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‘Digital sweatshops’: Gig workers ripped off by hazy laws

·8-min read
A courier crosses the road to deliver food in the central business district in Sydney on May 14, 2020. (Photo by Saeed KHAN / AFP) (Photo by SAEED KHAN/AFP via Getty Images)
A courier crosses the road to deliver food in the central business district in Sydney on May 14, 2020. (Photo by Saeed KHAN / AFP) (Photo by SAEED KHAN/AFP via Getty Images)

Australian gig economy workers are disadvantaged by unclear employee definitions – and the responsibility of addressing this falls to the federal government, a new report by the Victorian government has revealed.

The unfair treatment of people who find work from gig economy platforms lies in confusion around work status, particularly that these workers are not considered employees but are self-employed or ‘independent contractors’.

“A worker’s status as either an employee or contractor is pivotal,” said the report from the inquiry into Victoria’s on-demand workforce.

“It determines the application or otherwise, of a broad range of rights, entitlements and related benefits. ‘Non-employment’ workers are provided fewer guaranteed protections than employees.”

This is further complicated when ‘work status’ is not always easily or clearly defined.

“‘Work status’ can be indistinct – modern labour market work arrangements may have both non-employment and employment characteristics. This is a longstanding regulatory challenge,” the report said. “Indistinct or ‘borderline’ work status is common in platform work.”

Report finds gig workers vulnerable, have little control

Workers may find they do not have control over the terms of their employment relationship. “Sometimes, the ‘choice’ of work status and the arrangements lies primarily in the hands of only one of the parties to the arrangement,” said inquiry chairperson Natalie James.

“Workers are not given real choice about their arrangement and their resultant work status. This does not sit well with the concept of genuine independent contracting.”

The responsibility to streamline laws around work status should lie with the Commonwealth, and not on individual states, said the inquiry report.

Of more than 14,000 Australians surveyed for the report, 13.1 per cent had done gig economy work at some point, with more than a third (35.2 per cent) working across multiple platforms.

It also found many people who find work on gig economy platforms tend to be vulnerable, such as younger workers, students and migrants, who are low-skilled or have little to no leverage.

And these platforms and apps can have disproportionately too much control; it is often a challenge for workers to resolve concerns or disputes as workers are often barred from accessing the app while a dispute is being resolved.

Not only this, but given the diverse nature of gig economy work means there are inherent health and safety risks, such as driving on the road or entering people’s homes.

The lack of clarity in a worker’s work status may also present complications when filing taxes, and gig economy workers are often not paid super, putting them at a disadvantage when it comes to saving for their retirement fund.

Economists slam platforms as ‘digital sweatshops’

In its submission to the inquiry, the Australia Institute Centre for Future Work slammed gig economy platforms for failing to better harness technology to improve working conditions.

“Pay and security should improve, not deteriorate, thanks to the supposed efficiency and productivity of these technologies,” wrote economists Jim Stanford and Alison Pennington.

“Instead, too many of on-demand businesses are becoming digital sweatshops: recruiting workers from vulnerable groups, who lack access to more secure and better compensated jobs, to perform menial, often dangerous jobs, with no stability or security of schedules or incomes, and wages that often fall well below social norms and legal minimums.

“The pairing of modern digital technology with primitive and exploitive employment practices is not inevitable; it is only occurring because we are collectively allowing it.”

Findings true for all of Australia, not just Victoria

RMIT University Graduate School of Business and Law professor Anthony Forsyth told Yahoo Finance that the findings of the report, while Victoria-specific in scope, are not only applicable on a national scale but are relevant on a global scale.

“What the report recommends is that there should be a common definition of employment across the Fair Work Act and other laws that regulate safety workers compensation. And that would be a really important reform,” he said.

Forsyth also backed the report’s recommendation that the Commonwealth should lead the way in streamlining legislation.

“Changing the definition of employment across all statutes...can't happen in Victoria, because the Fair Work Act is federal law.”

Gig workers unlikely to see change

Forsyth believes it is unlikely that the Morrison government would take up the recommendations of the report.

“The Coalition in government has not shown any indication or interest in regulating the gig economy in the last five or six years. I don't expect that to change because at the moment, they [are] looking at other issues such as casual employment and enterprise bargaining. The gig economy isn't even on the agenda,” he said.

Global online marketplace Freelancer CEO Matt Barrie also agreed that any changes to legislation must be made on a federal level, not on a state level, but also added that the minimum wage in Australia, the highest in the world in real dollar terms, was not the issue.

Rather, government policies in other areas need to change in order to make living more affordable for lower-paid workers, he indicated.

“I believe the thing that hasn't been addressed is: the cost of living in Australia is astronomically high. In particular, the thing that is mind-blowingly high is the cost of housing,” he told Yahoo Finance. The cost of certain food can also be out of reach for many Australians, he added.

Freelancer operates all across Europe. While you might intuitively think that employment laws of different countries are harmonised by the European Union, this isn’t the case, Barrie said.

“When you operate a global platform, it’s hard enough to have to adapt it to every country’s regulation.”

“Any change should be led by the federal government, not the Victorian government.”

‘Opportunities for flexibility and innovation’: Minister

In a statement provided to Yahoo Finance, industrial relations minister Christian Porter said he had not yet had an opportunity to read the report.

“However, it is clear that the evolution of the gig economy presents significant opportunities for flexibility and innovation for Australia. For many workers, it provides an opportunity for freedom and flexibility,” he said.

“It also presents challenges which the Government is committed to addressing. This includes, for example, sham contracting which can rob workers of lawful entitlements and creates an un-level playing field by giving unscrupulous employers an advantage over their competitors.”

In the 2019-20 budget, the Morrison government had set aside $9.2 million in extra funding to the Fair Work Ombudsman to create a dedicated sham contracting unit, he said.

Deliveroo, Uber call for regulation overhaul

In submissions to the inquiry, major employers in Australia’s gig economy such as Uber and Deliveroo called for regulation in the sector to be improved.

“We need policies and reforms that find thoughtful solutions for delivering social protections,” Uber wrote in its submission.

“It is important however, that any proposals for change be dealt with holistically by the Commonwealth, in consultation with individual states.

“The historic state-by-state approach to workplace relations proved unsuitable for the Australian market, leading to inefficiency and uncertainty for multiple parties.”

The Rideshare Drivers’ Association of Australia said that the role of regulators was no longer as effective in solving problems created by the new on-demand economy.

“Traditional bases of legal and economic responsibility are morphing and dissipating, leaving nothing but the original worker and the original consumer, doing what they always did. Where once was an overarching mantle upon which rested responsibility as well as economic advantage, there now no such thing,” the association stated.

“The remote organisation of work has led to the abandonment of its traditional responsibilities. There is certainly a need for change, for new regulators and new laws.”

Deliveroo indicated in its submission that it would be unfair to drivers outside of Victoria if legislation were reformed in Victoria only.

“A patchwork of incompatible State regulations risks creating confusion for riders,” the food delivery firm stated.

“It is our view that it would be unfair if something as important as the degree of a security that an individual has when they work were to be subject to widely varying rules that may not be known to them when they cross State or Territory borders.

“Therefore, we believe that the Federal Government should work in tandem with the State Governments to solve this policy and legal challenge.”

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