The Fair Work Ombudsman has finalised its investigation into Uber and found its drivers to be independent contractors, not employees.

Key points: Uber classifies its drivers as 'independent contractors' rather than 'employees'

Uber classifies its drivers as 'independent contractors' rather than 'employees' It is an important distinction because it determines whether drivers receive the minimum wage and other benefits

It is an important distinction because it determines whether drivers receive the minimum wage and other benefits FWO finds drivers are not 'employees' because they have control over their own hours

Its decision confirms that Uber drivers are not entitled to receive the minimum wage, annual leave, sick leave or any benefits that employees receive.

For the last two years, the FWO had been looking into whether the rideshare giant had engaged in "sham contracting".

The regulator wanted to know whether Uber was misrepresenting its drivers as, essentially, people who are running their own business — to avoid paying employee benefits.

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

"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.

"Our investigation found that Uber Australia drivers are not subject to any formal or operational obligation to perform work."

How did FWO reach its decision?

In reaching its decision, the FWO said it looked at wide range of evidence, including drivers' contracts, log-on and log-off records, payment records and interviews with Uber drivers.

"Uber Australia drivers have control over whether, when, and for how long they perform work, on any given day or on any given week.

"Uber Australia does not require drivers to perform work at particular times and this was a key factor in our assessment that the commercial arrangement between the company and the drivers does not amount to an employment relationship.

"As a consequence, the Fair Work Ombudsman will not take compliance action in relation to this matter."

It took a similar approach to the Fair Work Commission, which found (in 2017 and 2018) that Uber drivers were in fact contractors, rather than employees.

The FWO, however, stressed that its probe related only to Uber — and was not an investigation into other companies in the gig economy including Ola, Deliveroo, DiDi and Menulog.

Uber said it "welcomed" the Ombudsman's findings.

"Driver-partners tell us they value the freedom of being their own boss," Uber's spokesperson said.

"In fact, more than 90 per cent of driver-partners in Australia tell us flexibility is the key attraction to using the Uber app."

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'Hopelessly broken' laws

"The decision is wrong because the drivers are not allowed to set their own rates," said Steve, an Uber driver who declined to provide his surname.

"Any contractor should be able to set their own rates."

The decision was "disappointing", said Max B — the Uber driver who lodged the "sham contracting" complaint with the FWO, and also runs an online advocacy group called Ride Share Drivers United.

"It goes against decisions made in several other courts around the world which found Uber to be an employer."

The Transport Workers' Union (TWU), meanwhile, has also slammed the decision and called for law reform.

"Today's decision … is devastating for workers in the gig economy," TWU national secretary Michael Kaine said.

"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.

"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."

Although the FWO has decided not to take further action, the drivers' campaign to be recognised as employees may not be over.

"Do I think it’s definitive? No I don't think so, because the Fair Work Ombudsman is not the only actor who gets to take action against Uber," said Associate Professor Sarah Kaine from the University of Technology Sydney.

"There are individual drivers, unions, worker bodies who also have an interest and could also take action."