As the gig economy continues to dominate the hot topics in employment law, seemingly conflicting decisions regarding Uber and Deliveroo merit further consideration.

Added to the mix is this week's European Court of Justice (ECJ) decision that workers who have wrongly been classified as self-employed can claim substantial arrears of unpaid holiday. Now more than ever it is key to get the classification of your workforce right.

Uber v Deliveroo

If Deliveroo riders are not workers but Uber drivers are, where does this leave those working in the gig economy? The devil is, as always, in the detail.

Uber

The Employment Appeal Tribunal (EAT) in Uber recently upheld the judgment of the Employment Tribunal (ET) that Uber drivers are 'workers' for the purposes of the Employment Rights Act 1996 (ERA). Specifically, they are workers when they are signed in to the Uber app, are within the territory in which they are authorised to work, and are ready and willing to accept assignments. They are therefore entitled to holiday pay and National Minimum Wage for those periods.

In line with the trend of case law in this area, the decision was made looking at the reality of the arrangement between Uber and the drivers rather than relying on the written contractual documentation which had been at pains to exclude indicators of worker status.

Key to worker status is the requirement for the individual to perform the work personally. The commercial reality was that the drivers had an obligation of personal service and when using the app were subject to Uber's control, including setting the fare charged.

Deliveroo

For an operation which to the outside eye appears to function similarly to Uber, how then did Deliveroo compare and contrast its position to get the outcome that its riders are not workers?

Deliveroo was a decision of the Central Arbitration Committee (CAC) on an application by the IWGB Union. In order to gain recognition for the purposes of collective bargaining, the individuals within the bargaining unit must consist "wholly or mainly of workers".

The CAC held that there was a genuine right of substitution which meant that riders had no obligation to personally perform any service for Deliveroo. This precluded the riders from being workers.

It is important to note that the relevant statutory test for worker in this case is slightly different to the test under the ERA examined in Uber. However, the CAC held that the riders were not workers for the purposes of the ERA either.

Not only is it questionable whether the CAC had jurisdiction to make this finding about the ERA, crucially its decisions are not binding on employment tribunals. How its finding on ERA worker status will be perceived in employment tribunal claims lodged by Deliveroo riders remains to be seen, but we can expect it to be persuasive authority.

Why the difference?

It all comes down to the issue of substitution.

The Uber contract states that the driver's access to the app is personal. The right of use cannot be transferred, nor are drivers permitted to share accounts or log-in information. The EAT found that there is no right of substitution; the drivers have an obligation to personally perform the services.

In Deliveroo the panel examined new contractual terms, brought in in May 2017, between the riders and the company which expressly included the right to substitution. Deliveroo riders are able to provide either their phone (complete with app) to a substitute or to pass on their log-in details so that the substitute can log in via their own phone to pick up a delivery.

Whilst the CAC expressed surprise that this substitution right existed given the lack of penalties for job cancellation (why would riders need to use substitutes?) and the level of vetting and training of registered riders (why would Deliveroo want unknown substitutes to be used?), it nonetheless found that substitution was a genuine right which had been exercised in practice.

Workers and holiday pay

In a landmark decision handed down this week, the ECJ has held in King v The Sash Window Workshop Ltd and anor that a worker who was incorrectly classified as self-employed was able to claim unpaid holiday pay for the entire length of his employment. He had not exercised the right to take holiday as it would have been unpaid (because Sash Windows considered him to be self-employed at the time). In the case Mr King claimed unpaid holiday pay spanning 13 years.

This decision has significant implications for the gig economy due to the potential liability for unpaid holiday pay where self-employed contractors are subsequently re-classified as workers.

The decision highlights the importance now, more than ever, of keeping a close eye on the developing case law to ensure that the status of your workforce is correctly classified.

The case will now return to the Court of Appeal to apply the ECJ's decision.

A legislative solution?

Alongside the progress effected by litigation, there is government recognition of the need for clarity and change.

Matthew Taylor's Good Work report, commissioned by the government to examine modern employment practices, was published in July 2017. The government's full response in expected by the end of 2017. As part of its response, it was announced in the Autumn Budget that a discussion paper will be published, exploring the case and options for longer-term reform to make the employment status tests for both employment rights and tax clearer.

In the meantime the House of Commons Select Committees on Work and Pensions and Business, Energy and Industrial Strategies (BEIS) published a joint report, 'A Framework for Modern Employment' setting out their own recommendations.

The Select Committees' report endorses many of the Good Work recommendations and suggests the following changes:

  1. Clearer legislation on employment status, which should focus on the importance of control and supervision of workers rather than having a narrow focus on substitution.
  2. Implementation of worker status by default for those companies with substantial dependent workforces currently categorised as self-employed.
  3. The pilot of a wage premium above National Minimum Wage and National Living Wage for non-guaranteed hours.
  4. A day one right for workers to a statement of their terms and conditions.

The Government's response and actions clearly have the potential to up-end this area of law.

The immediate future

In the meantime, despite the Deliveroo decision, we can only expect the case law to continue in the direction of seeking to curb false self-employment, which not only denies true workers their proper protections but also puts the tax-man out of pocket which has a consequent impact upon public services.

Coming up in February 2018 is a further employment status hearing in the Pimlico Plumbers Supreme Court appeal. It is also reported that Uber intends to appeal the EAT's decision to the Supreme Court, leapfrogging the usual step of a Court of Appeal hearing. With the comparatively slow process of drafting new legislation, we hope that the Supreme Court decision(s) will provide a more definitive set of factors to guide this area. Only one thing is for certain: the gig economy is likely to remain on the agenda for some time to come.