Foodora Australia admits riders owed $5m were ‘more likely than not’ employees
The administrators of now-collapsed Foodora Australia have admitted it is “more likely than not” their food delivery riders were employees rather than independent contractors – and are owed more than $5m in unpaid wages.
The admission is a world-first and could have significant impacts on the “gig economy” around the world, including competitors such as Uber, Uber Eats and Deliveroo.
Foodora’s parent company – German company Delivery Hero – is offering to pay $3m to the company’s creditors, which includes underpaid workers, but also the Australian tax office, and the NSW, Victoria and Queensland state offices of revenue.
The Transport Workers Union has vowed to go after the parent company for the full amount of unpaid wages.
On Thursday, the administrators released a report in which they conceded Foodora had been underpaying its workers by incorrectly classing them as independent contractors.
Contractors have greater flexibility to choose when to work, but are not entitled to award wages, penalty rates or annual leave – which are only available to employees. This meant some food app riders earned as little as $6 an hour.
Uber Eats and Deliveroo still claim their food deliverers are contractors, not employees.
But Foodora has admitted “it is more likely than not that the majority of the delivery riders and drivers should have been classified as at least casual employees”.
They found 20% of deliverers worked full-time hours (38 a week) at least once, and 5% of workers worked more than 38 hours a week for more than four weeks.
Under current Australian labour law, a mix of factors determines whether a person is an independent contractor or an employee.
In June, the Fair Work ombudsman took Foodora to the federal court alleging that at least three workers should have been classed as full-time employees.
The then-ombudsman, Natalie James, said the company exerted a high level of control – it made riders wear branded uniforms and sign up for set shifts, and restricted them to certain areas.
The administrator’s report agreed with many of these points: “Each rider/driver should have been provided with entitlements under the Fast Food Industry Award 2010 … from our sampling of the riders, it would appear to be more likely than not that the riders were casual employees. This appears to be consistent with the nature of the work, the hours worked and the position taken by the [tax office] in relation to their employee obligations audit.”
However, it said each individual would have to be looked at on a case-by-case basis.
In August, the company announced it would close its Australian operations within a month after financial issues and the pending court case.
The administrator’s report estimated that riders, if paid the lowest casual rate, would be entitled to $28m total in wages, but were paid only $23m.
However, Foodora did not have enough money to cover all the company’s debts.
Foodora also owes $2.1m in unpaid tax, $550,000 to Revenue NSW and an estimated $400,000 to Victoria and Queensland revenue, combined.
The report also revealed the company had made a loss every year since 2015. Over four calendar years, the company lost $3.3m, $10.9m, $7.5m and $7m, respectively.
Tony Sheldon from the TWU said the union intended to pursue the German parent company, which was solvent.
He said the admission strengthened the case against Uber and Deliveroo that their workers were also employees.
“It’s a business model based on wage theft and that is the brave new world of work,” he said. “I think it strengthens the case against Uber Eats, Uber and the like.
“Seventy per cent of delivery riders are visa holders, many of them students from overseas. The average age being 23, there is a responsibility for the government to pursue this company literally to the ends of the world.”