What should you know about Australia’s new gig economy regulations?

The gig economy, characterised by short-term, task-based work facilitated through digital platforms, has dramatically reshaped the employment landscape in Australia. From rideshare driving to food delivery, gig work offers unparalleled flexibility and independence. 

However, this growing sector has blurred traditional work boundaries, raising important questions about workers’ rights and employers’ obligations. As such, recent legislative changes aim to address these challenges and redefine the framework for gig economy work.

Understanding the gig economy

The gig economy refers to a labour market characterised by short-term contracts or freelance work, facilitated by digital platforms that connect workers with businesses needing specific tasks completed. Unlike traditional employment, where workers have ongoing, stable positions with defined entitlements, gig economy workers operate as independent contractors. They often lack the same protections and benefits, such as sick leave and superannuation contributions.

The Productivity Commission, Actuaries Institute, and the Foundation for Young Australians highlight that gig economy workers typically work through platforms that control their job assignments, ratings, and client interactions. This model contrasts with traditional freelancing or independent contracting, where workers manage their own reputation and client relationships.

Recent changes in legislation

The rapid expansion of gig work has prompted the Australian Fair Work Commission (FWC) to address the unique challenges faced by gig economy workers. Effective August 26, 2024, the FWC have the authority to implement legally binding minimum standards orders and non-binding guidelines for a new category of "employee-like" workers.

These new regulations are designed to establish minimum standards for gig economy workers, covering various aspects of their working conditions. Key areas affected include:

• Payment Terms: Ensuring fair compensation and transparency in how gig workers are paid.
• Penalty Rates: Providing additional compensation for work performed under specific conditions, such as during unsociable hours.
• Payment for Time Between Gigs: Addressing compensation for time spent waiting between tasks.
• Minimum Engagement Periods: Setting minimum durations for worker engagement on gig platforms.
• Eligible Deductions: Regulating what can be deducted from workers' earnings.
• Insurance: Ensuring that adequate insurance coverage is in place for gig workers.
• Consultation with Workers: Mandating consultation with gig workers regarding changes to working conditions.

Rights for Workers’ Delegates: Providing rights for representatives of gig workers to participate in discussions affecting their working conditions.

Additionally, gig workers will gain the right to challenge unfair deactivations and terminations by platforms. The FWC will also handle applications for collective agreements proposed by either digital platforms or unions representing gig workers.

Recent legal interpretations

In early 2022, two High Court decisions refined the criteria for determining whether a worker is an employee or an independent contractor. The court emphasised the primacy of written contracts, stating that the character of the relationship should be assessed based on the contractual terms rather than the broader context of the working relationship.

This shift means that gig economy workers may find it more challenging to contest their classification as independent contractors, even if their work exhibits characteristics of traditional employment. The focus now lies on the terms outlined in written agreements rather than the history of the parties' interactions.

Changes for independent contractors

The introduction of the "employee-like" category has also led to changes affecting traditional independent contractors. A new holistic test will determine the classification of workers, aimed at protecting low-paid contractors from exploitation.

Holistic Test: This new test assesses the overall relationship between the contractor and their client, similar to the approach used to classify casual employees. This measure is intended to safeguard low-paid contractors from unfair treatment.

Opt-Out for High-Income Contractors: Contractors earning above $175,000 annually can opt out of this new test if they prefer their current working arrangements.

Unfair Contract Terms: Independent contractors now have the power to challenge unfair terms in their contracts. The FWC can review and amend such contracts to ensure fairness. This provision applies to contracts entered into on or after August 26, 2024.

Australia’s evolving regulations for the gig economy represent a significant shift towards greater protection and fairness for gig workers. By introducing minimum standards and empowering the FWC to oversee various aspects of gig work, these changes aim to address long-standing issues related to worker rights and employer obligations.

As gig work continues to grow, understanding these new rules and how they apply will be crucial for both workers and employers. These regulations not only seek to enhance the working conditions of gig economy participants but also ensure that the gig economy remains a viable and fair sector within Australia’s broader employment landscape.