Foodora loses unfair dismissal case and is ordered to pay former delivery rider $16,000

A delivery rider wearing a Foodora-branded backpack leans against a bike with a Foodora-branded box on the back.
Foodora gone into voluntary administration since the unfair dismissal case started.(Facebook: Foodora)

Failed food delivery company Foodora has lost an important court case and the decision may have wide-reaching consequences for Uber, Deliveroo and other businesses in the gig economy.

Key points:

  • Company was ordered to pay $15,559 to former delivery rider who took them to the Fair Work Commission
  • Former workers are estimated to have been underpaid by $5.5 million
  • Meanwhile Foodora has offered to pay some of its debts, but less than half of what it owes in unpaid taxes and wages

The Fair Work Commission (FWC) decided that Foodora had unfairly dismissed one of its former bicycle delivery riders, Josh Klooger, after he spoke out publicly about the company’s worsening pay and conditions.

Mr Klooger, 28, was hired in March 2016 and was paid $14 per hour, plus $5 per delivery.

A close-up of a man's face
Former Foodora delivery driver Josh Klooger hopes his case improves workplace protections.(ABC News: David Marchese)

The company, which has since gone into voluntary administration, substantially downgraded its pay for new delivery riders over time.

Within two years, they were being paid just $7 per delivery and no hourly wage.

The FWC found Foodora terminated Mr Klooger’s contract in a “harsh, unjust and unreasonable” manner for essentially blowing the whistle.

Earlier this year, Mr Klooger also appeared on Channel Ten’s The Project to “agitate public complaint about aspects of the rates paid by Foodora to delivery riders/drivers”, FWC Commissioner Ian Cambridge wrote in his decision.

He also set up an online chatroom over Whatsapp, which had more than 250 riders as its members, and used the platform to discuss the company’s low pay and working conditions.

Within days of speaking out on TV, Foodora management sent Mr Klooger an email, alleging that he was “potentially breaching confidentiality and intellectual property rights” by maintaining the workers’ Whatsapp group.

It asked Mr Klooger to hand over access rights to the online chatroom, which he refused.

Foodora then terminated his contract immediately.

He subsequently sued for unfair dismissal with assistance from the Transport Workers Union.

The commissioner ultimately found Mr Klooger’s dismissal via email “without any proper, prior warning, was plainly unjust, manifestly unreasonable, and unnecessarily harsh”, and noted he had been an exemplary employee.

“The applicant was clearly a high-performing delivery rider, had previously been promoted to a managerial position and his entrepreneurial acumen had been recognised and applauded by Foodora management,” Mr Cambridge wrote.

Commission took issue with Foodora’s ‘batch’ system

The FWC, in particular, took notice of Foodora’s “batch” system, which former riders have described as an “oppressive” hierarchy that pits them against each other.

A pyramid showing Foodora's batch system, which pits delivery riders against each other.
Foodora’s batch system rewards its best riders by giving them first pick of shifts, while punishing its bottom-performers.(ABC)

This was found to be evidence of Foodora exercising a high degree of control over its workers — such that they were employees, not contractors.

This distinction matters because it threatens the business models of companies like Foodora.

By classifying their thousands of workers as “independent contractors” they avoid paying annual leave, sick leave, superannuation and other costly employee entitlements.

Foodora’s policy rewarded Batch 1 — the top 10 per cent of riders — based on who worked the most hours on evenings and weekends.

They were given first pick of shifts for the next roster.

But it punished everyone else, particularly the bottom 40 per cent who were left with the last pick of the next shifts.

The FWC ordered Foodora to pay Mr Klooger $15,559 as compensation for the unfair dismissal.

But he may have difficulty claiming this money.

The company is now out of business in Australia, yet owes significant debts to its former workers, the state and federal tax authorities, as well as a $28 million “loan” to its Germany-based parent company Delivery Hero.

“This fight does not end here. We will continue to pursue Foodora for the money they still owe riders in Australia,” TWU national secretary Tony Sheldon said, adding that the decision was a “world-first”.

“We will continue to demand an end to the exploitation of riders and other on-demand economy workers.

“This is a titanic wave coming towards every employer using wage theft as a business model through an app.”

Mr Klooger was understandably pleased with the decision.

“Riders should be able to earn a decent living and not see their wages continually slashed,” he said.

“They should be able to stand up and challenge employers when changes are introduced that affect their livelihoods. I hope this ruling prompts the Government to do the right thing by riders and ensure they have protections at work.”

Mr Klooger has previously said he felt compelled to stand up for new riders, many of whom were foreign students.

Today (Friday), he said he would now look for a different job “probably not related to the food industry”.

Foodora offers to pay debts, but not in full

At a creditors meeting on Friday, Foodora’s parent company offered to pay all its creditors a total of $3 million, which is less than half of what it owes.

The Australian Taxation Office claims the collapsed delivery company owes $2.1 million in unpaid taxes and Revenue NSW is seeking more than $550,000.

Meanwhile, Victoria and Queensland Revenue are potentially seeking an estimated $400,000.

In addition to its sizeable tax debts, the group to which Foodora owes the most money is its former workers.

Foodora’s administrators Worrells estimated former workers were underpaid by $5.5 million because “more likely than not … the delivery riders and drivers should have been classified as casual employees instead of contractors”.

But Worrells suggested it might not be worthwhile pursuing Delivery Hero for the debts in Germany’s courts as “the costs and time to resolve any claim will have a large impact on any distribution received by creditors”.

Foodora’s administrators said riders who were now legally classified as employees could have their claims against the company assessed.

Source: ABC News Australia