Are Australian Uber drivers “employees”? Will the Californian case Berwick v Uber have a flow on effect in other jurisdictions? Is the Uber empire about to fall?

In a recent Californian case, Uber driver Ms Berwick was found to be an employee rather than a contractor. While the question of whether a person is an employee or contractor is assessed on a case by case basis, Uber is in trouble if more drivers are found to be employees, as their business structure centres on drivers being contractors. In Australia, the Fair Work Commission (“FWC”) has yet to consider the case of an Uber driver, but it is just a matter of time before a case comes before the FWC. Uber has 3,000 drivers in Sydney alone and is adding over a thousand new drivers across Australia to its network each month. In this blog post I consider whether a challenge to the contractor status of an Uber driver could be successful in Australia.

The employee and contractor distinction in Australia

The employee/contractor distinction is important. If a worker is characterised as a contractor, they are not entitled to a whole host of benefits and protections that employees are entitled to under the Fair Work Act 2009 (Cth) such as superannuation contributions, leave, statutory termination notice, and unfair dismissal protections.

The test in Australia used to be focused on control. Courts would look at the nature of the control and the degree of the control (Gould v Minister of National Insurance (1951) 1 KB 731, Ormerod J). Control is still an important factor but the test has changed to a multifactor test. All relevant matters must be considered in determining whether a person is an employee or a contractor. The key case is Stevens v Brodribb Sawmilling Co (1986) 160 CLR 16. Hollis v Vabu (2001) 207 CLR 21 is often cited as the key case. However the multi-factor test originated in Stevens v Broadribb. In Stevens v Brodribb, a worker was killed by a log when he climbed onto a log truck. The worker had been directed to climb onto the log truck by another worker. Brodribb would be vicariously liable if the worker who made the direction was found to be an employee. In making their determination, the High Court stated that all relevant factors, including control must be considered. In the subsequent case of Abdalla v Viewdaze (2003) 121 IR 215, it was clarified that control was an important consideration, but no clear guide was provided on the weight to give to other factors. A useful non-exhaustive list of indicia was provided:

1.       Control;

2.       Entitlement to work for others;

3.       Tools/equipment;

4.       Whether work can be delegated or subcontracted;

5.       Whether hirer can suspend or dismiss the worker;

6.       Whether worker is presented as an “emanation of the business” to the world;

7.       Whether income tax is deducted;

8.       Remuneration;

9.       Allowance for leave; and

10.   Portion of money the worker spends on business expenses.

The Californian Case – Berwick v Uber Technologies Inc. (2015) Labor Commissioner of California Case No. 11-46739EK

Ms Berwick was an Uber driver who brought action claiming she was an Uber employee and was therefore entitled to be reimbursed for expenses incurred as an Uber driver such as bridge tolls paid and fines incurred when stopping to pick up passengers. California has a Labor Code which requires employers to reimburse employees for expenses incurred in the course of employment. Ms Berwick was found to be an employee.

The matter was before the Labor Commissioner of California. Uber have appealed the decision. However, the Labor Commission did conduct a useful examination of the Uber contract, which is useful when considering whether an Uber driver in Australia would be considered an “employee”.

The relevant test in California as to whether a contractor relationship or employment relationship exists is whether “there is an inference of employment if personal services are performed as opposed to business services”. This test is different to the Australian test, so I am not going to go into it in detail.

In deciding that Ms Berwick was an employee, the Labor Commission considered the degree of control Uber exercised over Ms Berwick. The control does not have to be complete control to be sufficient to constitute an employment relationship. In particular, the Labor Commission stated that the fact Uber retains control over the operation as a whole by both obtaining passengers in need for the service and providing the workers to conduct the service. The Californian Labor Code has a presumption of employment, so Uber had the burden of proof of establishing a contractor relationship. The presumption of employment does not exist in Australia.

A closer look at the contract

While the Uber driver contracts in Australia are likely not identical to the Uber driver contracts in California, we can use characteristics of the Californian agreement for the purposes of this hypothetical exercise.

Key components of the agreement that could indicate a contractor relationship:

1.       Driver can accept, reject and select among requests for rides;

2.       Driver has no obligation to accept a request;

3.       Driver selects and maintains vehicle to be used; and

4.       If a Driver accepts a request and fails to follow through or complete the request as directed by the passenger, the Driver may have to pay Uber damages.

