A Platform to Work: The Sharing Economy

A Platform to Work: The Sharing Economy

This article appeared in the December 2017 IPA Review:

An increasing number of Australians are turning to sharing economy platforms to work independently. Airtasker’s (a popular sharing economy platform) 2017 survey on the ‘Future of Work’ reported that 10 per cent of respondents earned income from sharing economy platforms, and 58 percent would consider earning income from a freelancing platform in the future.

There have been predictable calls for increased labour market regulations to provide protections against this ‘insecure’ form of work. However, employment and independent contracting are hardly new concepts, so there is no obvious reason that special regulation is required for work arranged through sharing economy platforms.

The marvel of the sharing economy is that the platforms create new
opportunities for exchange.

It is not true to say that work on these platforms is unregulated, as the common law rules apply. The key benefit of maintaining the common law approach is that the law is responsive to individual cases as actual problems emerge, in contrast to hastily regulating to address potential concerns that may never eventuate—but will prevent real opportunities for work.

THE FUTURE OF WORK

In 2015, Darcy Allen wrote in these pages that ‘The sharing economy is a market catalysed by disruptive technologies’. In this way, Allen observes that:

Communication technologies have drastically reduced the costs of coordinating resources. It is now marvellously cheap and simple to discover if there’s an idle car or an empty room around the corner.

I suspect ‘marvellously’ was used deliberately, as a hat tip to economist Friedrich Hayek’s ‘marvel’ at the price mechanism. Here, the marvel of the sharing economy is that the platforms create new opportunities for exchange—thousands of producers and consumers are voluntarily brought together to coordinate knowledge about their own specific situations and make decisions which are mutually beneficial.

It is also a marvel in that the sharing economy platforms, although established for a specific type of exchange, do not direct or provide any of the underlying services. In this regard, Allen noted:

The sharing economy does not own the cars, the houses, or the helicopters. What the companies own is the software—and the algorithms— that help match potential private buyers and sellers.

A burning question is whether we can now add that the sharing economy does not employ the workers. That’s certainly what platform operators will contend. Until now, the public policy focus has been on Uber and ‘legalising’ the underlying service of ridesharing. Having substantially achieved this goal across the country, the focus now shifts to how to characterise this work and how it fits within Australia’s labour laws.

Earlier this year, the Australian Financial Review reported that the Fair Work Ombudsman is undertaking an investigation into whether Uber’s engagement of its drivers ‘is compliant with Commonwealth workplace laws’. This followed Ride Share Drivers United complaints that drivers should be considered casual employees. This follows similar actions in the United Kingdom and California in the United States.

But what will be the position in Australia? Are people undertaking work on sharing economy platforms employees or independent contractors? The distinction is important because heavily regulated pay and conditions under the Fair Work Act will apply to employees.

EMPLOYEES OR CONTRACTORS?

While there has been no case law on the sharing economy as yet, this is not a new legal question. Our legal system has already developed a useful framework—the multiple indicia test—which involves weighing up a range of factors in determining the relationship. A court will focus on substance and facts rather than how parties might label their relationship.

Several popular sharing economy platforms—such as Deliveroo, Foodora, Uber or UberEats—facilitate deliveries by car or bicycle. One leading Australian case is analogous.

In 2001, the High Court of Australia in Hollis v Vabu Pty Ltd considered whether a bicycle courier was an employee of ‘Crisis Couriers’. The reason the employment status mattered in this case was because the courier had injured a pedestrian, and the company was only liable for those injuries if the courier was an employee. The majority of the High Court decided that the courier was an employee, and came to this view by considering five factors.

The first factor was whether workers were providing skilled labour or special qualifications. The more highly skilled, the more likely workers will be considered to be independent contractors. Similar to this case, customers on the above platforms are unable to request an individual driver but are matched with the closest. Although there is a rating system, there is limited opportunity to leverage any goodwill. But this is different for other sharing economy platforms like Airtasker or Freelancer where jobs are more skilled, and job posters award work based on individual profiles and previous reviews.

Second, whether workers have control over the execution of their work. The greater the level of control, the more likely an employment relationship will exist. In this case, couriers were required to be at work by 9:00am, their work was allocated by the company and they were not able to refuse any work. The key distinguishing feature is that there is complete freedom to use the platform for work whenever it is convenient.

Third, whether workers are being presented to the public as being part of the company. If workers are required to wear uniforms, for example, this will more strongly indicate employment. While some delivery platforms provide their riders with branded uniforms, others do not.

Fourth, whether workers have control over financial arrangements – such as setting their rates of pay and invoicing, for example. The more that workers must do for themselves, the more likely they will be independent contractors. The court noted in this case that a per delivery rate is not necessarily determinative of an employment or contracting relationship.

An issue for sharing economy platforms is that payment processing is a core function of the platform operators—especially as this is how the platform operator makes its share of the transaction. Another factor in this regard is the scope for bargaining. With some platforms, this rate is fixed by the platform itself. On other platforms there is bidding for work and the ability to set fixed or hourly rates.

Fifth, whether there is a capital outlay required. The larger the outlay, and the more specific the asset, the more likely the worker is an independent contractor. In this case, the court considered a bicycle to be a relatively small expense and one that was not specific to the job as it could be used for other purposes like personal transport or recreation.

While subsequent Australian cases have considered additional factors, these are the main ones. The above discussion shows that the test involves looking at the relationship between each sharing economy platform and the worker on its own individual facts. Platforms that don’t require a high degree of skill from workers, tightly controls the work that is undertaken, requires workers to wear branded uniforms, sets pay rates, and handles the processing are more likely to be considered employers. Other platforms that enable highly skilled workers to tender for specific projects on terms negotiated between users—removed from any control of the platform—will be far less likely to be considered employers.

As this discussion shows, there is nothing preventing the existing legal test from being applied to sharing economy platforms. The value of retaining the common law approach is that these broad principles can be applied to new platforms in the future. This approach doesn’t seek to benefit or punish any particular platform operator—a risk with specific sharing economy regulation. Platforms should not receive special exemptions from employment laws just because they are popular. At the same time, platforms should not be subject to special regulations simply because more people are using the platforms for work.

The alternative approach is to introduce new legislation designed to extend the operation of the Fair Work Act to the sharing economy even where it would not be considered an employment relationship under the common law test. Unions NSW, for example, are agitating for this kind of change and have previously threatened to bring legal action against platforms like Airtasker unless they agree to enforce minimum conditions on job posters. The Australian Labor Party recently announced that it wanted to change Federal laws to bolster collective bargaining and compulsory superannuation for sharing economy workers.

Blurring the lines between employees and independent contractors specifically for the sharing economy should be avoided. Underlying the success of the sharing economy is the ability to harness excess capital and labour. While platforms unlock this potential by significantly lowering transaction costs, specific regulation would introduce new costs and impose new barriers to entry for the development of new platforms. There is also a strong moral case for maximising the opportunities available for unemployed and underemployed workers to take advantage of sharing economy platforms to work, and specific regulation may hamper individual effort.

Ultimately, it is important that genuine independent contractors continue to enjoy their freedom of contract—now, and for whatever new platforms may be developed. As it stands, the existing legal tests provide for exactly that.

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