Firstly, what is meant by the gig economy? One definition states that it’s “a labour market characterised by the prevalence of short-term contracts or freelance work, as opposed to permanent jobs.” Essentially, it describes the increasing number of UK workers (now estimated at five million people) who get paid for the ‘gigs’ they do, such as a delivery or taxi journey.
Despite the recent employment disputes hitting the headlines, the flexibility of this type of work can benefit people wishing to have control over how much they work, and also for employers who only have to pay people when the work is available without incurring ongoing staff costs. It is the employment status and the rights that those working in this market are entitled to which is currently in question.
Most working relationships are clear and easy to classify. Someone is an employee, worker or self-employed and enjoys associated rights or flexibility. However, developments in the “gig economy” prove that understanding employment status is not always so straightforward.
Companies using ‘gig’ staff often pay and treat them as self-employed, manipulating written terms or deliberately using vague or unwritten terms to reinforce this despite many indicators of employment or at the least, worker status. The distinction between a worker and an employee or a worker and a self-employed person can often be blurred and difficult to determine even for employment tribunals. Therefore the associated rights can be equally blurred and uncertain. Key to recent decisions is whether ‘self-employed’ gig staff are really workers, entitled to holiday pay and the National Minimum Wage.
These recent cases highlight the ramifications of ambiguities in determining status.
Aslam, Farrar & Others v Uber ET 28 October 2016
In this first instance case two Uber drivers claimed entitlement to the National Minimum Wage and holiday pay. Their contract with Uber clearly stated that they were self-employed and used complex contractual arrangements to negate employment status. Their status was confirmed as that of workers as Uber instructed, managed and controlled them in carrying out their daily duties. The ‘distorted’ contractual arrangements did not reflect Uber’s true relationship with its drivers and were designed to misrepresent it. Key to determining whether individuals were genuinely self-employed was whether they were operating an independent profession or business or whether in reality there was a dependent work relationship. Uber has appealed and we may yet see further developments.
Dewhurst v CitySprint UK Limited ET 5 January 2017
Similarly, in the first instance CitySprint decision, Ms Dewhurst who was a cycle courier, brought a claim against CitySprint seeking payment for holiday. Her contract, described as a ‘confirmation of tender to supply courier services’ and the payment process as a ‘self-billing and invoice process’ stipulated that she was self-employed and permitted to provide a substitute to do the work. The tribunal found this did not reflect the reality of the situation and she was successful in showing that the true nature of her working relationship with the company was that of worker.
In delivering their decision, the Employment Tribunal referred to the Supreme Court decision in Autclenz Limited v Belcher & Others , where it was pointed out that “It matters not how many times an employer proclaims that he is engaging a man as a self-employed contractor; if he then imposes requirements on that man which are the obligations of an employee and the employee goes along with them, the true nature of the contractual relationship is that of employer and employee.”
Pimlico Plumbers Limited (PP) v Gary Smith
This case follows the reasoning provided in previous decisions, focusing on personal service and the ability to provide a substitute person. Mr Smith was a self-employed operative whose contract was terminated after a period of absence following a heart attack. There was no express provision permitting him to provide a substitute although there was evidence that he could swap jobs with other PP operatives.
The Court of Appeal upheld the decision of the Employment Appeal Tribunal regarding Mr Smith as “an integral part” of PP’s operations and subordinate to PP. Looking into the relationship as a whole it concluded that there was not “an unfettered” contractual right to substitute another operative of PP and that a limited right to substitute was not incompatible with worker status. The case also provides useful guidance regarding types of substitution arrangement and their effects on the requirement for personal performance.
Comments and useful tips
The following points can be taken from the above cases:
- Although tribunals take into account written agreements between the parties, they also consider other factors before determining the true nature of the working relationship.
- Employers should be prepared to re-examine their working arrangements. They may vary from time to time and appropriate procedure should be put in place to identify these changes.
- Tax law and employment law are not always parallel in recognising a person’s employment status. The fact that a person is considered as self-employed for tax purposes does not necessarily mean that they will not be treated as a worker under employment law and vice versa.
- Failure to determine a person’s employment status properly may result in non-compliance with immigration laws. Employers are required to carry out relevant ID and right to work checks with regard to their employees and workers but not self-employed contractors.
- Determining appropriate working status should be part of a company’s risk management processes. It will also have a positive impact on image and give comfort to shareholders, customers and contractors. The UK Government has recently launched a number of inquiries regarding employment status. This includes the Taylor review on modern employment practices. The outcome may still further widen the scope of worker status.