Are new gig economy businesses eroding employee rights?

Uber, for example, classifies more than one million drivers globally as independent contractors, not employees. Should these companies be entitled to skirt employment laws in the name of innovation?

Gig-economy platforms deliver convenience for consumers and flexibility for workers.

Associate Professor Sarah Kaine

Research director in the future of work, UTS Business School

Associate Professor Sarah Kaine

The gig economy is most definitely leading to an erosion of employee rights. This is particularly the case with the likes of Uber and Deliveroo, because their business model is based on keeping wages as low as possible. Airtasker leaves it to the market to determine the payment, but let’s not forget that outside the gig economy, we have regulated markets to ensure there’s a minimum wage.

How is Uber not an employer? It directs what trips a driver takes, how much money they can charge, the kind of car they can drive. It also directs performance management through its rating scheme.

Employees in the gig economy do have some flexibility in their working hours, but so does a casual employee at Coles or Woolworths.

Classifying workers in the gig economy as dependent contractors would be a step in the right direction. This concept has been around in our road transport sector for a long time, where a driver buys a truck but may only have one contract.

The problem is that we tend to get caught in the newness of the app, rather than looking at the underlying principles. I think people are still enamoured by digital platforms; their convenience has obscured the reality of the work that actually goes on behind them.

“Classifying workers in the gig economy as dependent contractors would be a step in the right direction.” Sarah Kaine

We need to deal with this like we’ve dealt with every other labour challenge – by making sure we have a reasonable standard of rights and conditions and wages for every worker in the economy.

Kamal Farouque

Principal, employment and industrial law, Maurice Blackburn Lawyers

Kamal Farouque

Workers in the gig economy have very few rights because many employee entitlements depend on an employment relationship. In a practical sense, these people are being characterised as independent contractors, so are taken out of our regulatory framework and system of employee rights. It’s a kind of employment-avoidance strategy.

A key test of employment is whether the hirer essentially controls the work that is being performed. To suggest that employees in the gig economy have control is a bit of a joke. Another test is whether the worker is in business on their own account; Deliveroo riders or Uber drivers are not really conducting an independent business.

In July 2017, the Taylor Review of Modern Working Practices in the UK recommended that these workers be given dependent contractor status. While this would be an improvement on the grey zone they currently operate in, why shouldn’t they be entitled to the current protections of all employees under modern awards? It is unfair to create a category of second-class workers who are entitled to only some employee rights.

“Just because technology enables a service does not mean fairness cannot be part of the equation.”  Kamal Farouque

We have to devise a solution in Australia that is appropriate to our history of employment and labour standards. Just because technology enables a service does not mean fairness cannot be part of the equation. All workers – including those in the gig economy – should be entitled to fair pay and decent conditions.

Jim Minifie

Productivity growth program director, Grattan Institute

Jim Minifie

Gig-economy platforms can improve the labour market, but they might make some people more insecure.

First, the improvements. Platforms help people fit their work around other priorities. Some people work on platforms to fill gaps in their income from other sources. Platform work can give more control to the worker: for example, some peer-to-peer platforms for disability services make it easier for people and their carers to find matches that really work.

However, the platforms can erode employee rights. Platform contractors lack many of the protections of employees, and may have less predictable income. Enough negative ratings and you can be banned from a platform, with no rights to due process. Platforms may also undercut firms whose employees benefit today from regulations or collective bargaining: if minimum wages or other conditions push up costs, firms that play by the rules could be priced out by platform workers. Some therefore argue that the rise of platforms could make many workers worse off.

“Platform contractors lack many of the protections of employees, and may have less predictable income.” Jim Minifie

Time will tell who wins and loses on the gig-economy platforms. So far, the evidence suggests that the flexibility benefits predominate. Platforms first took root in areas that were mostly dominated by independent contracting in the first place, such as ride sharing (which competes most directly with taxis). However, delivery services (like food takeaway services) may be taking market share from traditional employment (couriers, for example, and delivery drivers employed by restaurants).


Sarah Kaine
Associate Professor Sarah Kaine lectures in human resources management and employee relations in the UTS Business School in Sydney. Her research focuses on themes such as the transformation of employee relations in the digital economy. Before becoming an academic, Kaine worked as an industrial relations practitioner and a consultant to not-for-profit organisations.

Kamal Farouque
Kamal Farouque is a principal in Maurice Blackburn’s employment practice in Melbourne and has extensive experience in employment, discrimination and workplace law. He advises employees, including senior executives, on employment issues such as employment disputes and Fair Work Act cases.

Jim Minifie
Jim Minifie is productivity growth program director at the Grattan Institute and the lead author of its Peer-to-Peer Pressure: Policy for the Sharing Economy report. Before joining the Grattan Institute, he was chief economist, Australia and New Zealand, at the Boston Consulting Group.

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