When food delivery platform Deliveroo announced last week it would shut down Australian operations, it cited a tough business environment, but that tough part could actually be a looming lawsuit challenging the company’s contract-working model, Dr. Greig Taylor, lecturer at UNSW Business School.
His view echoes the Transport Workers’ Union, with national secretary Michael Kaine saying Deliveroo was the “outlier” in the gig industry.
The union has worked with Uber and DoorDash to strike deals to improve working conditions for delivery drivers, but Deliveroo has avoided that process.
Dr. Taylor said there are suspicions that Deliveroo “did a Foodora” by saving Australia.
Foodora was a subsidiary of Delivery Hero that suddenly left town in August 2018 due to tax, pension and $28 million to its German parent company. It was deposited a few weeks later.
The company faced a series of legal challenges, including an unfair dismissal case and allegations from the employment watchdog the Fair Work Ombudsman (FWO) that it had made sham contracts for delivery drivers. The FWO started a similar case against Deliveroo.
Foodora was also in the middle of a two-year dispute with both the Australian Revenue Service and the NSW Revenue Service over payments for unpaid pensions, payroll taxes and Pay As You Go taxes.
But at the time, Foodora gave similar reasons to Deliveroo for its departure, claiming it was shifting its focus “to other markets where the company currently sees higher growth potential”.
“The reality was that earlier that year the company was taken to federal court by the Ombudsman for Decent Work (FWO) over the highly controversial practice, widespread in the industry, of classifying its employees as ‘independent contractors’,” said Dr. .Taylor .
“When the ruling was against, Foodora announced that they would leave the Australian market.”
Deliveroo claimed there is too much competition in Australia, but a negative ruling was issued last year when the Fair Work Commission found that a driver had been unfairly fired for being an employee, not a contractor.
Writing on the wall
Dr. Taylor said the ruling, which the company successfully appealed to the full court of the framework contract in August would nevertheless have raised alarm bells for the company’s continued viability, with the ALP in the federal government threatening legislation on the issue.
“This had a number of implications for Deliveroo in addition to this particular case. It threatened to set a precedent that could have reclassified the entire rider workforce as employees, which would have caused significant costs to its operations as legal minimums and contributions would apply,” he said.
So Deliveroo has decided to cut its losses by going into voluntary administration.
“It has pulled similar stunts in Europe this yearas regulators and policy makers begin to address the miscategorization of workers in this area,” said Dr Taylor.
“In the specific case of Deliveroo’s workforce, they’ve sort of been left in the lurch by the company’s sudden departure. They are not classified as employees and therefore have little employment protection, including the right to austerity allowances.”
Those owed wages are categorized as “unsecured creditors” by KordaMentha, the company responsible for the voluntary liquidation. Dr. Taylor said that means they probably won’t even get back paychecks.
“Most work on more than one delivery platform, meaning they have additional work, but this will be of little comfort to those who have lost money as a result of the company’s bankruptcy or those who have relied on Deliveroo as their primary source of delivery. revenue,” he said.
Lawsuits such as those against Deliveroo and Foodora have wider implications for workers in the sector. Dr. Taylor said there is strong international interest in the field from policymakers and academics.
“It appears that regulation and/or legislation is being put in place to make employment in these companies less precarious,” he said.
“This is definitely something the Transport Workers’ Union (TWU) has been lobbying for for some time.”