The Victorian government is launching an investigation into the gig economy

The Victorian government will investigate the practices of the so-called gig economy and on-demand workforce, amid claims that workers are being underpaid and exploited.

Victorian Industrial Relations Minister Natalie Hutchins said the inquiry, chaired by former Fair Work Ombudsman (FWO) Natalie James, ill investigate the conditions of workers working to digital platforms.

The move comes are German food delivery multinational Foodora, under pressure from the tax office and the FWO over how the company classified its workers as independent contractors, was placed in administration as it prepared to shut down in Australia.

The FWO dropped legal action against Foodora over "sham contracting" in its employment contracts as a result.

A year-long Australian Senate inquiry into the future of work, which investigated the gig economy, handed down its report this week and recommended changes to workplace laws in order to "broaden the definition of employee to capture gig economy workers", saying Australian law is up to a decade behind some other countries.

But companies such as Uber and Deliveroo, which argue they are simply technology platforms, have based their economic model on not having to pay the on costs of employing workers and argue they should be classified as contractors.

They argued the current laws prevent them from offering more support for fear that their "partners" would be classified as employees, although the Senate recommended changing the current laws so workers would be captured under the employee definition in the existing scenario.

The Senate report also sought to address the issue of "permanent casuals", especially for people working for labour hire companies.

Natalie Hutchins says the Victorian inquiry will build on the work of the senate report and examine allegations on contracting arrangements and whether they are being used to avoid state workplace laws, as well as the enforcement of obligations such as compensation, superannuation and health and safety to people in the gig economy.

It will also look at international regulations and Australia's obligations under international law.

“This inquiry will lay the groundwork to ensure people are protected in the new economy,” Hutchins said.

Victorian Inquiry into the On-Demand Workforce Chair Natalie James said: “Australia is crying out for an evidence led, independent examination of the work arrangements in the gig and on-demand economies.”

The inquiry is expected to deliver a final report to the Government in late 2019 and will be seeking public submissions, worker and business input.