It all started back in 2013, when an allegedly self-employed plumber took out a case against Pimlico Plumbers, claiming that he should have been classed as a worker. Pimlico Plumber’s employment contracts were clearly not as watertight as their plumbing, since they lost the case. This case went to appeal in February this year, but Pimlico Plumbers lost the appeal and has announced that it will be taking it to the Supreme Court of the United Kingdom. But by then, a string of other cases had appeared before employment tribunals, and would continue to appear.
First there was Deliverroo, in August 2016. The company was told at that time by the Department for Business, Energy and Industrial Strategy (BEIS) to pay its workers the national minimum wage (NMW). Then came the case against Uber. In October 2016, two Uber drivers on behalf of 19 others brought a case against the company and won the right to be recognised as workers rather than self-employed. In April, the company was given the right to appeal, with a date set for 27 September. This right to appeal delays the need for Uber to change its business model fundamentally; but there is no understanding yet as to what the outcome of the appeal will be.
Then, on 6 January there was a ruling against CitySprint, which was ordered to pay holiday pay, the NMW and sick pay, to a bicycle courier that it had classed as self-employed. This hearing marked the first appearance of Judge Joanna Wade, who featured in each of the employment tribunals that followed. CitySprint was seen as a test case, and it was expected that potentially thousands of couriers would now take the firm to employment tribunal to contest their employment status. Clearly the company decided it would be in its best interest to appeal this decision, and the it has, in fact, done so.
On 24 March, Judge Wade decided against Excel. During the case, she noted that a contractor should be classed as a worker if he or she was required to work five days a week and receive pay rates that are non-negotiable. Excel has since been acquired by CitySprint, an acquisition that would seem to bring with it an enormous amount of risk if employment tribunal decisions continue to go against these companies.
“The notion that Uber in London is a mosaic of 30,000 small businesses linked by a common platform is to our minds faintly ridiculous. Drivers do not and cannot negotiate with passengers ... They are offered and accept trips strictly on Uber’s terms.”
Employment Tribunal judgment
Then, on 12 May, eCourier, a subsidiary of the Royal Mail, faced with an employment tribunal, instead settled with its “worker” agreeing that they were a worker and not self-employed. In a somewhat self-incriminating move, recognising the inherent risk in this situation, the company included in its annual report a statement that one of the most important risks it faced as a business would be rising employment costs that it would have to pay if employment tribunals classed their supposedly self-employed workers as workers.
In the latest iteration of this growing case law, in late July, Addison Lee, a minicab firm, also had to face Judge Wade in an employment tribunal and lost when the judge determined that one of its cycle couriers should be classed as a worker and not self-employed. The judge brought attention to Addison Lee’s use of contradictory language in the contract it signed with the cycle courier in question that would prevent Addison Lee couriers from ever being treated as workers. This was despite the fact that couriers were given Addison Lee-branded bags and T-shirts, responded to a central controller and used Addison Lee IT devices, including a system that had no “decline” button when a job was offered. In addition, the courier had been asked to sign a contract that stated: “You agree that you are an independent contractor and that nothing in this agreement shall render you an employee, worker, agent, or partner of Addison Lee.” In addition, the contract included clauses to scare employees, suggesting that they would have to indemnify Addison Lee against any liability for any employment-related claim or any claim based on worker status brought by then. This was a clear admission, said the judge, that the company knew the risks it was running in giving an incorrect employment status to its couriers.
“The best way to achieve better work is not national regulation but responsible corporate governance, good management and strong employment relations within the organisation, which is why it is important that companies are seen to take good work seriously and are open about their practices and that all workers are able to be engaged and heard.”
Matthew Taylor, Head of the Review of Modern Working Practices
While there is growing case law supporting the precept that people employed in the Gig Economy should be defined as workers and not self-employed, because such workers typically an app designed by their employer to get work many employers are treating such workers as self-employed. In addition, the regulations and legislation surrounding worker classification are poorly written and vague. In fact, in a sop to their employees, most of the companies that have lost cases at these employment tribunals complain about the vague wording of the regulations and appeal to the government to put this right.
They may get their wish. Despite the publication of Good Work: The Taylor Review of Modern Working Practices in July this year, to reviews of “fluff,” there are, in fact, several solid proposals about regulation that can be taken from the recommendations. In summary, the review aims to tackle exploitation at work, increase clarity in the workplace and help people to know and exercise their rights. The review seeks to apply the same principles to all forms of employment, and make the taxation of labour consistent across all its forms. It also suggests that the term “worker” be renamed “independent contractor.” The review also refers repeatedly to “the British way,”—a post-Brexit conceit meaning that Britain has a lighter regulatory regime than, for example, Germany and France, but a heavier regulatory regime than the United States. More flexibility in its labour regime means, the review claims, that the U.K. economy has higher employment rates.
