Gig Economy Latest: What does Deliveroo mean for you?

It was recently held that riders for food delivery firm Deliveroo were self employed and not engaged as workers as they had alleged.

In a decision that bucks the trend established by recent gig-economy cases, the Central Arbitration Committee (CAC) recently held that riders for app-based food delivery service Deliveroo were self-employed (and were not engaged as workers as the riders alleged).

This decision was hailed in the press as a successful avoidance by Deliveroo of any obligation to offer certain employment rights to riders, such as the national minimum wage and holiday pay. While it is true that the CAC’S decision means that Deliveroo need not confer these benefits on their employees, this was not the issue at stake in this case. The remit of the CAC is narrow and this case looked at whether Deliveroo should recognise a particular trade union to represent its staff. Trade union recognition is not available to genuinely self-employed contractors, hence the debate over employment status. It is also important to note that decisions of the CAC are not binding on other courts or tribunals (although they might be persuasive).

However, the analysis and findings of the CAC on employment status are still relevant to the wider debate on employment rights in the ‘gig economy’ and are likely to be referred to in future cases where staff challenge their employment status in search of more extensive benefits.

Personal Service v Substitution

To determine the employment status of the Deliveroo riders, the CAC closely examined every aspect of their day to day working lives including how riders were recruited and trained; how work was organised and allocated; how riders were paid; and whether they were obliged to accept work.

One important indicator that an individual is a worker rather than self-employed is that they must perform work ‘personally’. If an employee has a right to provide a ‘substitute’ to do their work, this is usually inconsistent with this requirement to perform ‘personal’ service (and therefore inconsistent with a finding that an individual is a worker or employee). A business seeking to show that members of staff are self employed will often look to demonstrate that individuals are able to ‘substitute’ if they wish. This was a key issue in Deliveroo.

The company’s documentation stated that the riders were permitted to provide a substitute, employed or engaged directly by the rider, to perform the delivery. There was no obligation to obtain Deliveroo’s approval or even to inform the company. Riders were also given very broad discretion over who to choose; any substitute was permitted as long as they had not previously had a contract terminated by Deliveroo or engaged in conduct that would have resulted in termination had they been a Deliveroo rider. It was the rider’s own responsibility to pay their substitute and make sure they had the necessary skills and training. Riders were required either to lend their device to their substitute or to share their login details to allow the substitute to use the app on a different device.

A key question for the CAC was why Deliveroo would choose to allow such a broad right of substitution and whether a rider would actually make use if it. The CAC stated that it “made a mockery of the extensive training given to riders” if they “could then sub-contract the right to use the app willy-nilly”.

Crucially however, Deliveroo adduced evidence to show that a few riders do make use of the right to substitute. One rider explained that he regularly engaged a substitute by sharing his password details with a friend. When pressed to explain why he did so, he explained that he exercised the right of substitution for his personal profit, taking 15-20% of the fee he received from Deliveroo and passing on the balance.

The CAC concluded that it was not really its role to interrogate the commercial wisdom of Deliveroo’s business model, and found that this broad and genuine right to substitute indicated self-employment. The decision sums up what the CAC termed the “substitution conundrum” stating that “by allowing an almost unfettered right of substitution, Deliveroo loses visibility, and therefore assurance over who is delivering services in its name, thereby creating a reputational risk, and potentially a regulatory risk, but that is a matter for them”.

Substitution: What do other ‘gig-economy’ cases say?

The employment tribunals have grappled with the right to substitute, and its implications for employment status, in other recent ‘gig-economy’ cases.

In the high profile case of Uber BV v Aslam the EAT found for a variety of reasons that drivers for the app-based taxi firm were engaged as workers (and were not self-employed as the company alleged). It was clear that they were required to provide their driving services personally and could not send a substitute to do their work.

The position on substitution in Dewhurst v Citysprint was slightly more nuanced. The claimant was engaged as a specialist cycle courier, transporting medical supplies, organs and blood around central London. Her contract stated that she was entitled to provide a substitute provided that certain criteria were met. Like Deliveroo, Citysprint stressed the substitute would be engaged at the claimant’s own cost and that the claimant would be wholly responsible for paying them and ensuring that they met the required standards. However, crucially, the company could not show that substitution had ever occurred in practice or explain how her special training and security clearance for medical deliveries could be transferred to a stand-in.

In Boxer v Excel Group Services Ltd, another case involving a cycle courier, an employment tribunal held that the claimant was required to provide personal service. There was a conditional right to provide a substitute, but the clause was so restrictive that, in practice, it was unworkable and was irrelevant to the question of employment status.

The questions of ‘personal service’ and the right of substitution were central to the Court of Appeal’s finding, in the case of Pimlico Plumbers and Charlie Mullins v Smith, that a plumber designated as self-employed was in fact engaged as a worker. This conclusion was based on a whole host of factors, including the fact that the claimant appeared closely integrated into the business and was required to wear branded uniform and drive a branded vehicle. On the substitution question, while there was no express right of substitution in the claimant’s contract, the company argued that plumbers could swap assignments between themselves and could even bring in external contractors if they wished. However, in reality, Mr Smith was required to provide personal service, as his contract placed huge emphasis on his own personal skills and competencies. 

‘Substitution clauses’ in employment contracts

Your contracts may state that a member of staff has the right to provide a substitute to carry out their work, even if this rarely happens in practice. Nothing in any of these gig-economy cases means that you need to scrap such a clause and, as the Deliveroo decision demonstrates, it is still the case that a genuine power to appoint a substitute is likely to stop someone being a worker or employee.

However, these cases make very clear that what you say in your documents will not in itself decide the status of the individuals you engage. A tribunal’s starting point will be the reality of the individual’s working arrangements.

Crucial to Deliveroo’s victory was witness evidence from an individual rider that he did in fact make use of his right to substitute. In the absence of robust evidence that substitution is actually possible and permitted in practice, the inclusion of a substitution clause in your contracts will not be enough to stave off a finding that your staff are workers or even employees.

The CAC in Deliveroo, found that the right to provide a substitute was ‘unfettered’ which clearly pointed towards the riders being self-employed. The CAC clearly struggled to come to terms with just how little concern Deliveroo seemed to have about the impact unfettered substitution might have on standards of service – but ultimately decided that the fact that the right was commercially questionable did not mean it was not genuine.

Had the right been more restricted or subject to conditions, this may have tipped the balance towards a finding of  worker status. The Court of Appeal’s decision in Pimlico Plumbers makes clear that whether or not a conditional right to provide a substitute is inconsistent with personal performance will depend on the facts, and the degree to which the right is limited or occasional.

We know that many employers struggle to balance a desire to keep staff at ‘arms length’ (for commercial reasons and to ensure flexibility) with a desire to exercise enough control to protect their brand. Now may be a good time to review substitution clauses (and other aspects of your employment contracts and related documents) to make sure they are fit for purpose and get this balance right.

Mark Hatfield (mark.hatfield@weightmans.com) is a Partner in the Employment, Pensions and Immigration Team and is based in Liverpool. If you have any questions or concerns, please do not hesitate to contact Mark or speak to your usual Weightmans advisor.

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