The gig economy: employment status in the spotlight
The headlines have recently been full of stories about the rights of workers in the ‘gig economy’, where staff are engaged to pick up work on a…
The headlines have recently been full of stories about the rights of workers in the ‘gig economy’, where staff are engaged to pick up work on a task-by-task basis. Uber drivers have taken the company to court to try and establish what level of employment rights they should have and drivers for the takeaway delivery firm Deliveroo have recently gone on strike about their rates of pay (which many said fell below the minimum wage). Which employment protections (if any) apply to these individuals will be determined by their employment status.
Worker or self-employed?
In essence, any workforce can be split into two broad categories: workers; and self-employed independent contractors. Within the broad category of ‘worker’ you find a sub-group of traditional employees who have greater employment protections than other workers. It is useful to remember that all employees are workers, but not all workers are employees.
Whilst the exact definition varies between different pieces of law, a worker is someone who undertakes to ‘perform personally’ any work or services. However, someone will not be a worker if they have a profession or business undertaking which means the service-recipient is a client or customer of theirs. Deliveroo and Uber both maintain that their drivers are self-employed independent contractors rather than workers because the drivers are (they argue) men and women in business on their own account who provide services directly to an end client (i.e. the person using the Uber cab or ordering the takeaway from Deliveroo). However, many of the drivers believe they should be classified as workers which would afford them a number of legal protections.
The lines between the three categories (independent contractor, worker and employee) are becoming increasingly blurred, particularly in light of the fact that technology is making it easier for people needing services and people providing services to get in touch with each other directly. Where an individual sits somewhere on the border of two of those categories, there is often room for legal challenge. In the case of a Deliveroo driver, sitting next to their bicycle in a town centre, wearing their Deliveroo uniform and waiting for a delivery to come through on their smartphone, the idea that they are operating their own business rather than simply ‘working for’ Deliveroo in the traditional sense does not necessarily fit with our everyday understanding of what it means to be self-employed.
Employment status determines employment rights
Independent contractors have very few rights in relation to their work; for example, they have no entitlement to be paid minimum wage, holiday pay or sick pay.
Workers have various employment rights such as the right to minimum wage, paid holiday, appropriate daily rest breaks, the right not to be dismissed or treated detrimentally for whistleblowing and must be included in a pension scheme.
Traditional ‘employees’ have all the employment rights that workers have but have some additional protections including (subject to length of service) the right to: bring an unfair dismissal claim; request flexible working; statutory maternity pay; redundancy pay; and to a minimum notice period.
In discrimination law the definition of a worker is slightly different to other areas of law and protection from discrimination extends to those engaged ‘personally to undertake work’ and to contract workers.
Many are questioning whether the current workforce categorisation (of independent contractor, worker and employee) is appropriate for the modern world of work. However, it seems unlikely that there will be any major changes on the horizon in the UK in terms of how the courts and tribunals determine someone’s employment status (and therefore which, if any, employment rights apply to them).
Key Questions an Employment Tribunal will ask
We therefore thought it might be helpful to provide a quick re-cap of the main things you will need to focus on to determine the employment status of your staff. The test is, in reality, rather complex. However, as a basic rule, there are three minimum factors that must be present for an individual to be classed as an employee: (1) personal service; (2) control; and (3) mutuality of obligations. There are also many other factors which are relevant. Below we have listed a few key questions you can consider to help to give you an indication of the employment status of your staff (and which the ET will think about if ever asked to determine the question at a Tribunal hearing):
- Is the individual in business on their own account? That is, do they provide you with services as part of their own business enterprise? Do they invoice you for their work? Are they able to provide services to other organisations? If so, they are likely to be an independent contractor.
- Is personal service required? Does the individual have to work for you personally or could they send in someone else as a substitute if, for example, they were unavailable one day? If they can send in a substitute, they are probably an independent contractor. If they have to work for you personally (i.e. there is a requirement for personal service), they are very likely to be a worker and may even be an employee.
- Do you have control over what the individual does in their day-to-day job? Do you control when, where and how they perform their work? Are they subject to your disciplinary rules and performance review process?
- Is there mutuality of obligations? Are you obliged to provide them with work? If so, are they obliged to accept any work you offer? In reality, do you always offer work and does the employee always accept that offer of work?
Question 1 is in some ways definitive, but of the other questions if the answers to questions 2, 3 and 4 is ‘yes’ then the individual is likely to be a traditional employee. If the answer to question 2 is ‘yes’ but the answers to questions 3 or 4 is ‘no’ then the individual is probably not an employee but is still likely to be a ‘worker’. Question 4 also introduces more complex issues about whether someone can be an employee/worker some of the time (but not all of the time).
The importance of getting it right
It is important that you are confident about the status of all of your staff so that you are fully aware of the legal rights that apply to your workforce. Getting it wrong could be very costly. For example, if an organisation categorises someone as an independent contractor when, in reality, they are a worker, then the organisation could face significant tax liabilities, penalties (including possible criminal sanctions) for failing to comply with auto-enrolment obligations and a wide range of employment tribunal claims from the worker including claims for unpaid holiday pay and minimum wage.
Similarly, if you have miscategorised someone as a worker when, in reality, they are an employee, you may not have a full appreciation of the potential legal risks in certain situations; for example, when undertaking a business reorganisation or TUPE transfer. No employer wants an unfair dismissal claim to be brought against them but particularly not when it comes entirely out of the blue! It is therefore really important that you get the categorisation of your workforce right.
If your next business project involves engaging operatives in a novel way, talk to us, to make sure your contracts, terminology and day to day approach give you the best protection.
If you have any queries about employment status or how this might impact on your organisation, please contact Claire Hollins (firstname.lastname@example.org) or your usual Weightmans adviser.