Transport Workers Union says the decision will be devastating for workers in the gig economy

This article is more than 1 year old

This article is more than 1 year old

The ridehailing company Uber does not directly employ its drivers, the Fair Work Ombudsman has said, because drivers have control over “whether, when, and for how long they perform work”.

The decision comes after an investigation into whether Uber’s “driver-partners” are lawfully classified as independent contractors or are effectively employees, as argued by unions and a lobby group, Ride Share Drivers United.

The conclusion prompted outrage from the Transport Workers Union, which called for new regulations for the gig economy, and the Centre for Future Work, which warned it could be a precedent to erode labour standards in other industries.

Sandra Parker, the Fair Work Ombudsman, said on Friday: “The weight of evidence from our investigation establishes that the relationship between Uber Australia and the drivers is not an employment relationship.

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“For such a relationship to exist, the courts have determined that there must be, at a minimum, an obligation for an employee to perform work when it is demanded by the employer.”

After examining drivers’ contracts, log-on and log-off records, interviews with drivers, ABN documents, payment statements and pricing schedules, the investigation concluded that Uber drivers “are not subject to any formal or operational obligation to perform work”, Parker said.

Her conclusion contrasted with the approach in the UK, where the court of appeal has ruled drivers are employees, but mirrors the approach of the US Labor Relations Board.

The centre for future work at the Australia Institute thinktank has suggested that Uber drivers earn $14.62 an hour on average driving for the most popular and low-cost service, UberX.

From 1 July, the minimum wage – which applies to employees but not independent contractors – will be $19.40.

Centre for future work’s director, Jim Stanford, said the ombudsman’s decision created an “enormous loophole” because “any employer can tell their workers they are free to clock out and go home any time they want”, and in some industries workers chose to sign up for shifts.

“Should that win [employers] the right to ignore minimum wage laws and other basic standards?

“For the ombudsman to conclude that this single dimension of supposed autonomy invalidates all labour protections is outrageous.”

Stanford cited other ways Uber exercised control over drivers, including the threat of “downgrading” drivers if they did not accept jobs and the fact that drivers “work when they are needed by the company because those are the only times they have some chance of decent earnings”.

“Workers operate absolutely under the thumb of the company in every other dimension of their work,” he said, citing the company’s ability to set fares and drivers’ pay.

The TWU’s national secretary, Michael Kaine, said the decision was “devastating for workers in the gig economy”.

“Last year we had a landmark victory when a Foodora rider won an unfair dismissal case, and we know the same control factors are in play for workers in Uber and right across the gig economy,” he said.

“If this is what our laws are guiding regulators to do then these laws are hopelessly broken and the government must act urgently to put in place rights that protect all workers.”

California is legislating new standards expected to force Uber and Lyft to recognise drivers as employees.