You have likely seen a great deal of media in recent weeks about employment status, particularly in the emerging gig economy. Much of the debate is in relation to whether the individuals engaged are employees, workers or self-employed, writes Robert Frampton at Herrington Carmichael’s employment department.
This debate is not new. It predates smart phones and even your author. However, the gig economy has raised new questions as to how we consider employment status and how equipped the law is to deal with new economic practices.
As a generalisation, most individuals will be regarded as ’employees’; employees have the greatest range of employment rights. There will then be some individuals who are ‘workers’; these are often individuals who work on a more casual basis. More than ever there are also a lot of individuals who purport, or are told to purport, to be self-employed, essentially in business for themselves.
The distinction between statuses is important because of the rights associated with each status. A worker is not an employee but they do have some employment based rights. For example, workers are entitled to be paid annual leave and national minimum wage (NMW), whereas self-employed people are not entitled to paid annual leave or NMW.
Uber recently lost its appeal against the Employment Tribunal’s findings against it. The Employment Appeal Tribunal decided that the level of control exercised by Uber meant that the drivers were workers. It agreed with the Employment Tribunal that the complex contractual documentation which described the Uber drivers as self-employed did not reflect reality.
Uber has, however, said that it plans to appeal this decision again, so this may not be the end of the story. One can imagine that the potential costs to Uber are vast and possibly threaten its business model.
Deliveroo has, on the other hand, successfully fended off a demand from its couriers for union recognition and workers’ rights.
As collective bargaining rights only apply to individuals who are employed, the case was seen as a test whether the Central Arbitration Committee (CAC) which oversees collective bargaining law, would disagree that the couriers were self-employed. The CAC agreed with Deliveroo’s argument that there is the ability to ‘substitute’ in the Deliveroo contracts, in other words, the couriers could allow other couriers to take their place on a job, and as a result, they cannot be classed as workers.
This complements the Court of Appeal’s decision in Pimlico Plumbers. In the Pimlico Plumbers case the court set out that a crucial element of employment status was whether there is a contract to work personally.
What does this mean for employers?
The difficulty of employment status, which has evolved as a result of case law, is that it is dependent on the facts of each case. This can produce inconsistent results, making it difficult to know whether someone is truly self-employed. Another complication is that sometimes an individual can be self-employed for tax purposes but be a worker for employment status purposes. This is because tax law only distinguishes between the self-employed and the employed. There is no ‘worker’ category. This can create a very blurred picture.
Any business which operates unusual working arrangements, for example, casual workers, zero-hour workers, freelancers or consultants, will need to look at its arrangements more closely. This should include carrying out an audit of employment arrangements and contracts to ensure they are appropriate for the arrangements in reality.
Is the gig up?
The gig economy continues to grow and diversify. There will be more and more businesses that use mobile technology to engage with those who work for them. There is clearly a desire from businesses to have a flexible and, in some cases, low cost workforce. However, it would be extremely arrogant to suggest that all individuals involved are being exploited and need protection. That is not the case. Many individuals enjoy the flexibility that comes with self-employment and could not hold down ‘regular’ employment. However, moving forwards, a fair balance must be achieved between flexibility and security.
Given that it appears this is a low priority for the Government, at the current time, it will remain with individuals to challenge their status and, as a result, the gig economy will keep moving. However, we expect more high-profile cases in the near future.