When food delivery platform Deliveroo announced the closure of its Australian operations last week, it cited a tough business environment, but that tough part could be a court case challenging the company’s contracting model, UNSW Business School lecturer Dr Greg Taylor said.
His views echo those of the Transport Workers’ Union, whose national secretary Michael Caine said Deliveroo was “overwhelming” in the gig industry.
The alliance partnered with Uber and DoorDash to strike deals that would improve working conditions for delivery drivers, but Deliveroo avoided that process.
Dr Taylor said there were doubts “Fodora did it” for Deliveroo to be bailed out of Australia.
Fudora was part of Delivery Hero, which was suddenly skipped town in August 2018 by its German parent company in taxes, pensions and $28 million. A few weeks later he was placed in administration.
The business has faced a range of legal challenges, including an unfair dismissal case and allegations by the employment watchdog the Fair Work Ombudsman (FWO) that it has made bogus contracts for drivers. The FWO launched a similar case against Deliveroo.
Fedora has been in a two-year dispute with both the Australian Taxation Office and Revenue NSW over unpaid superannuation, payroll tax and withholding tax.
But at the time, Fedora gave similar reasons for the exit to Deliveroo, saying it was shifting its focus to “other markets where the company currently sees significant growth potential.”
“In fact, the company was taken to federal court by the Fair Work Ombudsman earlier that year because of the industry’s most controversial practice of classifying workers as ‘independent contractors’.
When the decision was challenged, Fedora announced they would withdraw from the Australian market.
Deliveroo says there is too much competition in Australia, but the Fair Work Commission said last year a driver was unfairly dismissed because he was an employee and not a contractor.
Writing on the wall
According to Dr. Taylor, the company successfully acquired FMC in August. The appeal before the full bench, however, rings alarm bells for the continued viability of the business, with the ALP in the federal government threatening to legislate on the matter.
“This has a number of implications for Deliveroo beyond this particular case. As the statutory minimum and contribution are applied, the entire workforce of the Cavalry is classified as labourer, thereby risking creating a condition that will increase the cost of the work.
Therefore, Deliveroo has decided to reduce its losses by going into voluntary administration.
It sparked similar changes in Europe this year as regulators and policymakers began cracking down on the misclassification of workers in this field.
“In the specific case of Deliveroo HR, they were left high and dry with the sudden exit of the company. They are not classified as employees and therefore have fewer employment protections, including the right to severance pay.
People with wage debts are classified as “unsecured creditors” by Cordamenta, which oversees voluntary liquidation. This means you may not even get a windfall, says Dr. Taylor.
“Most operate on more than one delivery platform, which means they have more work to do, but this is of little consolation to those who lost money due to the company’s fold or relied on Deliveroo as their main source of income,” he said. he said.
Legal issues like Deliveroo and Foodora have wider implications for workers in the sector. Dr Taylor said there was significant international interest in the area from policy makers and academics.
“It seems that regulations and/or legislation are coming in to create less risk in these companies,” he said.
“This is certainly something that the Transport Workers Union (TWU) has been negotiating with for some time.”
