Implications for gig economy analysis
Lessons for the Australian Taxation Office
The issue of whether Uber drivers are employees or independent contractors has been fought over globally since Uber started operations in 2009. We explained and analysed the history of Uber’s main legal battles here.
The legal status of the drivers of Uber and other ride-sharing services is significant because they are arguably the most high-profile gig platforms that concern regulators, particularly tax regulators. Gig platforms offer new economic and business opportunity. If that opportunity is crushed by regulators, people and economies suffer.
Australian Decisions on Uber
In early June 2019 the Fair Work Ombudsman released a statement that, after a two-year investigation, it has concluded that drivers working through Uber are not employees.
Unions condemned the decision. The Transport Workers Union described the decision as ‘…devastating for workers in the gig economy’. However, the decision is sound. We explain why below.
And there are major implications and lessons for the ATO in the processes it applies when denying or allowing ABNs. This is important because the ATO can only deny ABNs to employees.
The Fair Work Ombudsman is an employment regulator not a court. The Fair Work Ombudsman has made its own internal decision as to whether it should consider running a legal case to argue that Uber drivers are employees. On the basis of the Fair Work Ombudsman’s assessment, the drivers are self-employed independent contractors.
The Fair Work Ombudsman’s decision has strong precedent in that it is consistent with a highly detailed investigation and legal ruling on Uber drivers by the Fair Work Commission in December 2017.
The Commission ruling found that Uber drivers are not employees but independent contractors.
We analyse this decision in some detail below.
The Fair Work Commission’s 2017 decision is important because it is a common law ruling that follows a proper common law process where the court:
- Looked at the facts of how Uber operates.
- Explained the common law criteria that must be applied.
- Applied the common law criteria to Uber facts.
- Made a decision based on the balance of the evidence.
This is the process that should be followed by the ATO in its internal assessments of whether people working through a gig platform are employees or not. If people are employees, the ATO can legitimately deny them ABNs. If the people are not employees, such persons, under the legislation, are entitled to an ABN.
This is because under the ABN legislation:
- a person is entitled to an ABN if they are ‘carrying on an enterprise’
- An ‘enterprise’ is an ‘activity’
- ‘in the form of a business’
- ‘an adventure or concern in the nature of trade’.
- A ‘business’ includes any
- ‘Profession, trade, employment, vocation or calling’.
- But a business does not include an ‘occupation as an employee’.
We have sighted ‘employment’ assessments done by the ATO. On our assessment the ATO process is amateurish and incompetent at best and at worst manipulated by the ATO to achieve its predetermined view that, when it wishes, independent contractors are employees. By these actions the ATO strips itself of its legitimacy. Examples are here.
A summary and analysis of the Fair Work Commission Uber decision 2017
Lessons for the Australian Taxation Office
This is an assessment of Fair Work Commission Decision  FWC 6610 Mr Michail Kaseris v Rasier Pacific V.O.F (U2017/9452) 21 Dec 2017. We quote directly from the decision.
The Facts of the Uber operation
The decision first describes the Uber operation, starting with the Uber-Driver ‘Services Agreement. The Services agreement says:
You [the driver] acknowledge and agree that your provision of Transportation Services to Users creates a legal and direct business relationship between you and the User, to which Rasier Pacific and its Affiliates [Uber] are not a party.
That is, the primary contract is between the driver and the passenger.
You acknowledge and agree that Rasier Pacific’s provision to you of the Driver App and the Uber Services creates a legal and direct business relationship between Rasier Pacific and you. Rasier Pacific does not, and shall not be deemed to, direct or control you generally or in your performance under this Agreement.
In other words, Uber does not control the driver.
… you retain the sole right to determine when and for how long you will utilize the Driver App or the Uber Services. You retain the option, via the Driver App, to attempt to accept or to decline or ignore a User’s request for Transportation Services via the Uber Services…
That is, each driver chooses if when and how long they will work and can accept or reject any job offer (contract) available through the Uber app.
You will not: (a) display Rasier Pacific’s or any of its Affiliates’ names, logos or colors on any Vehicle(s); or (b) wear a uniform or any other clothing displaying Rasier Pacific’s or any of its Affiliates’ names, logos or colors
In other words, drivers cannot present themselves as being part of Uber.
You acknowledge and agree that you have complete discretion to provide services or otherwise engage in any business or employment activities.
That is, drivers can engage in any other business activity they wish including even in competition with Uber.
The decision states
 Use of the Partner App by a driver is flexible and allows a Driver freedom to choose how and when the Driver works. A Driver is able to log on and log off the application whenever he or she chooses and the Respondent does not impose any minimum period that a Driver must be logged on to the application. Additionally, the Respondent does not impose any disciplinary procedures on a Driver if a Driver chooses not to log onto or not log off the Partner App.
 Whilst a Driver is logged onto the application, he or she has complete discretion as to whether the Driver accepts a trip request from a Rider.
 A Driver also has discretion as to the areas or locations within which the Driver wants to provide trips
 The relationship between Drivers and the Respondent is not exclusive. If a Driver wants to utilise another software application to provide transportation services, the Driver may do so
 The Respondent remits the fares and cancellation fees, after deduction of a service fee which is discussed below, to the Driver on a weekly basis and, since February 2017, at the request of a Driver at any time
 Clause 4.4 of the Services Agreement provides the following:
“Service Fee. In consideration of Rasier Pacific’s provision of the Uber Services, you agree to pay Rasier Pacific a service fee on a per Transportation Services transaction basis calculated as a percentage of the Fare…
 The Service Fee is the only payment that is made by a Driver to the Respondent.
