As Australia moves to a glut-prone new industrial environment in the wake of the COVID-19 pandemic, the nation is going to need greater flexibility in its labour force. Last month, in a historic judgment, the full bench of Australia’s Fair Work Commission led by its president, Justice Iain Ross, enabled the nation to take a major step in that direction.
Realising that part of the industrial relations landscape had changed, within a week of the decision, Woolworths CEO Brad Banducci quickly embraced the Fair Work ruling in part of his operation. Coles CEO Steven Cain and other retail chiefs are now considering following Banducci.
All Australian enterprises need to look again at how they organise their labour and as part of that review they need to consider whether last month’s Fair Work ruling can benefit their business, in the light of the deep chasm that are emerging in the industrial relations system, some of which I highlight below.
Like most major decisions, the issue, on the surface, was quite simple: was terminated UberEats driver Amita Gupta unfairly dismissed? But that question required Fair Work to decide whether she was an employee or a contractor. Thanks to John Howard’s 2006 independent contractors act, the rules determining whether a person is a contractor, or an employee are clear.
But the contracting issue has been clouded in recent times because the Australian Taxation Office had a social agenda and set up its own rules outside the Howard legislation. Fair Work has taken us back to the law of the land, but that does not mean everyone can be a contractor. Nevertheless, the full bench declared that, in the case of UberEats, delivery drivers are independent contractors and not employees, they and isolated four critical factors that made those drivers contractors:
• Uber did not exercise any control over the delivery drivers who could perform their work whenever they wanted and for as long as they wanted.
• There was no obligation for the drivers to accept a particular delivery request.
(dot) UberEats drivers are allowed to accept work from other food delivery groups or perform other types of passenger or delivery work.
• Drivers are not required to wear uniforms, bear company logos, or represent the Uber Eats business beyond what is necessary for collection and delivery.
These criteria can be used in a wide range of activities outside of UberEats, such as home delivery of groceries, which is why Banducci wasted no time in acting.
Woolworths, Coles and other supermarkets are experiencing an unprecedent demand for home delivery as a result of the COVID-19 restrictions. They simply do not have the trucks and drivers to meet the demand.
One alternative is to buy a vast number of trucks and hire new staff but that’s a very expensive exercise and its possible that demand will fall sharply when restrictions are lifted, causing huge termination payments.
Using the UberEats system means that contractors’ vehicles, including passenger vehicles, can supply the booming demand. And there is an army of good people with vehicles who are now unemployed or inactive under JobKeeper. Banducci can now make a major thrust into home delivery and with contractor flexibility he can pull back if demand falls away.
But Banducci must also accept a risk which also must be accepted by Cain and other retail chiefs who follow: the contract drivers are handling food, including frozen food, and it can go wrong. Retailers have much more control over staff. Of course, those contractors that don’t perform the required service will be dropped.
And the Uber system is not a simple contracting arrangement. The Uber organisation, or anyone else organising a similar service, is the “facilitator”. The money goes through the facilitator who clips the ticket, but the actual arrangement is between the parties. Supermarket customers using this system may need to directly pay an “Uber” style organisation and in some cases they will be able to choose between the contract system and a staff delivery.
Banducci decided to test the system in Townsville in Queensland: 2000 kilometres from Sydney where Woolies’ head office is.
Enterprises around the land now need to consider whether the contracting system can be used in part of their operations. Chief executives need to do something because the existing industrial relations system is crumbling as a result of bizarre court judgments. Judith Sloan set out the problem in The Australian last month.
For example, the courts ruled a casual worker was entitled to paid leave even though the worker had been paid a casual premium – usually 25 per cent – to compensate for not receiving paid leave and other entitlements. Before COVID-19 there were about 2.6 million casual workers and it was been estimated the decision will cost businesses, many of them small, a total of between $6bn and $8bn.
Payments to shift workers is also mess following court hearings. Contracting will not solve every IR problem but it’s an important first step. The next step maybe to abandon enterprise agreements and deal with staff members individually. That would annoy the human resources departments whose skill base is usually limited to enterprise agreements. But the system has turned nasty and there is little hope of legislative change.