Taxis, Uber and a fair day’s pay

A story in this morning’s media highlights the vulnerable position of pseudo self-employed “independent” contractors under Australian law:

A Perth-based Uber driver is suing the Silicon Valley giant for terminating him without notice, leaving him with $80,000 worth of car loans – one of which he says was spruiked by Uber.

In what’s believed to be the first case of its kind in Australia, Mike Oze-Igiehon alleges the company breached its contract with him by failing to pass on negative feedback before terminating his account suddenly in November.

Increasing numbers of Australian workers are being effectively forced to operate under such arrangements, with “outsourcing” being the New Black in corporate Australia (large and small) and labour hire companies more numerous than flies around a cowpat.

If Oze-Igieldon had been classified as an employee then termination of his “account” would have been unfair dismissal under the Fair Work Act, and if his loan had been classified as consumer finance he would also have enjoyed additional protections.

The problem is that more and more Australian workers are being forced into faux “independent” contractor arrangements despite in reality only being ordinary workers without skills or resources to survive amidst the swarming piranha of the real business world.  What do I mean by “faux” contractor?

Well, whether a worker is an employee or independent contractor in law depends on a multi-factor analysis, including whether the worker supplies their own tools, vehicle and so forth, whether they can lawfully decide what hours and days they work, and whether the “boss” can direct the manner of their work.

But being expected to supply own tools etc is a benefit to the boss and a detriment to the worker.  Moreover, workers with substantially only one “boss” or source of work and surviving on a series of short-term contracts or piecework rates have no genuine choice about how and when they work. They do what the “boss” says or they get “sacked”.

Meanwhile the boss avoids award wages, leave entitlements, PAYG tax, unfair dismissal laws etc etc. Australian employment law is completely outdated but neither unions nor the ALP seem to care because the victims aren’t union members.  Indeed they may well be aspirational Liberal voters who haven’t worked out they’re being sold down the river and aren’t being presented with a better alternative.

Maybe it’s time to consider extending at least some of the protections of the Fair Work Act and Australian Consumer Law to solo “independent” contractors with no employees. Perhaps any solo worker with only a single contract principal over (say) six months should be deemed at least prima facie to be an employee and entitled to basic award wages, leave entitlements and the like in the industry concerned, as well as protection from unfair dismissal.

Of course, a proposal of that sort  would not be without significant difficulties. First, it would probably immediately result in all “independent contractor” arrangements being entered for less than six months (but in fact being successively renewed).

Moreover, it would be difficult if not impossible to calculate weekly working hours in a fair manner where the “contractor” has tendered a lump sum for a job rather than being paid an hourly, daily or weekly piecework rate. Even if there was some workable method of calculating a fair number of hours for a given contracted task to be completed, this would still radically undermine any efficiency effect of such arrangements by removing incentive to complete the task more quickly and efficiently than the norm.  Maybe mandating payment of award wages is only feasible for “contractors” paid on piecework rates.

Similar problems potentially arise for workers paid by “splitting the bag” (sales revenue) with the boss or principal.  That is effectively how both the taxi industry and Uber usually (though not always) work.  Indeed taxi drivers have repeatedly been held (as recently as 2013) to be “bailees” (independent contractors) precisely because they “split the bag” and can at least in theory decide when, where and how hard they work.

I recall that a fixed amount pay-in to the owner was a more common arrangement for casual drivers in the taxi industry when I worked in it many years ago.  “Splitting the bag” was reserved  for trusted, experienced drivers, otherwise the owner might well regularly be ending up with 3/5 of SFA if the driver either didn’t know what he or she was doing or couldn’t be bothered working very hard.

On the face of it, requiring taxi owners to pay drivers an award hourly wage would be seriously uncommercial.  Arguably an owner would have no reliable way of knowing whether a driver’s takings were low because of a series of slow nights or because they were incompetent or a bludger (or both). On the other hand, maybe modern technology makes payment of a wage not as hopelessly impractical as it seems.  With a combination of electronic dispatch (which didn’t exist back in the day when I drove cabs) and satellite location tracking of vehicles, it should be possible to allow development of an algorithm that would reliably tell owners whether their drivers are really on the job or sitting at Maccas or a cafe socialising.

But even if that was possible, a requirement to pay award wages to taxi drivers would certainly result in significantly higher taxi fares.  I strongly suspect that most taxi drivers at present struggle to make even the adult minimum hourly wage (around $17 per hour) much of the time let alone any relevant award rate.  No doubt the same is true of Uber drivers.  Apparently Uber itself takes a somewhat smaller share of the bag (about 20%) than the typical taxi owner, but in contrast to taxis the driver has to supply his/her own vehicle and pay all maintenance, rego, insurance, fuel and the like.  As one article commented: “If you want to make a living off of Uber, you’re going to have to drive an insane number of hours.”

