As recently as last year, the gig economy’s “independent contractor” business model seemed like an unstoppable force. It started with Uber, but soon spread to food delivery and before long was entering new sectors, such as freight, logistics and healthcare.
The model reached hero status in the business community. It was the neoliberal panacea, a cure for all their ills.
Sham gig economy contracting provided the perfect business solution to all those pesky costs, such as minimum wage, superannuation and workers’ compensation.
The model soared across the economy like a state-of-the-art fighter jet, out manoeuvring regulators on every sortie, shooting down naysayers and workers’ rights advocates, and carpet-bombing competitors into submission.
But the forces on the ground have marshalled and rallied. The billion-dollar new age super disruptor is now taking hits left and right, sending it into a slow-motion death spiral.
As it reaches terminal velocity the challenge for workers and investors, already duped into getting on board this rebirthed clunker, is to salvage something of their stolen entitlements and sunk capital from the wreckage.
Internationally and in Australia, the first incarnation of the app-based or platform-based economy — where workers are arbitrarily labelled contractors to separate them from their rights — is under great pressure. The regulators are coming, albeit frustratingly slowly. Workers, supported by unions such as the Transport Workers Union (TWU), are asserting their rights and parliaments are being forced to listen, causing investors to cool off and venture capital to take flight.
The recent Foodora case is the canary in the coalmine for gig economy companies. They ignore it at their peril.
Food delivery platform Foodora closed its Australian operations and entered administration in August, after continued accusations of underpaying workers and with an unfair dismissal case before the Fair Work Ombudsman.
In November, administrators for Foodora released a report to creditors revealing the company owed its riders $5.5 million in unpaid wages, the Australian Tax Office $2.1 million, Revenue NSW $550,000 and Revenue Victoria and Queensland $400,000.
After a “significant amount of time”, expert accounting and legal advice, Foodora administrator Worrels said it had determined that riders for Foodora are likely to be classified as workers and thus eligible for benefits such as a minimum wage, superannuation and sick leave.
“We have now reached the position that, on the basis of the information available at the date of this report, it is more likely than not that the majority of the delivery riders and drivers should have been classified as at least casual employees of the company rather than independent contractors,” the report said.
Foodora’s parent company, Germany-based Delivery Hero, has agreed to pay back only $3 million of the money it owes in Australia, despite recently posting global revenue of $1.2 billion.
The admission that gig economy riders and drivers should be classified as workers could have major ramifications for the sector. The TWU’s Tony Sheldon said the admission could act as a “lightning rod for further action in various parts of the world”.
Inquiries into gig economy
The Foodora case comes on the back of a lengthy Senate Inquiry into the future of work, which noted the exploitative nature of the emerging gig sector and recommended legislative amendments that "broaden the definition of employee to capture gig workers" and ensure they have full access to workplace protections. Federal Labor has pledged to act to improve workers’ rights in the gig economy if it is elected next year.
In Victoria, following widespread claims of worker exploitation, Minister for Industrial Relations in the Daniel Andrews’ Labor government, Natalie Hutchins, announced an inquiry into the conditions of workers in the on-demand or gig economy.
The inquiry will be chaired by former Commonwealth Fair Work Ombudsman Natalie James. It will examine allegations and determinations concerning contracting arrangements and whether these arrangements are being used to avoid workplace laws and other statutory obligations.
It will review the application and effective enforcement of workplace laws, including accident compensation, superannuation and health and safety to people in the gig economy. The inquiry will also examine how on-demand workers are regulated internationally and interstate, including Australia’s obligations under international law.
Unfortunately for gig economy operators, capital flight and a regulatory reckoning are not their only problems. Workers, especially in ridesharing, are finding out that this BYO capital and risk model has got major problems, and they are leaving the sector in droves. They cannot make a decent wage and they are working in a very hazardous environment with no protections.
