Foodora accused of sham contracting, underpaying workers

Fair Work Ombudsman launches legal action against Foodora Australia, alleging sham contracting and below-minimum wages.

The Fair Work Ombudsman has accused Foodora of engaging in sham contracting and unlawfully paying workers below the legal minimum. Photo: File

The Fair Work Ombudsman has launched legal action against Foodora Australia, alleging the food delivery company engaged in sham contracting and unlawfully paid workers below the legal minimum.

The Federal Court action alleges Foodora underpaid three workers and breached sham contracting law by misrepresenting to them that they were independent contractors when they were actually employees.

It is alleged that Foodora required each of the workers to have an Australian Business Number and sign a contract titled ‘Independent Contractor Agreement’ on the commencement of work.

One worker was paid $14 an hour plus a $1 for every delivery and a second worker was paid $17 an hour or $10 for each delivery.

The action relates to two bicycle delivery riders who delivered food and drinks to customers in Melbourne and a delivery driver who delivered food and drinks by car to customers in Sydney.

The Melbourne workers were juniors aged just 19 at the time, while the Sydney worker, an Indian migrant who is now an Australian permanent resident, was aged 30 at the time.

The Fair Work Ombudsman alleges that the workers were lawfully entitled to receive the minimum wage rates and entitlements that applied to their positions under the Fast Food Industry Award, and the amounts Foodora paid them were not sufficient to meet those rates and entitlements.

As a result of its investigation, the Fair Work Ombudsman allegedly found that the employees had been underpaid their minimum lawful wage rates, casual loading and penalty rates for night, weekend and public holiday work.

It is alleged that the three workers suffered a loss of $1,620.74 over a four-week period. Additionally, it is alleged that Foodora failed to make any superannuation contributions on behalf of the three workers.

Most of the underpayment — $1,168.50 — relates to the Sydney delivery driver, who worked significantly more hours than the two Melbourne workers over the four-week period.

The Fair Work Ombudsman alleges Foodora committed several breaches of the Fair Work Act. The company faces penalties of up to $54,000 per contravention.

The Fair Work Ombudsman is also seeking a Court Order for Foodora to back-pay the workers in full and make superannuation contributions on their behalf. A case management hearing has been scheduled in the Federal Court in Sydney for July 10.

Fair Work Ombudsman Natalie James said companies adopting sham contracting as a business model were “availing themselves of an unfair competitive advantage by depriving workers of their lawful minimum employment conditions and protections”.

“Relevant to the decision to litigate in this case is the extent to which contracting arrangements are utilised by this significant business,” Ms James said.

“There has been broad community and academic debate about the status of ‘models’ using smartphone-driven technology as a means for deploying a workforce that delivers food to consumers from restaurants and fast food outlets.

“The only way to answer the question of whether the workers delivering the meals are employees or ‘independent contractors’ is for someone to ask a court to consider the specific ‘relationships’ between a company and its workers.

“As the national workplace relations regulator, the Fair Work Ombudsman is now putting this question of significant public interest before a court to consider.”