Do most Australians want taxi (and Uber) drivers to be paid a fair wage, or do we prefer getting cheap fares by turning a blind eye to  exploitation of vulnerable workers?  Sadly I suspect the latter is probably the case.

About Ken Parish

Ken Parish is a legal academic, with research areas in public law (constitutional and administrative law), civil procedure and teaching & learning theory and practice. He has been a legal academic for almost 20 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in the early 1990s.
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Nicholas Gruen
Nicholas Gruen(@nicholas-gruen)
5 years ago

I’m sympathetic to addressing how peremptory the severance was in the case you cite, if the facts are as alleged.

There are some other things to keep in mind. I think the flexibility that Uber drivers has is really a huge boon to a lot of people and invisible to lots of people pontificating on it. If you earn most of your income through Uber it’s really incredibly good to be able to determine your own hours and to do it in ‘real-time’ as we say these days.

And it’s perhaps even better if you like a bit of moonlighting. The other day I was picked up by an Uber driver who was moonlighting for a bit of fun. He was a pricing analyst in an insurance company, didn’t need the money and didn’t care for it in the low amounts it was being offered by Uber either. He likes driving round meeting people. I can half imagine myself doing it from time to time, but I seem to manage to keep myself too busy to do that. Perhaps when I’m older, but it probably won’t go anywhere, especially as it’s all a hassle setting up. (And I don’t have a car that’s new enough …)

I’ve asked several Uber drivers now how much they do it for the money and how much for the entertainment and the answer is usually around 70% money. I’m not really arguing against imposing minimum conditions (nor for it) just noting something that I think is important that is rarely considered.

The other problem is that ‘unfair dismissal’ is a joke today. It’s kind of necessary to have it if one is trying to have minimum conditions, because if you don’t then anyone arcing up against unfair conditions can just be quietly sacked a few weeks later – with it being well known that it happened so as to ‘set an example’ – you get the idea.

But as things work now, lawyers have so infiltrated the system that someone who is sacked for incompetence or anything else (perhaps other than easily demonstrated dishonesty, though I’m not sure even there) can generally claim about 8 weeks pay just by triggering the unfair dismissal provisions. The employer knows that they’re better off paying the money than challenging it, as that will cost them more.

So it’s a vexed and unhappy question.

5 years ago

As someone that takes taxis all the time for reasonable distances (uberX only appeared in SA a few weeks ago), there is a flipside to this. As a guess, I find normal taxis are late more than 5 minutes perhaps 30% of the time (after booking hours ahead), sometimes by quite a lot, which is bad if you need to get a plane since it forces you to go far earlier than necessary. This is because the drivers choose to take your job even though they know they can’t get to you on time. They also try and cheat me perhaps 2-3% of the time (generally not turning the meter on and trying to negotiate a “fair” price at the end which is never similar to the price I pay every other time — the standard trick is to put a water bottle in front of the meter). So whilst I think Uber should have first contacted the driver, in the current system there is no simple way for the consumer to complain about the service of particular drivers with standard taxis or it is so arduous and amounts to so little it is not worthwhile. Clearly the taxi companies don’t care, because things that are easier to deal with and annoy people everywhere else, such as Cabcharge’s ridiculous fee, still exist in SA. At least with Uber there is this possibility.

If you want to get around the Uber model and help good drivers, then the solution is simple if you take a cab at the same time every week. Just tell the driver that you are happy pay them a given amount of cash for the journey, and there is nothing Uber can do about it (unlike taxis where the car is important). Many drivers will love this because of course they won’t lose a great amount to Uber so including the job they might miss they are still up in terms of money.

Chris Lloyd
Chris Lloyd
5 years ago

“If you want to make a living off of Uber, you’re going to have to drive an insane number of hours.” I am surprised that Uber cannot offer cheaper fares without exploiting drivers. There are two cost elements that are removed compared to the old model. The first is the capital value of the license plates which were huge and supported the claim for higher rates. The second is all the red tape that went with the old system. If driver pay is low and fares a barely lower than traditional fares, then it sounds like Uber must be gouging the system because of their monopoly of the technology.

derrida derider
derrida derider
5 years ago

Australian employment law is completely outdated but neither unions nor the ALP seem to care because the victims aren’t union members.

Actually quite wrong about the unions – they care precisely because these potential members aren’t actual members. Have a look at how the Transport Union suborned the Labor government to legislatively enforce minimum rates and other conditions (purely in the interests of “safety”, of course) for truck owner/contractors – and the big trucking firms with their quasi-franchise model have correspondingly suborned the Coalition to try and repeal it. It’s actually one of Turnbull’s stated motives in aiming for a more pliant Senate.