For employers and workers in the gig economy, the usual optimism that a new year brings is surely dampened by a huge dollop of trepidation as they await the outcome of a landmark employment appeal decision due later this year.  

Guest article: Monica Beckles, Inside Advantage

Perhaps for none more so than the taxi-app company Uber following the challenge by two of its drivers on the company’s decision to categorise and treat them as self-employed.  The company is taking the case to the Court of Appeal in a final attempt to overturn the original employment tribunal decision in 2016 that ruled the two drivers were not self-employed individuals, but in-fact workers employed by Uber. 

The Employment Appeal Tribunal (EAT) upheld the Tribunal’s decision and dismissed the company’s appeal in 2017.  Should Uber lose its final appeal, which is widely anticipated, the decision will have major ramifications for businesses operating in the gig economy, and their customers.

The gig economy

There is no agreed definition for ‘gig economy’; the term is used to refer to the emerging and expanding practice of offering self-employment opportunities to individuals, rather than the more typical employment as an employee or worker.

Gig companies argue that this practice is necessary to cater efficiently to a society that demands access to products and services at the push of a button, typically facilitated through the use of apps or other such technology. 

The rise of the gig economy has certainly driven an increase in the number of individuals setting up in business in their own right. According to the Office for National Statistics (ONS), the past decade has seen an increase of 1 million self-employed people working in the UK, to approximately 4.8m people as at September 2017, approximately 15% of the UK workforce. The Chartered Institute of Personnel and Development (CIPD) suggests a quarter of these self-employed people work in the gig economy. 

Self-employment can be an attractive proposition to both employers and individuals alike. It offers individuals the flexibility to choose where, when, how and for whom they perform their work, as well as advantageous tax benefits. Things many would not trade to gain employment rights, and which are also attractive to employers as it reduces the risks inherent in the employment relationship.  

Of course, self-employment existed before the gig economy, but hitherto the roles were usually reserved for consultants or trades people with specific expertise, enabling employers to gain access to knowledge and expertise they may not have within their current workforce, without the additional time and costs associated with recruitment and/or training.

The gig economy has changed that.  Companies such as Uber, Deliveroo, Addison Lee and CitySprint have created a paradigm shift by offering low skilled and low paid roles such as drivers and couriers, which often command far longer working hours to earn a decent income, thus compromising the very thing that attracted the individuals to the roles in the first place; flexibility. 

Opponents of gig economy labour practices argue that these companies are exploiting their staff and the government-commissioned Taylor report into modern employment practices shared this view, making a number of recommendations, including extending entitlement to certain employment rights to all workers, irrespective of employment status.

Employment status

The question of employment status has been a long-standing and complex issue for decades.  Classification of an individual as ‘worker’, ‘employee’ or ‘self-employed’ determines their entitlements under employment legislation as well as the treatment of their tax and NI by HMRC.  An incorrect classification could prove extremely costly! 

Nevertheless, the tests for employment status can yield ambiguous results with the potential for HMRC and an employment tribunal to reach a different determination on the same case.  HMRC could class an individual as self-employed and tax them accordingly, whilst an employment tribunal may consider the same individual to be a worker, or even an employee.

The key tests include:

  • Is there mutuality of obligation between the parties to offer and accept work
  • Is the individual required to provide a personal service to the company or do they have the right to use a substitute
  • How much control does the company exert over the individual

Other tests used to determine if an individual is self-employed include an assessment of current tax arrangements and whether the individual works for more than one companyAny written agreement between the parties would of course be examined, but it is the day to day practices of the working relationship that will carry more weight than the wording of any agreement.  The picture created from the tests would determine the individual’s employment status and their employment rights.

Workers have limited rights such as paid holiday under the Working Time Regulations and entitlement to the National Minimum Wage, whereas employees have the full remit of employment rights, including protection against unfair dismissal.

Whilst self-employed individuals do not have employment rights per se, there are certain limited circumstances in which such individuals could be protected under employment legislation.  For example, S.83(2)(a) of the Equality Act 2010 affords protection to individuals who are required to provide their work personally. Such individuals are entitled to protection against discrimination, as Pimlico Plumbers discovered.  

The key tribunal cases

In the landmark case involving the gig economy, Aslam and others v Uber BV and others, it was the degree of control the company exercised over its drivers that ultimately led to a finding of worker status.

Uber had argued that their business model is akin to a dating app, merely facilitating the connection of two willing parties, the driver and the passenger.  However, the drivers claimed the company monitored their work and encouraged passengers to rate them after a journey.  The ratings would then be used punitively if they fell below the accepted level and the app would be disabled, preventing the drivers from working.

The degree of control also contributed to the claimant’s success in a similar case, this time not involving the gig economy, Pimlico Plumbers Ltd and another v Smith. Like Uber, the company is due to challenge the original employment tribunal decision in the Supreme Court, before Uber takes its case to the Court of Appeal.

In this case, the claimant, Mr. Smith, worked as a self-employed contractor for nearly 6 years before arguing that he should not be classed as one. Despite the company’s protestations and a written agreement, the Tribunal agreed.

The level of control Pimlico exercised over Mr. Smith was clearly evidenced by the restrictive covenants in his written agreement, which precluded Mr. Smith from plying his trade in Greater London for three months following the date of termination.

There was an obligation on Mr. Smith to work approximately 40 hours per week, adversely affecting his ability to work for any other customers/clients. Mr. Smith also provided a personal service and there was no express right of substitution in his written agreement, although Pimlico argued the right did exist.

Upon examination, the Tribunal found the practice of substitution was merely plumbers swapping shifts and jobs, rather than an external individual standing in for Mr. Smith whenever he was absent.  This element of personal service gave the claimant the right to include a claim against the company for discrimination.

Deliveroo, CitySprint and Addison Lee

Individuals working with Deliveroo, CitySprint and Addison Lee have also taken similar cases to the tribunals.  It is highly probably that these companies will be required to make up any shortfall in national minimum wage and provide paid holiday to the individuals, backdated for two years.  The companies are also likely to be forced to alter their business model to provide individuals with pre-determined shifts, which will compromise the price and convenience they currently enjoy.

There is no one size fits all in this issue.  The simple fact is, self-employment works (excuse the pun!) for some individuals and they would not welcome the imposition of employment rights and the loss of flexibility.

If fair employment rights were the key driver behind the Taylor review and not simply increasing the revenue coffers through increased tax and NI, the government could be well advised to seek solutions that give individuals a choice according to their particular need.

Employers are advised to ensure that the day to day working practices reflect any written agreement and if there isn’t one, draft one. HR professionals may be well advised to get hold of a courier’s helmet to protect themselves from the avalanche of claims that are sure to follow, particularly now that individuals no longer need to pay a fee!

Once again, Happy New Year!

 

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