People & Human Resources, Startup News & Analysis

Internal staff email warns Foodora about “sham contracting”, as gig economy scrutiny builds

Emma Koehn /

A leaked email from a manager at food delivery service Foodora has suggested the company’s contracts are “concerning” from a legal perspective, as one gig economy expert says scrutiny on the space will be widespread in years to come and the fallout could be significant.

Fairfax reports it has cited an email from a client manager to senior leaders at the gig economy platform in Australia, which suggests Foodora contracts “may have lines in them which blur the lines between employment or contractor arrangements”.

In the email, the manager reportedly said the company should be concerned about how it outlines its relationship with its contractors, saying businesses are not able to represent an employment relationship as an independent contract if it meant this gave “the company more control” over its workers.

Legal experts have previously told SmartCompany that in order for a contracting arrangement to be legitimate, workers need to have control over providing their services to a business, as well as fulfilling criteria like providing their own tools and having the freedom to work for other clients or businesses.

However, Foodora has rejected the claims that it engages in any sham contracting practices.

“Foodora Australia has lawfully engaged its riders as independent contractors and has not been found by any court of law to have engaged in any malpractice in respect of engaging riders,” the company said in a statement provided to SmartCompany.

The company said the email in question contained the opinion of one staff member and the company uses the independent contractor model to allow drivers “flexibility” about when they work and when they would prefer to decline a delivery shift.

Scrutiny will only grow

Over the past two years, there have been a number of claims from food delivery riders across the globe who believe their arrangements with food delivery platform amount to employment relationships, not contractors.

In the UK, delivery drivers for Deliveroo brought a case to Britain’s Central Arbitration Committee arguing they were entitled to basic employment rights like minimum wages and regular hour. The drivers lost their bid and were found to be “self-employed” individuals.

In Australia there have been a number of tests of so-called “sham contracting” in recent times, including one which saw courier businesses Z Transport and Boxbay fined $72,000 for paying workers as though they were contractors despite them working regular hours and being entitled to leave accrual and minimum wages.

Concerns about the contracts at providers like Foodora are just the very beginning of a growing scrutiny on gig economy practices across a number of business sectors, says Dr Zlex Veen, a scholarly teaching fellow at the University of Sydney Business School.

“There is definitely a momentum for future scrutiny on these practices,” he tells SmartCompany.

“If you look at recent developments, the Senate’s inquiry into the future of work is underway. From a regulator’s point of view, that Senate inquiry is going to be shining some lights,” he says.

Having researched the gig economy space for some time, Veen says businesses need to take note of regulatory changes that could go well beyond sham contracting and how gig economy workers get paid.

“One of the things we have identified in our research is occupational health and safety in these businesses. Whether or not many of these platforms are required to pay workers’ compensation is a grey area. There are risks with how some of these platforms, not all but some, operate — and if these workers are injured at work, it’s the public that could end up footing the bill.”

Given that scrutiny is building, many are questioning what the balance should be between “flexibility” and entitlements, says Dr Josh Healy, senior research fellow at the University of Melbourne’s Centre for Workplace Leadership.

For many people, it’s not clear in principle why these workers shouldn’t have access to customary, minimum standards,” he tells SmartCompany

“It really seems as though there is a build-up of interest here, and there is concern from the other side too, from within companies about what they might be exposing themselves to [with their agreements].”

More borrowing from gig economy models

Beyond concerns about safety for ride delivery platforms, there could also be implications for other Australian businesses from future regulatory scrutiny on gig economy businesses, says Veen. This is because there is no doubt traditional industries are watching gig platforms closely and increasingly borrowing their practices.

“You see other industries going down that path, and at the moment it’s a lot in service work. Once this really starts creeping up in other industries, the broader impacts for society are unknown,” he says.

Veen says that even in sectors that are not home to traditional “gig economy” operators, some businesses are still using practices that are currently being surveyed by governments and regulators as part of their “future of work” research. This includes shorter working hour shift commitments or project-based work.

It’s starting to affect relatively high-skilled, white collar work, and with administration services and the like. One of the things is now you can engage people for administration services for a shorter period of time,” he says. 

Businesses should be watching the regulatory space closely on this front, but Veen suggests companies should also be thinking well beyond contracts when they think about how employment arrangements will operate in future.

“The gig economy is just one small area of the ‘future of work’ thing. Think about automated vehicles — once they are around, things won’t just be about treatment of Uber drivers,” he says.

NOW READ: Online food delivery set to become $2.4 billion market, but is it a “formula for making money”?

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Emma Koehn

Emma Koehn is a former senior SmartCompany journalist.

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