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You may have heard about the many lawsuits against Uber in the US. Uber drivers across the country launched class actions claiming they are employees and not contractors, and should, therefore, receive the same rates of pay, leave and security as if they were employees. This article explores the issues around these class actions against Uber, the business models of other sharing economies and the Australian position if these types of actions were to arise here.

The US Position

Last month, Uber settled one of these class actions with their drivers in the states of California and Massachusetts. Uber settled the claims for the $114.2 million so that Uber could avoid having to reclassify its drivers as employees in these states. However, it has been released that if the actions had continued to court and if the court had ruled that Uber had to reclassify these drivers as employees, they would owe them as much as $1 billion in compensation.

Clearly, it is in Uber’s interests to keep their workers as contractors and not employees. They would have to pay them all of these additional rates plus cover the costs of things like the upkeep of driver vehicles and petrol costs. In this market of a sharing economy, it is becoming increasingly difficult to classify workers definitively one way or the other as either employees or contractors – particularly Uber drivers.

On the one hand, workers for Uber can choose their hours, much like a contractor, however, they also have to meet strict criteria to be able to work for the ride-sharing platform, similarly to being an employee. Some of the control Uber exercises over their drivers includes setting the rates and requiring the drivers act towards passengers in a particular way.

Uber has now replaced one class action for another, with a new lawsuit filed in the state of Illinois on 1 May this year. Like the claims in California and Massachusetts, this claim is also seeking to re-classify Uber drivers as employees and to recover unpaid overtime and compensation. The lawsuit also claims that drivers should be able to recover tips that were earned but were then taken away by Uber. This new class action has joined drivers across the country and will continue putting this issue in the spotlight.

Sharing Economies

The classification of workers also impacts on other sharing economies like Deliveroo, Foodora and Airbnb. The premise of these business models is that individuals have the freedom to work when and where they want. They are theoretically independent workers linked to customers through the use of platforms controlled by third parties, like Uber. The growth of this business model allows individuals to become entrepreneurs, often supplementing their primary income with these additional roles. The flexible nature of these positions, however, leads to confusion about what these individuals are entitled to as ‘independent workers’ for these platforms. Of particular concern is the level of control that these platforms have over these workers, despite their strong stance that these workers are contractors. The rise of Internet use and the ease with which individuals can connect to each other through a variety of mediums has seen a significant change in the traditional full-time employment role.

The rapid growth of these types of industries has seen the law struggle to keep up to regulate the changes to this hybrid business model. Ensuring workers are paid appropriately and receive their entitled allowances and leave becomes increasingly difficult, in the US, internationally and here in Australia.

The Australian Position

In Australia, we have clear legislation in place around employee entitlements, and how to work out what an employee is entitled to when considering their contract of employment or relevant industry award. There is also significant case law that has dealt with the issues of when a contractor is deemed an employee.

If the same actions were to arise against Uber in Australia, it is possible there would be a different outcome and that Uber’s drivers would be re-classified as employees. The reason being is that employment law in Australia considers the entirety of the relationship between the worker and the employer to determine the most appropriate classification.

Our legal system takes into consideration issues including:

  • Can a worker choose their hours or place of work?
  • Do they have to bring their own equipment?
  • How are they paid for their services?
  • Are they required to wear a uniform?

It considers these aspects, among others, to determine the nature of the relationship as a whole, not just the surface portrayal of the arrangement. It will be the overall impression that will lead a court to determine whether or not a worker is an employee or a contractor. That’s not to say that it will be easy for courts here to navigate the issues brought to light by the sharing economy.

It is currently unclear as to whether we will see the same level of challenge that Uber has seen in the US in regards to the classification of workers, but there are still issues around rates of pay that are becoming increasingly difficult to ignore. For example, food delivery platforms Deliveroo and Foodora, which have grown rapidly in Australia over the last year, pay their drivers significantly less than what a courier would receive under the National Award rate if they were an employee.

As of last month, Foodora were paying their couriers $14 an hour with an extra $5 per delivery, and Deliveroo were paying their riders $16 an hour with an additional $2.50 per delivery. A courier under the Award rate is paid $18.31 an hour, so if riders for either platform don’t receive any deliveries in an hour, they are paid less than the Award rate, and they are not entitled to any superannuation, leave or overtime rates. It is yet to be seen whether there will be any actions filed against either company or other sharing economies concerning these issues. As such, it’s also uncertain what position Australian Courts will adopt.

Key Takeaways

If you’re taking advantage of the flexible work arrangements of apps like Uber, Deliveroo, Foodora or Airbnb, or are simply about to commence ordinary work, it is important to have an understanding of the difference between an employee and a contractor.

One thing is clear – you must enter into any type of work relationship with an understanding of what you will receive and what you will forfeit when entering into contracts with your employer. It is also vital for Uber and others platforms like it to make sure they are clear on all of the legal issues they will potentially face, and how they will be able to make sure they are compliant with Australian law, regardless of how the situation is determined internationally. Questions? Get in touch with our startup lawyers on 1300 544 755.


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