A TWU survey of 1100 rideshare drivers conducted earlier this year illustrates the depth of the problem. Some of the key findings were that:
- half of the drivers work full-time;
- on average, they earn $16 an hour (before costs like fuel, insurance and car maintenance);
- of those who work full-time, 67% earn less than the average weekly wage ($1586);
- almost one-third of drivers are motivated to drive because "they have debts to pay"; and
- almost two-thirds say the pay is "not good enough to save for super or leave".
Nearly 7 out of 10 drivers said they were victims of arbitrary "deactivation" — essentially being locked out of the app and prevented from working due to customers making false complaints. These drivers are not given a right of reply to address any allegations.
The TWU said it had received 969 reports of drivers being harassed and/or assaulted. A large number of them had "received threats" (37%) and either been the victims of physical assault (10%) or sexual assault (6%). The results show what is obvious to most — spending your days and nights driving strangers around can be stressful, dangerous and traumatic.
So why would anyone join the gig economy? In rideshare for example, the value proposition being put by the companies is so skewed against the interests of the individual worker it beggars belief that people continue to sign up.
Desperation can be the only explanation. Why else would anyone risk their life, their capital — in many cases the only asset they have: a car — and their well-being for less than $10 an hour, once petrol, depreciation, tolls, insurances and registration is taken out?
Desperation means workers have no choice. Workers, who have no choice, no collective bargaining capacity and are forced to compete with one another for scraps of work, are being exploited. It cannot be reasonably described as anything but exploitation.
Unfortunately, desperation is not something that is in short supply in the community, and there is no shortage of those willing to take advantage of it. Some gig platforms are even trying to form “partnerships” with charitable organisations, which is just code for securing a strong supply of vulnerable people who come to charities seeking help.
Last year, ABC's Compass ran a story in which Catholic charity Jesuit Social Services was directing women clients to a female rideshare company. So powerful is the marketing spin that even reputable organisations can be duped into sending vulnerable people to work for below minimum wages with no workers’ compensation or superannuation.
The marketing material of these firms make claims about being part of a caring community, which is all designed to lure the marginalised and lonely. They fail to mention that if workers get sick, injured, killed, assaulted or some other totally foreseeable thing happens, they are on their own, without so much as a paid sick day.
For this, workers have to bring their own car, pay for petrol and pay a commission to the company.
But hey, they get flexibility.
Protection for workers
The Australian Competition and Consumer Commission (ACCC) has a role to play in protecting the next wave of gig workers from falling prey to the sharks. Even now, rideshare companies proudly boast that drivers can “earn” up to $1200 a week on their platform. This sounds great — except it is completely illusory.
They may, if they are very lucky, receive that much in payment receipts for fares. But that is not “earnings”, any more than all the money in the bookmaker’s bag before the race is run and won can be considered “earnings”. Earnings are what is left after the pay out. It is what you take home, not what you take in that matters.
According to the TWU survey, for rideshare drivers take home pay is on average between 50 and 60% of receipts, once all the costs are taken out.
Unfortunately, the ACCC, which is supposed to stop false and misleading promotions such as those, is sitting on its hands.
The momentum towards finding a better way to capture the benefits of technology without jettisoning 150 years of employment law is now unstoppable. In Europe and Britain the problem of gig economy rights is front and centre. Even British Prime Minister Theresa May, who is not exactly known for her pro-worker agenda, announced last month that her government will do more to protect gig economy workers.
The Victorian inquiry next year will be significant and promises to herald a new legislative approach. Hopefully this new approach addresses the most grievous breaches of rights and:
- explicitly defines and focuses on the individual’s rights, not how their employment is labelled;
- makes superannuation payable to all workers; and
- ensures other entitlements are available to all workers and are transportable across platforms and employers.
It should also feature significant financial penalties and even jail terms for companies that refuse to change their business models and provide even the most fundamental rights to workers.
We need to push governments to legislate to recognise the rights of workers in the gig economy. These workers have been ignored for far too long and every day we wait for the regulations to catch up.
People are being conned and injured. They work with no sick leave, maternity leave, family or carer’s leave or compensation, and are paid below minimum wage.
In Australia in 2018 that is beyond unacceptable. It is outrageous.