Australia’s workplace regulator issued a landmark ruling on Friday that Uber drivers are not employees and therefore have no right to a minimum wage or holiday pay, a decision that could inform similar investigations by regulators across the world.

The two-year investigation by the Fair Work Ombudsman concluded drivers are not subject to any formal or operational obligation by the ride-hailing company to perform work — a key consideration required under Australian law to determine whether an employment relationship exists. The ruling removes the risk of the ombudsman taking action against Uber.

“The weight of evidence from our investigation establishes that the relationship between Uber Australia and the drivers is not an employment relationship,” said Sandra Parker, Fair Work Ombudsman. “As a consequence, the Fair Work Ombudsman will not take compliance action in relation to this matter.” 

The ruling marks a major victory for Uber, which is facing similar probes in multiple jurisdictions. In December, a UK court upheld a ruling by an employment tribunal that determined Uber drivers were employees and should have received minimum pay and other worker entitlements. Uber is appealing this case in the UK Supreme Court. 

Last year Australia’s tax office classified riders working for Foodora, a food delivery service, as employees rather than contractors. It is involved in legal action against Foodora seeking unpaid tax and superannuation payments.

Uber’s business model relies on maintaining that drivers are not employees — meaning it is not subject to rules on pay and benefits — as a means of reducing costs. But that has brought fierce criticism and prompted legal claims and investigations by regulators, as drivers have looked to secure better terms.

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Uber agreed to pay $20m to settle a legal dispute with drivers in California and Massachusetts ahead of its initial public offering in May that gave it a market value of $70bn. As part of the agreement, the company was allowed to continue treating them as independent contractors but it agreed to make some changes in how its removes drivers from the platform as well as to allow appeals against removal.

Uber Australia welcomed the Ombudsman’s ruling and said the company was investing to support its drivers. 

“We want to work with governments and the community to ensure Australians can access independent and flexible earning opportunities, without limiting their access to the support and security they deserve,” said an Uber spokeswoman.

But union representatives lamented the ruling and called on the government to enact new legislation to protect workers’ rights in the gig economy.

“Today’s decision by the Fair Work Ombudsman is devastating for workers in the gig economy,” said Michael Kaine, national secretary of the Transport Workers’ Union of Australia.

The ombudsman said the investigation related solely to Uber Australia and was not an investigation of the so-called gig economy more generally.

Companies operating in this sector used a range of business models and the Fair Work Ombudsman said it would continue to assess allegations of non-compliance on a case-by-case basis.

Via Financial Times