p. 26 and TWU, Submission 39, p. 22

15 Fair Work Ombudsman (FWO), Submission 28, p. 3

16 Senate Committee Interim Report, p. 41

17 Senate Committee Interim Report, p. 42 citing Jodi Ingham, Deliveroo, Individual Consultation, 17 July 2019

18 Senate Committee Interim Report, p. 42

19 Senate Committee Interim Report, p. 151

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Contacts

Aimee Brennan

Aimee Brennan

Lawyer