Menulog’s application for a new modern award for its drivers, signals a shift by some in the gig economy to recognising that these workers are in fact employees. This may have significant ramifications for the industry at large.

Modern awards set out the minimum entitlements, pay rates and conditions for workers in a particular industry. As the way we work and conduct business evolves, certain industries may outgrow their coverage under an award, and in cases where completely revised models of commerce and work are established, entirely new awards may be appropriate.

Currently, there are more than 100 industry awards available covering employees in Australia, but it is Menulog’s contention that none of these are appropriate for the new ‘on-demand delivery services industry’ (“the Industry”). This Industry includes providers such as Uber, Deliveroo, DoorDash, Menulog and others who provide a platform – usually online or via an app – that facilitates immediate consumption by a customer of consumables from a third-party business.

Independent contractors in the gig-economy

Traditionally, on-demand delivery companies have treated their drivers as independent contractors. A handful of decisions have challenged that assumption, namely Klooger v Foodora Australia Pty Ltd in 2018 and Diego Franco v Deliveroo Australia Pty Ltd in 2021.

There are hefty penalties for businesses that wrongly classify their employees as independent contractors (known as sham contracting), whether knowingly or not. This is because employees are afforded greater protections and entitlements (such as minimum wage, superannuation, sick leave and so on) as opposed to independent contractors, who in turn command greater freedom and control over the way they work. Businesses that incorrectly classify employees as independent contractors have been required to back pay entitlements to workers and can be subject to significant penalties.

The issue as to whether these gig workers are actually employees or not has been the subject of significant debate and litigation. In this context, Menulog has sought to treat its workers as employees BUT subject to a bespoke award. As such, on 24 June 2021, Menulog made an application to the Fair Work Commission (“the Commission”) requesting that the Commission create a new, bespoke award for the Industry. In their application, Menulog submitted that the new award would provide an industry appropriate foundation for minimum employment entitlements to adopt an employment model”. This reflects their move away from independent contracting and towards engaging workers as employees- a decision hailed by the Transport Workers’ Union as a step towards rectifying the exploitation of delivery drivers in the ‘gig economy’.

Is there a need for a new award?

With the growth of the Industry, now expanding past the original offering of fast food to groceries, restaurant meals, alcohol and packages, and as workers are progressively being found to be employees, proper classification under a modern award is becoming increasingly relevant. Up until this point, Menulog operated on the basis that their employees where subject to coverage by the Miscellaneous Award 2020 (“the Miscellaneous Award”). The Miscellaneous Award exists to cover employees which would not otherwise be captured by an award, but it should not be applied where an employee is otherwise better safeguarded under another award.

For the Industry, possible alternative awards include the Fast-Food Industry Award 2010 (“the Fast-Food Award”), where riders regularly deliver fast food, or the Road Transport and Distribution Award 2020 (“the Road Transport Award”), where delivery drivers may be classified as couriers. In Menulog’s view, neither of these alternatives were appropriate and these arguments were considered in detail by the Commission, as outlined below.

The Commission’s power to create a new award

The Fair Work Act 2009 (Cth) (“the Act”) gives the Commission the power to create a new modern award. It also confers authority to vary the terms of an existing award in circumstances where an amendment would   better ensure protection for a particular industry.

Before a new award can be created, the Commission must consider the following:

  1. Whether employers and employees are currently covered by a modern award;
  2. If they are covered by a modern award, does this coverage meet modern awards objectives;
  3. If coverage does not achieve the modern award objective, whether the Commission should either vary an existing award or create an entirely new award.

For this purpose, the Commission must have regard to the modern awards objective which requires them to consider whether an award applying to a particular industry provides a fair and relevant minimum safety net of terms and conditions for employees.

Menulog’s application for a new award

Initial Application

On 24 June 2021, Menulog applied to the Commission, asking that they find that the creation of a bespoke award for the Industry would not be contrary to the modern awards objective and to make directions for the consideration of their proposed ‘On Demand Delivery Services Award’.

In doing so, the Commission considered whether an existing award applied to the Industry. On 12 July 2021, the Commission released a statement wherein they expressed their provisional view that the Fast-Food Award did not apply but did not express a view regarding the application of the Road Transport Award.