The review notes that the United Kingdom must maintain this flexibility. It also reveals that the Gig Economy employs more than 1.3 million people, more than half of whom have a full-time job in addition. It also notes that many young people are considering moving into the Gig Economy, and that the situation will therefore cover more employees and workers than it does currently.
Definitions of ‘employee’ and ‘worker’ from the Employment Rights Act 1996
Below is an excerpt from Section 230 of the Employment Rights Act 1996 – Employees, workers etc.
(1) In this Act “employee” means an individual who has entered into works under (or where the employment has ceased, worked under) a contract of employment.
(2) In this Act “contract of employment” means a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing.
(3) In this Act “worker” (except in the phrases “shop worker” and “betting worker”) means an individual who has entered into or works under (or, where the employment has ceased, worked under) -
(a) A contract of employment, or
(b) Any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.
Source: Good Work—The Taylor review of modern working practices
The review suggests a number of legislative efforts.
Primary legislation to establish tests for employment status.
Retain the three-tier approach, of an employee, worker, and self-employed.
Increase the importance of “control,” in defining a worker status (e.g., if a company has control over every aspect of work from pay rates to the requirement to work).
Adapt the piece rates legislation so that employees and employers can be flexible and still be paid or paying the national minimum wage (NMW), this would allow the NMW to be earned within a margin of error on average over a longer period.
Align employment status with tax status, removing some of the differentiating factors that makes it more profitable for employers to employ workers.
Employers should provide a written statement of terms and conditions not only to employees but also to workers for independent contractors.
Allow people to determine their employment status using a government-designed online tool.
The review also wants to stop employers using flexible working to transfer risk and to exert control over their employees and reduce costs.
It also suggests a number of other changes to existing employment law. These include a higher NMW for employees employed on zero-hours contracts, to discourage employers from using such contracts. In addition, it calls for more transparency for agency workers and more awareness about people's holiday pay rights. It also suggests that people should have a right to request a direct contract after they have been employed for 12 months with the same employer on a temporary contract. If an employee has been working for 12 months on a zero-hours contract, they should be able to request a contract based on the hours actually worked.
A great deal is made of improving employee engagement, especially in sectors where casual work is prevalent. For example, the review suggests that the proportion of a workforce making a request for consultation with an employer that must be honored should be lowered from 10 percent of the workforce to 2 percent. It also suggests that companies should be required to make disclosures about their employment models, use of agency staff and zero-hours contracts, for example, in their annual reports.
Currently, the agencies overseeing employment regulations are Her Majesty’s Revenue and Customs (HMRC) which enforces both the NMW and National Living Wage (NLW) on behalf of the Department for Business, Energy & Industrial Strategy (BEIS). In addition, the HMRC provides the enforcement function for Statutory Sick Pay (SSP). The Gangmasters and Labour Abuse Authority (GLAA) operates a licensing regime for businesses that supply temporary labour in high-risk sectors in the fresh-food supply chain. The Immigration Act 2016 gave GLAA additional powers to investigate modern slavery (forced/compulsory labour) and other labour abuse offences across England and Wales regardless of worker status or sector. The Employment Agency Standards Inspectorate (EAS) is responsible for ensuring compliance with the Employment Agencies Act 1973 and the associated Conduct of Employment Agencies and Employment Businesses Regulations 2003. The Health and Safety Executive (HSE) enforces parts of the Working Time Regulations 1998 including the maximum weekly working time limit and night work limits, as well as the Health and Safety at Work Act 1974 (The Act).
While recognising that this somewhat piecemeal approach will have to continue, the review makes a number of suggestions about extending the remit of some of these agencies. For example, it suggests that the remit of the EAS be extended to cover umbrella companies (companies that act as an employer to agency contractors who work under a fixed term contract through an employment agency). The use of umbrella companies reduces liability for employers and allows expenses for employees to be offset against tax. Taylor also suggests that the government repeal legislation that allows agency workers to opt out of equal pay entitlements, something that agency workers are often forced to do when signing contracts. Taylor also says that the HMRC be given the responsibility to enforce all employment rights.
Other changes include the ending of all employment tribunal fees for workers bringing cases, which have been discouraging them from doing so, and the ability to receive an expedited preliminary hearing. Taylor also suggests that the burden of proof about unemployment status be reversed so that an employer must prove an individual is not entitled to the relevant employment rights, not the other way around. In order to make enforcement more effective, the review also suggests high levels of enforcement and significant fines for repeat offenders, as well as “naming and shaming.”
The review also contains recommendations on training and encouraging flexible working to benefit workers not just employers. There is also a suggestion that the Low Pay Commission be responsible for ensuring quality of work not just quantity. It is at this point that the accusations of fluff are perhaps justified. But if many of these recommendations are transferred into law then the burden on employment tribunals should be lessened considerably, and both employers and employees will have more clarity on their relationship. The idea that corporate governance and transparency—and simply asking employers to be nicer—will solve this problem are somewhat overoptimistic. It is only by legislation and effective enforcement that the Gig Economy will be brought under control.