Employment Laws - Innovation impediment or stimulator?


  • Businesses should be alive to the fact that, in spite of technological advances, engagement of workers must still fall within the current legal framework.
  • Employers adopting business models, driven by innovation, should turn their minds to the nature of the work required by the business and, in that context, seek advice on the most appropriate method of engagement.
  • Written contracts should be put in place with workers which are appropriately adapted and tailored to meet the flexibility that the business requires while also being compliant with legal obligations.
New ideas and technologies have led to innovative and dynamic methods of delivering services and products to existing and future markets. Whilst innovation is driving businesses to offer new delivery models, services and products, industrial law does not change at the same rate.

In Australia it remains the case that despite developments in service models the two key ways of engaging a worker remain either as an employee or contractor.

Businesses, when engaging their own workers to support innovative service models or when investing in companies with such workers, need to consider which of those two key ways of engagement is most appropriate given the delivery framework and the level of risk the business is prepared to bear. Later in this article we address some questions businesses should ask as part of assessing the most appropriate manner of engagement.

The development of new service models is leading to greater discussion about the existing legal framework for engaging workers and whether it has adapted appropriately and remains flexible enough for the current and anticipated business climate.

The Dean of Sydney University Law School, Professor Joellen Riley, has sounded the alarm bells in relation to the potential pitfalls affecting employees and employers of businesses “selling” innovative products and / or working in innovative ways.

Professor Riley has questioned whether some workers are now “at the mercy of this new gig-economy, this new Hungry Mile?” These comments were made in reference to the new and, what some have termed, “cheap services” being offered by businesses such as Airtasker and Uber.

Professor Riley questioned the impact on employment of the new “sharing economy” and recent advances in technologies. Such advances have had the effect of automating many jobs, and in some case, are said to be undermining the protections afforded by industrial entitlements which have been developed over the course of more than a century.

Our neighbours across the sea, New Zealand, are also considering the ramifications that technology is having on employment, and have launched a two-year program - the Future Work Commission - which is looking at, amongst other things, the impacts of technology on employment and the changing nature of work in light of both current and anticipated future technological developments.

Grant Robertson, New Zealand MP, speaking at a Future Work Conference, succinctly described the tension between technology and employment where he said:

“Stable, permanent full-time jobs are increasingly being replaced by an anywhere, anytime work model, facilitated by digital technology. The on-demand economy driven by smartphone technology, the role of big data and the changing nature of business are the critical dynamics to understand.”

These “critical dynamics” include businesses reflecting upon their engagement models, mindful of ensuring such models fit within the parameters of the current legal framework. However, the new business models do not always fit easily into the classic paradigm of “employee” versus “contractor”.

The reason why it is relevant to ensure that the engagement of workers is correctly characterised is because companies otherwise risk breaching industrial laws and instruments and face exposure to legal claims.

For example, a situation where a person is engaged as a contractor, where legally he or she is really an employee could lead not only to financial liability (due to later claims for annual and long service leave and superannuation, among other entitlements of employees) but also give rise to reputation damage should the worker bring such legal proceedings.

Further, the engagement may be found to contravene the “sham contracting” provisions in the Fair Work Act 2009 (Cth) and result in the imposition of a civil penalty. Under those provisions, a business must not misrepresent an employment relationship as being an independent contracting arrangement.

In addition, relevant considerations arise in terms of the safety obligations of businesses, and ensuring that the engagement model has sufficient controls in place to ensure that workers and others are not exposed to undue risk of injury.

A business should ask a number of questions about what it requires in respect to a particular role in order for the appropriate engagement model to be ascertained. Questions include:

  • What day-to-day “work” does the business need performed?
  • Is the role short-term or on-going?
  • Does the business want the worker to be involved in different projects?
  • Where does the business require the work to be performed? At one location, at multiple locations, or does it not matter where the worker performs the work?
  • How much flexibility does the business require in terms of when the work is undertaken? Does the business want to decide exactly what hours the worker works, or does the business model allow individuals to determine themselves when they want to work?
  • Does the business want the worker to be the “face” of the business?
  • Does the business want the worker to comply with particular policies and procedures?
  • Does the business want to direct how the worker undertakes their work?

The answers to these questions, among others, are taken into account when assessing whether or not the relationship should be characterised as “employment”. At its heart, the more “control” the business wishes to have over the worker, the more likely the engagement will be one of employment rather as a contractor.

If a business characterises a relationship as an independent contracting arrangement there may, nevertheless, be a risk that an individual (or even the Fair Work Ombudsman) claims that it was not the correct characterisation.

In that context, even though Uber characterises its drivers as independent contractors, that arrangement is facing challenge overseas. A class action has been commenced by a group of Uber drivers in the United States claiming they are employees of Uber not contractors engaged by Uber. The UK Employment Tribunal recently determined that UK Uber drivers were “employed” as “workers” within the meaning of certain legislation, including the Employment Rights Act and the National Minimum Wage Act.

Such issues are also highlighted in recent submissions made to the NSW Government’s inquiry into workplace arrangements in the point-to-point transport industry (which includes ride-sharing services such as Uber). The inquiry is considering matters such as driver remuneration and conditions in light of the existing law, the impact of technology and safety for both passengers and drivers.

These are a useful reminder for businesses that, despite there being innovative models of providing services to customers, the engagement of workers to provide those services is subject to long-standing employment law principles arising from years of case law and legislation.

Businesses who engage workers in a similar fashion to Uber, or in ways that are not traditional forms of engagement, should ensure they are aware of the potential risks of those arrangements, and be mindful that they can come under legal scrutiny.

So while “contracting” arrangements are often considered to be most flexible, flexibilities do exist within the traditional model of employment. This is particularly the case where the employees are not undertaking roles covered by a modern award or enterprise agreement, and are engaged on an “all-inclusive” salary.

In respect to the latter employees, employment contracts can be drafted which are appropriately adapted and tailored to the needs of the business. For example, the contract can include flexibility around the duties the employee is to perform or projects on which the employee is work; moving the employee between different parts of the business depending on the business’s needs; having the employee undertake work at different offices; and including flexibility when the employee is to undertake their work.


Businesses should be alive to the fact that, in spite of technological advances, engagement of workers must still fall within the current legal framework. In an employment law context, this may mean actively considering the way that people are engaged to work for the business, and the most appropriate structure for the arrangement.

Ultimately, it is important to ensure that written contracts are put in place which are adequately adapted to, and reflective of, the desire of a business to have a fluid innovation agenda while also being compliant with legal obligations.