Philip Harman, Partner – Employment and Pensions Group, DAC Beachcroft LLP, looks at the Gig Economy.
"The Gig-Economy" - A few years ago you may have never even heard the phrase, or if you had, you may not have understood what it actually meant, or thought it was something to do with music gigs. Now, the term Gig-Economy is common place in the media, and not a week goes by without people discussing this issue. Opinions are split on whether it is a positive notion or not. Some argue that it is a system which has evolved to take account of the flexibility both companies and individuals are looking for in a more modern way of working; others believe it is a way for companies to exploit individuals by avoiding granting them basic employment rights.
The landscape of employment status is becoming considerably more varied, with more individuals engaged in a range of different working arrangements to suit their own needs or the needs of modern businesses. This movement has, however, resulted in there being much less clarity as to individuals’ "status" in a company, which in turn, has resulted in a significant increase in employment disputes. The employment status cases have been widely reported. But why does "status" matter?
There are generally three categories of worker status. On one end of the spectrum there is the genuinely self-employed contractor - an individual who has a significant degree of flexibility in their own working arrangements but has no employment rights (other than some limited health and safety and discrimination protections). On the other end of the spectrum there is the traditional employee – an individual who largely works under the control of his or her employer, but benefits from having significant employment protection and full statutory rights including the right not be unfairly dismissed and to receive a redundancy protection. Somewhere in the middle of these two, there is this hybrid category of "worker" – an individual who is not quite an employee but is still required to do their work personally and entitled to some employment rights (such as National Minimum Wage, paid holiday, and working time protections such as rest breaks) but does not get the extended protection that a full employee would.
Unfortunately there is no simple or single legal test to determine the issue. What further complicates the matter is that the principles relating to whether an individual is self employed for tax purposes are similar but not the same. The recent cases have been extensive, and the direction of travel is clear: so far, companies such as Uber, City Sprint, Addison Lee, Pimlico Plumbers and Hermes have all been unsuccessful in their argument that their staff were genuinely self-employed. The Courts (from the Employment Tribunal up to the Supreme Court) have decided the individuals are workers, and therefore entitled to the increased protection. In the recently reported cases, the only case that has broken the trend and has been decided in the businesses' favour, is Deliveroo.
So what have we learnt from these cases and what can businesses do to limit the risk of their casual contractors being deemed workers?
Firstly, a huge factor in the cases is whether the individual us required to do their job personally. If they are then they are likely to be regarded as being at least a worker if not an employee. This has led to the growth of the importance of "substitution" as a legal argument. The law recognises that if someone can delegate / substitute their work at a whim (at any time, for any reason and to any person) then they are not required to do the job personally and therefore they cannot be an employee or worker. This is the argument Deliveroo succeeded with. The trick is that the ability to substitute must be genuine and not subject to so many restrictions or limitations or conditions that the ability to substitute is completely undermined, which is why Pimlico failed.
Secondly, there is the issue of control. The more control that a company has over the individual; the higher the risk they will be regarded as workers. For example, where there is requirement to wear company branded uniform or drive a company branded van these are all pointers away from someone being genuinely self-employed. Self-employed individuals should be free to decide whether to accept work and then free to organise their own work. Companies should also avoid "managing" such individuals, for example by reviewing or assessing their performance or conduct, if they want to lessen the risk of them being considered workers.
Thirdly a key point to come out of the case law is that it is largely irrelevant what is written in a company's contract with the individual, if the contracts do not reflect the reality of the situation. For example, even if there is a robust and cleverly drafted substitution clause in the contract, if this is not ever used, or if there are any obstacles to an individual using it, then this will not be sufficient. Ensuring that contractual documentation in place between the business and the workforce is sufficiently clear, understandable and accurately reflects how the relationship operates in practice is a must.
This is a fluid area of law, Uber's latest appeal was heard by the Court of Appeal at the beginning of November 2018. The Government has also promised to reform this area, for example to place more onus on the company rather than the individual to prove the case. We will update you further when the Judgment is delivered which we anticipate being early next year.
For further information please contact:
Partner – Employment and Pensions Group
DAC Beachcroft LLP
0161 934 3058
Partner – Employment and Pensions Group
DAC Beachcroft LLP
0161 934 3110