On-demand restaurant delivery firm foodora Australia Pty. Ltd. is negotiating a possible payout of as much as AUD$8 million (US$5.8 million) for misclassifying delivery workers as independent contractors as it exits the Australian market, according to news reports. And at least one union is using the case to call for greater scrutiny of independent contractor relationships.
The Sydney Morning Herald newspaper reported last week that foodora’s administrator estimated it underpaid delivery workers by AUD$5.5 million (US$4.0 million) not including taxes as the drivers should likely have been classified as “casual employees” instead of independent contractors. The union said in its announcement said the company could owe more than AUD$8 million.
The administrator, Worrells Solvency and Forensic Accountants, had announced in August that it had been appointed to help foodora’s parent company, Berlin-based Delivery Hero, wind down operations in Australia.
In a statement to Staffing Industry Analysts, Bodo von Braunmühl, head of corporate communications at Delivery Hero, said the union presented only half the story. “Administrators did state that it is more likely that riders were employees than not, but this assessment has to be taken on ad hoc basis and each case is different,” von Braunmühl said.
Foodora operates in 22 countries. Its departure from Australia was due to an unfavorable market position, according to the company statement.
Going forward, does the company plan to change the classification of its workers?
“The regulatory framework is different from country to country,” according to von Braunmühl statement. “In Germany, for example, we employed all riders from day one.”
In Australia, the Transport Workers Union said the case points to the need for more regulation on the gig economy.
“Never before has a major company in the gig economy acknowledged its workers are employees or that it owes them minimum pay or retirement contributions,” according to a post written by Michael Kaine, national secretary of the Transport Workers Union.
“This demonstrates why government needs to regulate the on-demand economy so that the swindling of workers and tax revenues ends,” Kaine wrote. “But we must regulate it in the right way.”
Before this, foodora had been sued by Australia’s Fair Work Ombudsman in June claiming the company had misclassified delivery workers as independent contractors. The suit covered three workers first engaged by the company in 2015. However, the lawsuit came to a stop when the company filed for voluntary administration.