The Commission specifically considered the following issues:

  1. Whether the Fast-Food Award is suitable for the Industry;
  2. Whether the Road Transport Award is suitable for the Industry; and
  3. If the Miscellaneous Award is suitable for the Industry, and if so, does it provide a fair and relevant safety net for the industry.

Commission’s Decision

Recently, on 28 January 2022, the Commission released their decision on the abovementioned points and submissions. Menulog reiterated their firm position that  neither the Fast-Food Award nor the Road Transport Award applied in the circumstances – namely because of their novel model that they allege distinguishes them from coverage under either award.

In their submissions, Menulog described the industry as follows:

“the on demand delivery services industry means the collection and delivery of food, beverages, goods or any other item, that are ordered by a consumer from third-party businesses that offer food, goods and other items for sale for immediate collection and delivery on an online or application-based platform”.

Does the Road Transport award apply?

In considering the application of the Road Transport Award, the Commission found that the proposed new description of Menulog’s business activity as ‘the collection and delivery of food’ was effectively the same as the wording contained in the Road Transport Award, being ‘transport by road’ and that their description of ‘ food, beverages, goods or any other item’ fell within the definition used by the award, ‘goods, wares, merchandise, material and anything whatsoever’.

While Menulog argued that this description referenced raw materials and manufactured items and did not specifically account for the delivery of prepared meals, this was rejected by the Commission, stating that in any other case prepared meals would be captured by the words ‘anything whatsoever’.

The Commission went on to consider the other alleged distinguishing features of the Industry, such as the use of technology (and this not being contemplated at the time of drafting the Road Transport Award), the delivery by riders of items from a third-party and not the employer, and the fact that items must be available for immediate consumption. The Commission concluded that none of these aspects brought the Industry outside of the scope of the Road Transport Award. In arriving at such a conclusion, the Commission cited that the use of technology within the road transport industry has changed without impacting the scope of the Road Transport Award and that the nature of the timeframes for delivery (immediate consumption), and collection and delivery of items from third-party businesses were not uncommon features of the road transport industry, especially for couriers.

Does the Fast-Food Award apply?

Menulog submitted that the Fast-Food Award does not apply because it covers fast-food outlets only and not employers (who do not make the food) and that they are not the exclusive providers of fast-food, but other meals such as restaurant meals could be ordered.

The Commission was also of the opinion that the Fast-Food Award, while having the capacity to partially apply to drivers for some engagements, was insufficient and would have some overlap with the Road Transport Award. As the Road Transport Award offered more appropriate coverage, the Fast-Food Award should not apply. The Miscellaneous Award is only applicable in circumstances where an employee is not better protected by another award, and so consequently the Miscellaneous Award was found not to apply either.

Next Steps

The next step is for the Commission to consider whether the modern award objective is being achieved if it holds the Road Transport Award to be the applicable award. This will require the Commission to consider whether the industry’s classification under the Road Transport Award is appropriate in providing a fair and relevant minimum safety net of terms and conditions. If not, the Commission may find that the Road Transport Award may be varied, or create a new award altogether

The Commission has agreed that prior to their consideration of these issues, that interested parties may engage in consultation and conciliation first.

This decision signals a shift in the coverage of on-demand delivery drivers from the Miscellaneous Award to the Road Transport Award (or a new award). Together with recent decisions which found that in some cases, drivers were employees, this process may lead to improved conditions for workers and a decrease in the risk of exploitation of workers under the gig economy.

Businesses operating in this industry or similar should ensure the proper classification of their workers and if appropriate, under the correct award. For businesses in the gig economy, we suggest you take the following action to ensure your business is properly protected:

  • determine whether your drivers are actually employees or independent contractors;
  • if they are employees, consider the appropriate coverage of the Road Transport Award and what this may mean for your business;
  • ensure that you have appropriate contracts of employment or independent contractor agreements in place.

We regularly help our clients in the gig economy deal with these issues and ensure they are best placed to meet their legal obligations.

If you wish to discuss any aspect of this client alert or require specialist advice or assistance in relation to this article, please do not hesitate to contact us.

This alert is not intended to constitute, and should not be treated as, legal advice.

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This article is for general information purposes only and does not constitute legal or professional advice.  It should not be used as a substitute for legal advice relating to your particular circumstances.  Please also note that the law may have changed since the date of this article.