Key components of the agreement that could indicate an employment relationship:

5.       Uber provides iPhone which is required to access the application (but only if the driver does not already have a compatible phone);

6.       Uber must approve the vehicle used;

7.       Driver must maintain the vehicle used in accordance with Uber standards;

8.       Driver must notify Uber of any changes in vehicle or fleet;

9.       Drivers are encouraged not to accept tips;

10.   Driver is not paid directly by passengers. Driver is paid by electronic funds transfer by Uber according to Uber rate of pay scales;

11.   If a passenger is a “no show”, Uber has complete discretion as to whether to charge the passenger the cancellation fee, and complete discretion as to whether the Driver will be paid their cut of the cancellation fee;

12.   Uber issues Drivers with identification and password keys for the use of the Driver only – ie the Driver cannot subcontract to a third party to do the work with their Uber application;

13.   Drivers can be required to undergo a screening process and attend the Uber information session regarding the use of its devices.

A closer look at the reality of the relationship

In Australia, the Fair Work Commission usually starts the multi-factor test by considering control, followed by detailed analysis of other relevant factors. Traditionally, courts have found ownership of large vehicles an important indication of a contractor relationship. For example, truck drivers who own their trucks are more readily classified as contractors. There seems to be a fixation on this asset ownership, even in light of other factors which would appear to outweigh the vehicle ownership. Given that a car is a much smaller asset than a truck, Uber drivers may not face the difficulty of getting around the traditional fixation of the FWC and predecessors on large vehicle ownership. However, the relationship is assessed on a case by case basis, and Uber drivers who own larger vehicles such as limousines or luxury vehicles may find it more difficult to establish an employment relationship.

At first glance, an analysis of control makes Uber drivers appear to be independent contractors, as Drivers can choose their work hours, choose the vehicle they use, and choose which requests to accept. However, a closer look shows Uber does exert some control over Drivers. Drivers do not have complete control over the hours worked. In the Californian case, Uber could deactivate a driver if they were inactive for 180 days. Drivers had to make a formal application to be reactivated. Uber also maintains significant quality control, encouraging passengers to rate their Uber trips. Uber drivers must maintain a passenger review star rating of 4.6 or greater. If the rating is below 4.6 Uber turns the driver’s application off. Uber also maintains quality control in other ways, by vetting potential drivers who must provide personal information and pass background tests. Uber also control the tools the drivers use by providing iPhones with the pre-loaded application, requiring cars to be registered with Uber and having requirements such as that the cars cannot be more than 10 years old. Uber also controls the fee drivers receive from passengers. Drivers cannot negotiate fees from passengers and are encouraged not to accept tips. Drivers are not paid directly by passengers, but by Uber.

Likely Fair Work Commission outcome

Despite the presence of some factors indicating a contractor relationship, it is unlikely an Uber driver would be considered an employee by the Fair Work Commission. The Californian case of Berwick v Uber is unique. In California, the “presumption of employment” and the low threshold of control to constitute an employment relationship meant that Ms Berwick was successful at first instance. Uber has appealed, and the decision could be overturned on appeal.

The Australian test for whether a worker is an employee or contractor is different. The multi-factor approach involves identifying factors for and factors against the existence of an employment relationship, followed by a weighing of these factors. Control is an important factor. Uber describes itself as having no control over drivers, as drivers can work when they want to, manage their own schedules and can refuse work. In practice, Uber does exert some control, as discussed above. In considering the other factors for and against the existence of an employment relationship, the Fair Work Commission will likely focus on the fact Uber provides the application, that drivers  are paid by Uber rather than directly by passengers, and the fact Uber can withdraw the driver’s access to the application in certain  circumstances. While there are some factors indicative of an employment relationship, overall the factors weigh more heavily towards a contractor relationship. In saying this, the worker’s relationship to the hirer is assessed on a case by case basis, and due to the flexible nature of the test, it would not be impossible for the Fair Work Commission to make a contrary finding.

The status of Uber drivers as contractor or employees is important. Many of the 3,000 plus Uber drivers in Sydney could be classified as “vulnerable” as most come from Sydney’s 30 postcodes with the highest unemployment rates such as Lakemba, Bankstown and Auburn. Ensuring workers are afforded the correct status and receive appropriate entitlements is important, particularly for Australia’s vulnerable workers, and will no doubt be considered very carefully when a case eventually comes before the Fair Work Commission.