The Gig Economy and Employment Rights

The term “gig economy” has become increasingly ubiquitous in recent times and refers to a state of work characterised by an abundance of temporary positions filled by independent contractors on a short-term basis. The term is most commonly used to refer to newer, app-based and tech-driven employment for the provision of on-demand services.

The basis for this new way of working is that individuals make themselves available on an ad-hoc basis and contract with the service provider to provide the relevant services, which could be anything from takeaway food delivery to taxi services, in a return for a flat fee. App-based companies such as Uber and Deliveroo argue that their role is merely the provision of a technology platform which effectively enables individual “giggers” to meet customers, and as such they cannot be deemed to be employers.

While there are arguments for and against this new way of working, what is indisputable is that it is becoming ever more prevalent. Recent research by the international financial company Intuit suggests that 40% of US workers could be independent contractors by 2020.

Employee or Self Employed?

The distinction between an employee and a self-employed independent contractor is often not cut and dried, and a tribunal or court will look at the day-to-day reality of the relationship between the parties. Labels imposed by the parties, or contracts signed between the parties, will not be determinative if they do not reflect that reality.

If an employer exerts significant control over an individual in terms of how, when, where and by whom work is to be carried out, then that individual is likely to be deemed an employee. Similarly, if there is “mutuality of obligation” between the parties in that there is an expectation that an organisation will provide work, and an understanding that the individual won’t turn that work down, then the person is likely to be classified as an employee. Conversely, If an individual can reasonably send another person to “fill in” and carry out the work in their place, then they are more likely to be deemed self-employed. Equally, an individual providing their own equipment, and being responsible for their own tax affairs and insurance is more indicative of an independent contractor.

For individuals, classification as an employee brings an entitlement to be paid in accordance with minimum wage, as well as attracting the protection of a suite of other employment rights.

Uber, Deliveroo and Pimlico Plumbers

The novel business models introduced by new gig economy companies such as Uber have brought significant disruption to traditional ways of performing and classifying work, and in turn have attracted challenge from unions and individual workers asserting employment rights.

In the past year Uber has been the subject of such a challenge in the UK, brought by an Uber driver. Uber argued that it is not a taxi firm in the traditional sense but is instead a tech company that puts customers in touch with drivers. The tribunal rejected the notion that Uber was merely acting as an agent for the drivers, such that drivers were in effect contracting directly with passengers, on the basis that this did not reflect the reality between the parties. The drivers were engaged by Uber as workers while operating in their assigned territory, signed in to the Uber app and available to take bookings. The tribunal ultimately ruled that Uber drivers are in fact workers: UK employment law contains an additional employment category of “Worker” that brings an entitlement to certain minimum employment rights.

The Uber case was followed in the UK by the government instructing Deliveroo that it must pay its riders minimum wage unless they are deemed by a court or the UK Revenue Service to be genuinely self-employed. This development came on foot of Deliveroo changing their “rider agreements” to allow for riders to be paid on the basis of number of deliveries made, where formerly they were paid a fixed hourly rate. Deliveroo has implemented similar contractual changes in Ireland.

The wide reaching effects of the development of the gig economy is also reflected in an appeal to be heard in the UK this year brought by Pimlico Plumbers Limited, a leading UK based supplier of plumbing services, of an earlier employment tribunal decision that its plumbers are workers rather than independent contractors.

Plumbers engaged by Pimlico are required to wear a uniform, and drive a van bearing the company’s logo. These factors would generally indicate that the plumbers were employees. However, the written agreements used by the company gave the impression that its plumbers were self-employed. The plumbers also accounted for their own tax and were VAT registered, they provided their own tools, equipment and materials, and maintained their own insurance. Plumbers had the option to choose their working hours, and could reject particular jobs. The company was under no obligation to provide work if there was none available.

Nevertheless the tribunal decided the plumbers were workers, on the basis that they provided a personal service. Although a plumber could provide a substitute to carry out work, the right was not absolute, and the most the company was prepared to tolerate was a form of job-sharing or shift swapping, without any legal obligation. This was insufficient to amount to an unfettered right for a plumber to send someone to work in their place.

Future Developments

It is likely that technological advancements will continue to alter the way in which work is organised into the future. The type of work brought about by the gig economy offers many advantages for those who wish to work on a freelance basis and who value the flexibility that goes with being self-employed. Equally, others look to their employment to provide certainty and security in terms of guaranteed hours and pay.

What is evident is that the type of working associated with the gig economy sits uncomfortably alongside the current black and white classifications of employment status: an individual is either an employee or an independent contractor. The reality is that the rapidly changing nature of work, including the development of the gig economy, may require revisiting the traditional understanding of employment status in order to both accommodate changes to how people are working while at the same time looking to safeguard workers’ employment rights.

The International Labour Organisation has called for governments to look at policies and legislation to address employment misclassification. Given the increased focus in this area, it may be that the Irish government will look to review modern employment practices in this country. It may take a high profile case being brought in Ireland for this to happen. Companies which rely on the on demand freelance workforce will certainly be watching with interest for any developing trends that may impact on this new business model.