That is, Uber charges a fee to drivers for the services that Uber supplies.
 A requirement of providing transportation services to Riders, is that Drivers accept and meet certain service standards which are identified in the Services Agreement, policies and communications
 Clauses 8.2 and 8.3 of the Services Agreement deal with the kind of insurance that a Driver must maintain whilst providing transportation services and provide the following…
In other words, there are services standards that drivers must meet. For example, this can include ensuring their vehicle is registered, has insurance, is clean and so on.
 The Respondent does not provide any of the equipment (save for the technology platform) that is required by a Driver to enable the provision of transportation services.
That is, the driver provides all equipment. Uber only supplies their app. Drivers have to supply their own vehicle and the phone upon which they access the app.
 Clause 12.2 of the Services Agreement states that either the Respondent or a Driver can terminate the Services Agreement at any time.
In other words, that either the driver or Uber can terminate the agreement at any time.
These facts were uncontested.
Uber does not control the driver.
- The driver can work or not work through Uber.
- Decide when, if, where and for how long they work.
The work is not ongoing
- Uber and/or the driver can terminate the agreement at any time.
There is strict offer and acceptance of contract
- Uber makes offers of jobs to drivers who can accept or reject jobs.
There is no restraint of trade/employment on the driver
- Drivers can do any other work they wish.
Drivers are not ‘part and parcel’ of Uber
- Drivers cannot make themselves out to be part of Uber’s business.
Drivers supply their own equipment.
Distinguishing an employee from a contractor
The FWC decision states the common law criteria that must be used to distinguish an independent contractor from an employee. (Bold emphasis added.)
53(4) Consideration should then be given to the various indicia identified in Stevens v Brodribb Sawmilling Co Pty Ltd and the other authorities as are relevant in the particular context. For ease of reference the following is a list of indicia identified in the authorities:
- Whether the putative employer exercises, or has the right to exercise, control over the manner in which work is performed, place or work, hours of work and the like.
- Whether the worker performs work for others (or has a genuine and practical entitlement to do so).
The right to the exclusive services of the person engaged is characteristic of the employment relationship. On the other hand, working for others (or the genuine and practical entitlement to do so) suggests an independent contract.
- Whether the worker has a separate place of work and/or advertises his or her services to the world at large.
- Whether the worker provides and maintains significant tools or equipment.
- Whether the work can be delegated or subcontracted.
- Whether the putative employer has the right to suspend or dismiss the person engaged.
- Whether the putative employer presents the worker to the world at large as an emanation of the business.
Typically, this will arise because the worker is required to wear the livery of the putative employer.Whether income tax is deducted from remuneration paid to the worker.
- Whether the worker is remunerated by periodic wage or salary or by reference to completion of tasks.
Employees tend to be paid a periodic wage or salary. Independent contractors tend to be paid by reference to completion of tasks. Obviously, in the modern economy this distinction has reduced relevance.
- Whether the worker is provided with paid holidays or sick leave.
- Whether the work involves a profession, trade or distinct calling on the part of the person engaged.
- Whether the worker creates goodwill or saleable assets in the course of his or her work.
- Whether the worker spends a significant portion of his remuneration on business expenses.
It should be borne in mind that no list of indicia is to be regarded as comprehensive or exhaustive and the weight to be given to particular indicia will vary according to the circumstances.
The task in a proper common law assessment is to assess the facts against the criteria and from that form a conclusion based on the balance of the evidence. The decision reads as follows:
 In this application, the Applicant [driver], on the evidence, appears to have had complete control over the way in which he wanted to conduct the services he provided.
 However, weighing against these factors is the control the Respondent exercises over the Applicant and its other drivers … [examples discussed] … Although these factors show some control, they are not overwhelmingly strong factors. Moreover, evidence of the kinds of control commonly associated with employment, principal amongst them, the obligation to attend work and to perform work when in attendance.
 In this case, the Applicant is required to provide his own capital equipment.
 The Applicant did not and was not permitted to display any of the Respondent’s or its affiliates names, logos or colours on his vehicle.… This is a factor that weighs against a conclusion of an employment relationship.
 It is clear from the evidence that the Applicant does not receive a wage but rather receives a proportion of the fee charged for the trip.… These are matters which all point away from the existence of an employment relationship.
 … the Applicant made a number of submissions … The Applicant says that if he was truly an independent contractor, he would be able to charge a lower or higher fare without being restricted by what the Respondents Services Agreement. That is a factor, but when weighed against all of the indicia going the other way, it is not significant.
 It seems to me plainly to be the case that the relevant indicators of an employment relationship are absent in this case. The overwhelming weight of the relevant indicia point the other way.… the Applicant was not an employee for the purposes of s.382 of the Act ….
Unions, for example, may criticise this decision. It doesn’t conform with their desire to force everyone into ‘employment’ where unions obtain their power.
The ATO, for example, may not like this decision. It doesn’t conform with the ATO’s bureaucratic objective to force individuals into employment-type tax status. Individuals as businesses are administratively annoying for the ATO.
But. The law is the law. The finding of an individual’s legal status (employee or independent contractor) is not something that can or should be manipulated by institutions that have their own self-interested agendas.
The Fair Work Commission decision outlined above demonstrates how the process of employee vs independent contractor should be conducted and the criteria for deciding the outcome.