Uber has settled a high-profile case with one of its food delivery riders, avoiding a landmark ruling on whether gig economy workers are employees or contractors, experts say.

The Australian arm of the multinational company settled with former Uber Eats delivery rider Amita Gupta before the full bench of the federal court could rule on whether she was an employee or a contractor.

It would have been the first ruling in the federal court on the status of Uber’s workers.

The Transport Workers’ Union said it believed Uber had settled because the company was facing defeat after a series of critical questions from judges in a court hearing earlier in November.

Federal court judge Mordecai Bromberg said in court that Uber Eats riders “appear to be the representative of the Uber Eats”, despite the company’s protests.

“Who would the public have perceived the worker as an emanation of, if not Uber?” he asked.

“It could be anybody,” the company’s barrister, Ian Neil, replied. “There’s nothing that represents her to be an emanation of Uber, apart from the fact that she would turn up with food in her hand at the end of a process that had begun with the customer ordering the food.”

Bromberg asked: “Why would you assume, given the process … starts with Uber and ends with an Uber app, so far as the customer is concerned – why would you assume that the driver is an emanation of the restaurant [rather than Uber]?”

He continued: “Everybody knows what function Uber plays. The restaurant’s function is to prepare the food. Uber’s function is to deliver the food; isn’t that right?

“The very name Uber would convey to the ordinary person some form of transportation service; wouldn’t it?”

Neil replied: “We could not accept that.”

Labour law expert Prof Joellen Riley Munton from the University of Technology Sydney, said it appeared that Uber had “decided not to take the risk” of a court ruling, and settled.

Earlier rulings in the Fair Work Commission had sided with the tech giant, and ruled their workers were not employees. This case would have been the first ruling in the federal court.

“Uber has clearly taken the view that a federal court decision (of a full bench) finding that Ms Gupta was in fact an employee would be very disruptive of its business model,” Riley Munton said.

“The settlement means that there is still no federal court ruling on the question of whether workers like Ms Gupta are employees, so there is no precedent to disturb the Fair Work Commission findings in the Gupta case, or in earlier cases.”

The Transport Workers’ Union national secretary, Michael Kaine, said he was confident Uber would have lost.

“It is clear from the court hearing that Uber was on the ropes,” he said.

“A settlement … was the only option left to the company in the face of a potential judgment.”

However, Riley Munton said the critical comments in the hearing did not necessarily indicate how a court would have ruled.

She said the recent case of CFMMEU v Personnel Contracting Pty Lty, where a backpacker challenged whether he was an independent contractor, showed the limits of relying on comments.

“Justices Lee and Allsop were both very critical of the arrangement and said that it beggared belief that a person doing such menial work was an ‘independent contractor’, but they still decided that he was one, because they felt constrained by an earlier decision dealing with the same labour hire outfit’s contracts,” she said.

“So critical comments don’t always lead to a decision. Still, the law is still unresolved in a case like Gupta’s. They wouldn’t necessarily have any precedent that they had to follow in that case. An application of the high court authority in Hollis v Vabu Pty Ltd may well have found that she was an employee.”

Riley Munton said the union was correct in saying the case, if it had not been settled, could have reshaped the entire gig economy.

“As is always the case with legal decisions, they are decided on their own facts and can be precedent only where the same or very similar facts prevail,” she said.

“Because Uber Eats uses the same contract for all its staff, it would very likely mean that all its drivers on that contract were employees and that would have significant ramifications for their business.

“It would also pave the way for the other platforms to be challenged, if the terms of their contracts and their working arrangements are the same.”

A spokesman for Uber said they “welcome the resolution of this case”.

“Uber Eats has previously won this case in two hearings before the Fair Work Commission, a specialist employment tribunal, including before the full bench which comprised the three most senior members of the Fair Work Commission, including the president.”

Kaine said athough the union supported Gupta’s outcome, the key to reforming the gig economy was regulation from the government, not legal cases.

“It should not take brave workers like Amita standing up to a global multinational corporations to hold them to account,” he said.

“Workers across Australia should have rights and the federal government must take responsibility for workers … We urge the government to carefully read the transcript of the hearing and to start looking at Uber with the same jaundiced view that the federal court judges in this case did.”

Riley Munton said the case could lead to more Uber workers taking the matter to court and winning a settlement.

“I think one of the most interesting outcomes of this case is that other Uber workers with a grievance might feel empowered to push harder for a settlement themselves,” she said.

“In seeking to avoid litigation that is getting uncomfortable, Uber might need to treat the claims of workers more seriously in future – to avoid matters proceeding to court.

“There could be a de facto improvement in workers’ treatment – at least when it comes to challenging being sacked from the platform.”

Gupta had taken the company to court over an unfair dismissal claim, after she was cut off from the delivery app for late deliveries. Two previous rulings in the Fair Work Commission sided with Uber, and she then appealed to the federal court before the settlement.

*By Naaman Zhou, The Guardian*